A Supreme Court Ruling Could Make Your Online Purchases More Expensive

Friday, 22 Jun, 2018

In a five-to-four decision issued today, the Supreme Court ruled that states can make online businesses collect sales taxes - even if they don't have a physical presence in that state.

The cases the court overturned said that if a business was shipping a customer's purchase to a state where the business didn't have a physical presence such as a warehouse or office, the business didn't have to collect sales tax for the state.

Following an earlier indication by the court in 2015 that it would reconsider the Quill decision, the South Dakota legislature chose to charge companies that deliver more than $100,000 worth of goods or services or have more than 200 separate transactions within the state its 4.5 per cent sales tax.

The top court in the U.S. has ruled that states can force online companies to collect sales tax from their customers.

For the full story, head on over to CNN Money. Online sellers that haven't been charging sales tax on goods shipped to every state range from jewelry website Blue Nile to pet products site Chewy.com to clothing retailer L.L. Bean.

"Will states step forward and pass laws similar to South Dakota?" asked Annette Nellen, director of the Masters in Science in Taxation program at San Jose State University, on Thursday. South Dakota expects to collect another $48 million to $58 million in taxes a year because of this ruling. "Small web businesses will be hardest hit, particularly those with only a single location, because they can't afford the overhead to comply with thousands of different tax rules across the country", said Chris Cox, outside counsel for e-commerce trade association NetChoice, in a statement. North Dakota. They argued that a decision in a case involving mail-order catalogs was obsolete in the modern e-commerce world. This will be a huge boost to state budgets, but online retailers won't be pleased.

The court's decision came in response to South Dakota v. Wayfair, a 2017 case. Amazon actually already charges sales taxes on the goods that it sells directly. Ten states require out-of-state sellers to notify buyers and inform states of the unpaid sales taxes.

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Reiterating the concerns of business groups, the dissenting opinion also argued that "the burden will fall disproportionately on small businesses".

And don't even get me started on the unfair competitive advantage an online seller gets compared to a brick-and-mortar store that has to pay taxes in the community where it is located.

While the ruling opens the door for states to collect taxes from online businesses, there're some significant outstanding questions now that the court has made its decision. She said small businesses do not have the time, nor resources, to be tax collectors for other states.

But the practical effect in MA may be more about providing clarity than gaining any substantial new revenue, since MA already started collecting taxes from online sales previous year - despite a lawsuit challenging those collections.

Stocks for several major online retailers dropped in response to the news, including Amazon, Wayfair, and eBay.

You have most likely been able to avoid paying sales tax on a lot of online purchases over the years, but that's coming to an end.

And according to the Supreme Court case, some large online retailers do not collect taxes on their remote sales. Chief Justice John Roberts dissented, saying the decision should be left to Congress, and was joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.