As the worlds of traditional brick-and-mortar retail and e-commerce continue to blend together, there is still at least one divide, and the U.S. Supreme Court has agreed to hear a major case about it.

Online retailers Overstock.com Inc., Newegg Inc. and Wayfair Inc. contend they do not need to collect or remit online sales tax in states where they do not operate. But the state of South Dakota disagrees.

The U.S. Supreme Court decided late last week that it will hear arguments in South Dakota v. Wayfair. The case, slated to be argued in April, will give more clarity to lawyers operating in the retail space—both online and offline.

Many attorneys and executives in traditional retail have voiced their support for the high court to overturn an earlier decision in Quill v. North Dakota, which they feel has inadvertently created a loophole for online retailers to avoid paying sales tax if they do not have a physical presence in the state.

Trade associations such as the Retail Industry Leaders Association, the National Retail Federation and the South Dakota Retailers Association filed briefs in support of South Dakota's lawsuit against Overstock, Newegg and Wayfair.

“Retailers have supported this case since the beginning, and believe it is the right case to correct the constitutional course set more than 50 years ago—well before the advent of e-commerce—that today gives online-only retailers an unfair commercial advantage at the expense of local retailers,” RILA general counsel and Retail Litigation Center president Deborah White said in a press release Jan. 12.

She added that retailers hope the court will conclude the economic-nexus standard, which asserts nexus based on a certain level of revenue generated in the state, is “a more appropriate way” to decide which retailers have to collect sales tax than the physical presence test created by the Quill case in 1992.

“In doing so, the court will validate efforts by the states to treat community and absentee retailers equally when they conduct business with consumers in their state,” she said.

Lee Cheng, former general counsel of Newegg, one of the online retailers named as a defendant in the case, said that RILA's argument doesn't hold up. He argues that if an online-only retailer doesn't have a physical presence in a state, such as South Dakota, then it is not seeing the benefits that tax-paying brick-and-mortar retailers in the state get, including roads and infrastructure.

Cheng, now chief legal officer for another e-commerce site, eForCity, said it is encouraging that the Supreme Court has decided to take on the case, because, otherwise, he believes litigation in this area will only continue to pile on. Cheng is hopeful the Supreme Court will uphold its earlier decision in Quill.

Jonathan Johnson, president at Overstock subsidiary Medici Ventures Inc., said in a statement Jan. 12 that “unless Congress intercedes, under the U.S. Constitution any retailer without a physical presence in South Dakota cannot be required to collect and remit state sales tax.”

“States do not have power to conscript individuals or organizations that do not have a physical presence within their state to do the state's job of collecting sales tax,” Johnson continued. “It's a straightforward notion. And, disregard for the precedent would have severe consequences for future businesses and individuals. … We will confidently stand shoulder to shoulder with our competitors to fight this brash attempt by the state of South Dakota to evade constitutional law.”