Supreme Court ruling says states can now tax online purchases

Supreme Court ruling says states can now tax online purchases

Supreme Court ruling says states can now tax online purchases

On Thursday, the United State Supreme Court overturned two decisions regarding states' collection of taxes from online sales.

Home goods seller Wayfair and other e-commerce companies had attempted to challenge a South Dakota law that levies taxes on purchases made through certain online retailers. Amazon collects sales tax from customers in the 45 states that have a sales tax.

The 5-4 court opinion finally recognizes the impact of the internet and acknowledges commerce has changed since the court ruled in the 1960s and early 1990s that businesses had to have a physical presence in the state before the state could require them to collect state and local sales taxes. Congress, as the court acknowledged, could enact a broad-based law for state sales tax collection. Retailers including Apple, Macy's, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from their customers who buy online.

Hattlestad says although taxpayers will be paying sales tax they didn't previously, that may mean the difference in avoiding increases in income tax or property tax, as government will now have those funds for operating. The internet has changed retailing, and Justice Anthony Kennedy, who wrote the new decision, said, "each year, the physical presence rule becomes further removed from economic reality". When a web retailer doesn't collect sales tax, the consumer is supposed to pay a use tax (surprise!), but the compliance rate is notoriously low (no surprise). "Today's Supreme Court decision is an important and overdue update to our system", Herbert spokesman Paul Edwards said in a statement to FOX 13.

"As a regional destination for working, eating, entertainment, and shopping, sales tax revenue is a major part of how we operate our government and improve our community", said Chris Floore, assistant to the county manager for public affairs for Macon-Bibb County. 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 16 states with laws similar to South Dakota's, including IN and ME, are less likely to be challenged.

The decisions had resulted in some companies not collecting sales tax on every online purchase. Amazon does collect on direct sales, but not indirect sales.

"You are now going to have to invest in software that is going to help you, hopefully, to be able to navigate those state's laws".

Owners who have never collected out-of-state sales tax will need to get up to speed.

The law specifically protects small businesses from collecting sales taxes if they have less than $100,000 in sales as well as fewer than 200 transactions in the state. The court in Wayfair overruled Quill as well as an earlier physical presence case, National Bellas Hess v. Department of Revenue of IL. North Dakota reaffirmed that out-of-state vendors did not have to collect sales taxes. "With our state's growing economy, I don't want to reach into West Virginians' pockets when we don't need to", he said.

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