Sunday, 23 September, 2018

Why the Online Sales-Tax Ruling May Have Limited Impact

Sales tax now can be collected on online purchases due to a ruling from the U.S. Supreme Court Sales tax now can be collected on online purchases due to a ruling from the U.S. Supreme Court
Kenneth Drake | 24 June, 2018, 23:40

South Dakota residents may see lower sales tax rates because of a provision in state law passed years ahead of a U.S. Supreme Court decision allowing states to make online shoppers pay it.

In 1992, it was ruled that consumers didn't have to pay sales tax on an item if it was being shipped from a store that didn't have a physical presence in the state of the buyer.

Rep. Tom Reed, R-N.Y., said he supported the ruling's creation of a level playing field between online sellers and physical retailers.

Honestly, this shouldn't be surprising to anyone, but it's a bummer nonetheless. Amazon has been charging sales tax in the state for more than three years, since it opened large warehouses in Lakeland and elsewhere in Florida. The South Dakota Supreme Court invalidated the law because Quill Corp. v.

"I would really love for our government to get behind the idea of small business and when you do something like this it does not encourage small business", Keyton said. Attorneys say any state, arguably, now has the space to make online businesses collect a tax from the buyer, then the seller must turn the money collected over to the state the product was sold in. "Regardless of how Americans shop for goods, whether that's on the internet or in our neighborhood small businesses, we must expect that all retailers face equal sales tax treatment". That could bring $500 million or more in additional sales tax revenue to Florida, and the Legislature should require that the tax be collected.

Online retailers will have to deal with a hodgepodge system until Congress enacts a federal standard, which is unlikely this year given the midterm elections in November.

South Dakota wanted out-of-state retailers to begin collecting the tax and sued several of them: Overstock.com, electronics retailer Newegg and home goods company Wayfair.


The cost can be reduced for retailers who sell to customers in the 24 states that participate in the Streamlined Sales Tax Agreement, a plan aimed at simplifying tax collection.

Nevertheless, the Court stopped short of giving its full blessing to the South Dakota law, stating that the taxpayers had made other challenges to the law and those need to be addressed by the state courts first. Previously, these businesses had to charge state sales taxes on top of their base price in what many consider an unfair advantage since online retailers largely ignored the requirement.

Now, for the first time since 1992, any of the U.S. states have the right to impose a tax on online shopping.

"As to who will have to collect, once that case is decided, it seems their economic nexus definition, or what we are now referring to as a de minimus threshold for interstate commerce, which is any retailer with more than 200 transactions or $100,000 of sales into South Dakota over the trailing 12 months".

A sales tax is supposed to be a broad tax on consumption: You buy and use things, you pay tax.

But to brick-and-mortar stores, the ruling righted a decades-old imbalance that favored internet retailers and led to the demise of thousands of merchants.

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