Published: Mon, June 25, 2018
Finance | By Jaime Brady

Online Shopping Just Got More Expensive Thanks To New Supreme Court Ruling

Online Shopping Just Got More Expensive Thanks To New Supreme Court Ruling

The Supreme Court ruled Thursday that states can compel retailers to collect sales taxes even if they don't have a physical presence in the state, effectively paving the way for more taxes on online shopping.

Besides its namesake site, Wayfair Inc. also owns the Joss & Main, AllModern and Birch Lane sites. Many big retailers, such as and Macy's, already collected sales tax for online purchases because they had warehouses or stores in those states. Kosewicz pays $3,600 a year for tax collection software to handle payments and reports to her home state, Washington. Secretary of Finance Aubrey Layne says the ruling could generate an additional $300 million a year for the state. But he said that any disruption of long-established rules governing a critical segment of the economy should be undertaken by Congress.

A case study Vince Kadlubek was originally happy enough when he heard of the Supreme Court ruling. While the Supreme Court spoke approvingly of the law, it sent it back to South Dakota's highest court to be revisited in light of the court's decision. Kennedy also said that the rule makes no sense, and that "this Court should not maintain a rule that ignores these substantial virtual connections to the State".

If an online consumer purchases an item sans sales tax, the tax is still owed but the customer bears the responsibility of reporting the amount.

Prior to Wayfair v South Dakota, businesses that didn't have a physical location in a state were not required to remit sales taxes to that state government for their sales.

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Blair says the new ruling will have to be studied further, and the U.S. Congress would have to first pass legislation before any changes would be considered locally. North Dakota, that involved mail-order catalogs.

The states that are likely to see the biggest percentage increase in revenue are Louisiana, Tennessee, South Dakota, Oklahoma and Alabama, according to a Barclays research note. 2514), which provides that a seller is considered to be doing business in the State and subject to our General Excise Tax if the seller has $100,000 in sales or more than 200 transactions in the current or immediately preceding taxable year.

Amazon also collect taxes from online sales if the state the shipment is made to collects sales tax.

The ruling is a victory for states that said they were losing billions of dollars in revenue every year, and for large retailers that had argued that the physical presence rule meant they were playing by different rules than online-only sellers.

The decision, which overturns an earlier Supreme Court precedent, will boost state revenues at the expense of consumers and sellers who have avoided sales taxes in the past. The 5-to-4 decision reversed decades-old decisions that protected out-of-state vendors from sales tax obligations unless the vendor had a physical presence in the state. "In some cases, the sales tax numbers are 7 or 8 percent and you would expect to see that passed through". But smaller online stores may not have been collecting sales tax, which the Supreme Court ruling could change.

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