The nation's justices agreed on Friday to hear a battle between South Dakota and the e-commerce site Wayfair over the power that states should have to tax businesses that aren't located within their borders yet sell goods to local residents.
The ruling came with a three-day deadline for Governor Abbott to call a special session to address the maps - Paxton appealed the ruling to the Supreme Court, which then halted the lower-court ruling while they looked into the case.
When Sen. Heidi Heitkamp, D-N.D., got the news that the U.S. Supreme Court would be taking up a case on state's rights to collect sales tax on online sales, she just started smiling.
Even though 17 of the top 18 online retailers have begun collecting sales taxes, states project that they could lose $34 billion this year.
Critics of the 1992 decision say it no longer fits a world where much of our commerce happens, at least in part, online. The Government Accountability Office, which provides nonpartisan reports to Congress, wrote in a report previous year that state and local governments would have been able to gain between $8.5 billion and $13 billion in 2017 if they could require out-of-state sellers to collect tax on sales into the state.
In 2016, South Dakota lawmakers passed a law requiring out-of-state sellers to collect and turn over sales tax to the state.
Years of declining consumer purchases at retail stores and malls, as shoppers increasingly chose to buy online, have cost state treasuries huge amounts of sales tax revenue, but the Supreme Court might be coming to their rescue.
The Supreme Court will probably hear arguments in the case in April. North Dakota, was occasioned when North Dakota attempted to collect a state use tax from the Quill Corporation, a mail-order office equipment company.
In a separate ruling about a week later, the same court ordered nine Texas House districts in Bell, Dallas, Nueces and Tarrant counties to be redrawn, saying they also were created to discriminate against minority voters. And the company, which has warehouses scattered around the country, pays sales taxes in those localities.
The White House may also be stepping into the sales tax fray.
"We are eager for the chance to present our case before the U.S. Supreme Court", Paxton said in a written statement Friday. The law was subsequently struck down by the South Dakota Supreme Court, and Wayfair, Overstock and Newegg are petitioning the U.S. Supreme Court to leave retail taxation up to Congress. "Moreover, the integration of tax collection software is extraordinarily expensive".
Congress still has a role to play, said Matthew Shay, president of the National Retail Federation: "Even if the court rules in favor of a modern sales tax policy, legislation will still be needed to spell out how that would work". Systemax agreed to collect the tax, while the other companies contested the state law. The state needs its tax revenues because its state constitution requires that the state government budget be balanced.