Supreme Court says states can require online retailers to collect sales tax

Internet retailers will soon be required to pay state sales tax across the entire United States following a 5-4 decision by the Supreme Court.

Quill imposes the sort of arbitrary, formalistic distinction that the Court's modern Commerce Clause precedents disavow in favor of "a sensitive, case-by-case analysis of purposes and effects".

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

"Etsy recently asked a sample group of sellers how they would respond to laws requiring the collection and remission of taxes on sales outside the sellers' home jurisdictions", the company said.

I'm just happy that our state tax authority now loosely resembles the world that we actually live in.

He noted that it could apply not only to behemoths like Amazon and eBay but smaller businesses, like a machining company that sells parts online. Amazon actually already charges sales taxes on the goods that it sells directly. Kennedy also said the previous ruling effectively created tax shelters for retailers.

That said, with the Supreme Court decision opening the floodgates to an online sales tax, businesses are anxious - and with good reason.

South Dakota's suit stemmed from a law requiring sales taxes for any out-of-state seller that delivers more than $100,000 worth of goods.

This overturned two Supreme Court rulings: 1967's National Bellas Hess, Inc. v. Department of Revenue of IL and 1991's Quill Corporation v. The estimate represented between 2 and 4 percent of total state and local sales tax collections in 2016, the analysts said. Typically states would focus their efforts on online vendors and not the customers, but with today's ruling, it becomes moot.

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Until now, many sellers that have a physical presence in only a single state or a few states have been able to avoid charging sales taxes when they ship to addresses outside those states.

South Dakota Gov. Dennis Daugaard (R) estimated that his state alone would get an additional $50 million a year in new taxes from online purchases because of this ruling.

But NetChoice, a trade association for e-commerce firms, warned small businesses would have trouble complying with the different tax requirements in each state. North Dakota, the 1992 ruling that previously made it illegal. It's been a long-running issue for Utah, which has claimed a loss of more than $200 million in sales tax revenue from online purchases by consumers.

"Our states are losing massive sales tax revenues that we need for education, health care, and infrastructure", he told the court during the case. The DOR decided that as long as a company is doing business in MA using computer software or hardware located in the state, or is using Massachusetts-based delivery services or payment processors, that counts as having a physical presence in the state.

"The dominant issues under debate in this case involved policy, not law", the representatives also said.

The ruling is likely to lead other states to try to collect sales tax on purchases from out-of-state online businesses more aggressively. And it sued Wayfair, Overstock.com and Newegg, which won in lower court decisions.

In South Dakota v. Wayfair, the question the High Court considered was this: "Should this Court abrogate Quill'ssales-tax-only, physical-presence requirement?"

The court decision was praised by Florida business groups.

(Copyright © 2015. All Rights Reserved.)
 
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