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    Trump Administration Joins States in Push to Expand Online Sales-Tax Collections

    Justice Department urges Supreme Court to overrule a 1992 precedent giving online retailers an exemption from obligation applying to bricks-and-mortar shops

    The Robert F. Kennedy Department of Justice Building in Washington. ​The U.S. solicitor general, Noel Francisco, said in friend-of the-court brief that a 1992 precedent should be overruled. ​
    The Robert F. Kennedy Department of Justice Building in Washington. ​The U.S. solicitor general, Noel Francisco, said in friend-of the-court brief that a 1992 precedent should be overruled. ​ Photo: Andrew Harnik/Associated Press
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    WASHINGTON—The Trump administration on Monday urged the Supreme Court to expand states’ authority to collect sales tax on internet transactions, joining a chorus of state officials seeking to overrule a 1992 precedent exempting many online retailers from having to add taxes to a consumer’s final price.

    In 1992, the justices “did not and could not anticipate the development of modern e-commerce,” Solicitor General Noel Francisco wrote in a friend-of the-court brief. “In light of internet retailers’ pervasive and continuous virtual presence in the states where their websites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers.”

    South Dakota is leading a charge to overrule 1992 case, Quill Corp. v. North Dakota, with arguments scheduled next month. Some 35 states and the District of Columbia, as well as organizations representing retailers from booksellers to shopping malls, have filed briefs supporting South Dakota’s position. Catalog mailers and online retailers have opposed the state, arguing that it is too burdensome for many businesses to comply with 50 or more separate state taxing regimes.

    The 1992 case held that constitutional provisions assigning Congress authority over interstate commerce prohibited states from requiring out-of-state retailers to collect sales taxes without congressional assent. While consumers remain obligated to pay sales tax, few know of this duty and fewer still voluntarily comply, robbing state treasuries of billions of dollars, officials say.

    Conventional retailers also complain that the Quill precedent puts them at a disadvantage with online competitors, which can effectively sell products tax-free.

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    The Quill case, following earlier precedent, found that retailers whose “only connection with customers in the [taxing] state is by common carrier or the United States mail” were too far removed to fall under the state’s authority.

    “The court should resolve this case by making clear that an out-of-state internet retailer’s virtual presence within a state is a sufficient ground for requiring the retailer to collect sales or use taxes owed by its in-state customers,” Mr. Francisco wrote.

    In 2016, South Dakota adopted legislation intended to test the Quill holding, and filed a state court action to require several online retailers based elsewhere, including Wayfair Inc. W 0.10% of Boston, Salt Lake City’s Overstock.com Inc. and Newegg Inc. in the City of Industry, Calif., to collect its sales tax.

    The internet retailers, who unsuccessfully urged the high court not to hear the case, said in their brief that Congress was the appropriate body to decide whether the rules on tax collection should be altered.

    Additionally, they argued that the states exaggerated the problem of lost revenue, as the dominant online retailer, Amazon.com Inc., currently collects tax on its own sales for every state that imposes such a levy.

    “If Quill is overruled, the burdens will fall primarily on small and medium-size companies whose access to a national market will be stifled,” the online retailers wrote.

    A decision in the pending case, South Dakota v. Wayfair Inc., is expected before July.

    Write to Jess Bravin at jess.bravin@wsj.com