Supreme Court States Can Force Online Retailers to Collect Sales Tax

first_img Drunk Shoppers Blow $48B Annually—Mostly on AmazonNew Etsy Initiative Helps Offset Carbon Shipping Emissions Stay on target Let us know what you like about Geek by taking our survey.center_img States can now require online retailers to collect sales taxes, even if the seller doesn’t have a physical presence in the territory.The Supreme Court on Thursday ruled to overturn a 1992 precedent that outlawed the collection of such tariffs in South Dakota.A regulation that, according to the court, provided “incentive to avoid physical presence” in various states, and led to a “judicially created tax shelter” for businesses.“When the day-to-day functions of marketing and distribution in the modern economy are considered, it becomes evident that [the] physical presence rule is artificial, not just ‘at its edges’ … but in its entirety,” the official document said.Ultimately, in this rapidly changing society, the 26-year-old statute is already antiquated.“The Internet’s prevalence and power have changed the dynamics of the national economy,” Justice Anthony Kennedy wrote in the majority opinion.In 1992, mail-order sales (remember those catalogues thick with tempting merchandise?) in the US totaled $180 billion, the court said. Last year, e-commerce retail sales alone were estimated at $435.5 billion. Add to that remote sellers, and the numbers exceed half a trillion dollars.“This expansion has also increased the revenue shortfall faced by states seeking to collect their sales and use taxes,” Kennedy said, citing an annual loss of $694 million to $3 billion in 1992. Estimates now range from $8 to $33 billion.So what does this mean for customers? Well, you can expect to pay more for furniture from Wayfair, jewelry from Overstock, and electronics from Newegg—none of which have employees or real estate in South Dakota.The new legislation—aimed at larger online retailers—shouldn’t affect artisanal products from eBay and Etsy. South Dakota’s law applies only to sellers delivering more than $100,000 of goods, or at least 200 transactions, in the state each year.Thirty-one states already levy online sales taxes. It is unclear whether this week’s ruling will prompt them to adjust their laws, or encourage the remaining 19 states to follow suit.Proponents of the “landmark” decision—including South Dakota Attorney General Marty Jackley—regard this as a win for Main Street businesses “that will now have a level playing field and tax fairness.”House Judiciary Committee Chairman Bob Goodlatte (R-Va.), Rep. Anna Eshoo (D-Calif.), and Rep. Jim Sensenbrenner (R-Wis.) are less than thrilled, calling the reversal “a nightmare for American businesses and small online sellers.”“This decision will have broad ramifications well beyond the sales tax arena,” they said in a joint statement, suggesting that this ruling “will stifle online commerce, close businesses, and ultimately harm consumers.”In public statements released Thursday, Wayfair and Overstock agreed to comply with the law, which they believe will have little noticeable impact on the firms.“Wayfair has long supported a legislative solution that would establish a level playing field for brick-and-mortar and online retailers by permitting states to collect sales tax on online sales,” the company said. “While we believe the court was not the ideal venue for creating this level playing field, we expect that [Thursday’s] decision will bring clarity and certainty to this issue.” Overstock, meanwhile, is also urging the U.S. government to help soften the blow.“The framers of the Constitution intended Congress to regulate interstate commerce by thoughtful legislation,” executive Jonathan Johnson added. “To lessen the potential impact of [Thursday’s] ruling on Internet innovation, Congress can, and should, pass sound legislation allowing states to accomplish their aims while still permitting small Internet business to thrive.”last_img

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