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Supreme Court Decision Will Cost Consumers

24 June, 2018, 23:49 | Author: Shawna Walton
  • Supreme Court closes online sales tax loophole

Before Thursday's Supreme Court ruling, the only way a state could collect sales tax from online retailers is if the retailer had a physical presence in that particular state. That ruling held that a state can not require an out-of-state seller with no physical presence in the state to collect and remit sales taxes on goods the seller ships to consumers there.

Now, states can push ahead with legislation requiring companies to collect and remit sales taxes for goods bought online elsewhere. As of 2015, states and localities collected $1.6 trillion in taxes, so closing the online sales tax loophole would be enough to boost that by about one-half of one percent.

Honestly, this shouldn't be surprising to anyone, but it's a bummer nonetheless. At first, online retail was just a minor sideshow, but after a quarter century of booming, it has become the place to be, and the squealing from all sides about the tax subsidy has been deafening for years. Attorney General Marty Jackley said it was a win for South Dakota and for "Main Street businesses across America that will now have a level playing field and tax fairness".

The South Dakota law challenged in the case provided that a business having $100,000 in annual gross sales in South Dakota, or conducting 200 business transactions in South Dakota, needed to collect South Dakota's sales tax on those sales or transactions. Small businesses may have to figure out how to comply with various state sales tax laws, though there are software options to help. "The expansion of e-commerce has also increased the revenue shortfall faced by States seeking to collect their sales and use taxes, leading the South Dakota Legislature to declare an emergency". The bill would have taken effect if the U.S. Supreme Court or Congress acted to allow such collections.

In fact, the unfair burden has been on local retailers who have been collecting sales taxes.

The Trump administration had urged the justices to side with South Dakota. North Dakota, deciding that companies should charge sales tax even in states where they have no physical location. Some states have exemptions for collecting sales tax.

Washington, Florida, South Dakota, Nevada and Tennessee get more than half of their total revenues from sales taxes, meaning big gains could be in store.

In any event, today's decision is a victory for bricks and mortar retailers who have built stores in Hawaii and have employed local residents.

But as online retail proliferated and technology made tax compliance somewhat simpler, these decisions created an odd and growing tax loophole: Shop at your corner store and you had to pay sales tax; buy online, and you often could avoid it.

TrumpStore.com now collects sales taxes in just four states. Those retailers understandably have had concerns over the years when they faced increasingly intense competition from online sellers who, in some cases, boasted that purchases from their sites were not subject to the same taxes that would need to be added to the price of the same goods from a local store.



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