Supreme Court online sales tax ruling pleases politicians. Consumers? Maybe not.

In the waning days of Washington's 2017 legislative session, state lawmakers desperate for new revenue to balance the budget turned to a legally questionable scheme aimed at collecting more sales taxes from online shoppers.

A new U.S. Supreme Court ruling Thursday appears to have wiped away those questions and validated the new de-facto requirement for many online retailers to charge Washingtonians sales taxes as they hadn't before.

That means Washington residents buying goods online will end up with less money in the bank. It also means the state's gamble paid off.

"If nothing else, our 2017 budget, which was balanced on the backs of this deal, is locked in and is safe," said state Sen. Reuven Carlyle, a Seattle Democrat who has advocated for an online sales tax law since 2013. The state projected the 2017 law would bring in roughly $1 billion over a four-year span.

Thursday's 5-4 decision from the Supreme Court originated from a 2016 sales-tax collection law in South Dakota. It reversed a 1992 ruling that said states could not force businesses without a physical presence in their borders to collect sales tax and ship it back to the local government. The court said at the time the requirements would be too much of a strain on businesses.

Online shoppers in most states — including Washington — do owe a "use tax" on purchases from out-of-state businesses, but few pay it. As times have changed and internet shopping has grown, sales-tax dependent states like Washington and South Dakota have lost out on oodles of cash.

That led South Dakota to directly challenge the 1992 Supreme Court precedent.

In crafting its law, Washington tried to step around the 1992 decision, offering online retailers a choice to either collect sales taxes or face strenuous requirements to report tax information to the state Department of Revenue.

It was patterned after a Colorado law that eventually was ruled legal in the 10th Circuit Court of Appeals. But the Colorado law was also held up for years in the legal process.

NetChoice, a trade association focusing on electronic commerce, all but guaranteed it would challenge Washington's law in the 9th Circuit Court of Appeals and hamstring the state's ability to collect the taxes it promised in its budget.

That lawsuit has yet to materialize. Steve DelBianco, the group's executive director, said it still could sue Washington state based on some of its unique requirements for sales-tax collection aimed at middlemen platforms such as eBay.

DelBianco said his group is unlikely to challenge the state's efforts to force out-of-state retailers to collect internet sales taxes in light of the court ruling.

The Supreme Court decision is considered a win for retailers that do in-person sales, known as brick-and-mortar businesses. Many have argued the status quo left those businesses at a disadvantage since many online retailers could offer lower prices without the sales tax tacked on.

That imbalance was a key factor in passing the online sales tax law in Washington state.

"We’ve seen an explosion of online retailing, some of which collect and some of which make no effort," said Senate Minority Leader Mark Schoesler, a Republican from Ritzville. "We heard stories from major retailers in King County that told us they were a display room for online shoppers."

Not everyone has been excited about Washington state's new law.

eBay opposed it and led an online effort to defeat it, arguing that a patchwork of state laws and regulations could sow confusion and be a burden for small businesses using their platform.

In a statement Thursday, the company urged Congress to create standard rules across the country with a small business exemption.

Washington's law applies to online businesses grossing more than $10,000 a year in sales to Washington residents.

The law went into effect on January 1, said Anna Gill, a spokeswoman for the state Department of Revenue. Patti Wilson, DOR's project manager for the new sales tax law, said roughly 400 or 500 businesses have been collecting sales taxes since the law took effect.

Amazon, Washington's most famous online retailer, has already been required to collect sales tax in Washington state since it has a physical presence in the state.

Carlyle said it was too soon to tell if lawmakers would streamline Washington's new law in the 2019 legislative session by fashioning it after South Dakota's direct approach, instead of Colorado's multiple-choice offer.

Carlyle did say he expects to look at more tweaks to requirements for platforms such as eBay to capture taxes on even more sales.

What money that could bring is unclear, he said.

“This affirms the bipartisan decision the Legislature made in 2017 and will help level the playing field for our small brick-and-mortar stores across the state as they face increasing competition with large, out-of-state retailers," Sen. Christine Rolfes, a Democrat from Bainbridge Island, said in a statement. Rolfes is the top budget writer for Senate Democrats, who hold a majority in the chamber.

“As we plan for the 2019 legislative session, we now have an opportunity to further modernize our sales tax collections," she added.

This story was originally published June 21, 2018 at 1:44 PM with the headline "Supreme Court online sales tax ruling pleases politicians. Consumers? Maybe not.."