With Billions At Stake, Supreme Court Rules States May Tax Online Retailers

25 June, 2018, 07:00 | Author: Corey Lynch
  • States stand to pocket billions as Supreme Court rules internet businesses must collect sales taxes

The U.S. Supreme Court ruled in a 5-4 decision Thursday that online retailers can now collect sales taxes on out-of-state purchases.

The South Dakota law under review was the result of an intentional effort by South Dakota to pass a law with an "economic nexus" threshold for use tax collection purposes that would conflict with the "physical presence" standard imposed by the Supreme Court's 1992 decision in Quill Corp. v.

The decision, in which South Dakota prevailed over the online furniture retailer Wayfair, immediately sent ripples through the internet shopping industry sending shares tumbling in Amazon, eBay, Etsy and others. The estimates of the amount of sales tax lost to sellers outside of a jurisdiction is from $8 billion to $33 a year according to the Supreme Court decision. But he said that any disruption of long-established rules governing a critical segment of the economy should be undertaken by Congress.

The case the court ruled in has to do with a law passed by South Dakota in 2016. Consultants like Mark Grinis, partner, global real estate at EY, said he did not expect a surge in demand for stores even if prices ticked up for online businesses. The state appealed the decision, and the Court reversed its 1992 decision on Thursday. Now, on most of their online purchases there will be sales tax. The decisions made it more hard for states to collect sales tax on certain online purchases, and more than 40 states had asked the high court for action. "These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause", he wrote.

Regardless of where new sales tax laws come from, small sellers are likely to be seriously affected.

The Supreme Court in 2015 unanimously upheld Colorado's law requiring those notices and reports.




The new ruling will force online retailers to pay billions more in taxes, dealing a blow to smaller companies that were previously exempt from state taxes. North Dakota lawmakers previous year passed a bill requiring out-of-state sellers to remit sales tax, treating them as if they have a physical presence in the state. When we asked him if sellers must immediately begin collecting sales tax for all states and all localities, he said no, "but it does mean that sellers need to start preparing for a sea change in their compliance obligations".

The Trump administration supported the Republican initiative saying that the old Supreme Court ruling put traditional retailers at a disadvantage.

Big chains have been collecting sales tax nationwide because they typically have physical stores in whatever state a purchase is being shipped to.

Adrienne Kosewicz, owner of Play It Safe World Toys, poses for a portrait in her home office in Seattle. The internet retailers argued that allowing every state to collect taxes on online sales would cause confusion and unreasonable burdens in today's online-heavy retail economy.

Many bike retailers do some e-commerce to complement their brick-and-mortar sales.

At a local retailer, a consumer is going to pay a six percent tax rate. "Each state gets to determine whether the products, goods, and services sold by the sellers should be subject to that state's sales tax".

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