US Supreme Court Permits States To Tax Remote Sales

Source Etsy

For example, a business with one salesperson in each state must collect sales taxes in every jurisdiction in which goods are delivered; but a business with 500 salespersons in one central location and a website accessible in every state need not collect sales taxes on otherwise identical nationwide sales. Many state legislatures will enact laws to take advantage of the Supreme Court's decision, and implementation is likely to be drawn out, uneven, and confusing.

Writing for the court, Justice Anthony Kennedy said the 1992 ruling, which involved catalog sales, was obsolete in the e-commerce era. That unfair advantage for web retailers was called out Thursday by the U.S. Supreme Court in a decision that should help level the playing field between bricks-and-mortar and Internet-based sellers. "The government shouldn't discriminate against one type (of retailer) or pick winners and losers". Wayfair already collects and remits sales tax on approximately 80 percent of our orders in the United States, a number that continues to grow as we expand our logistics footprint.

However, the potential tax gains may be far lower than hoped.

"A lot about our world and economy has changed in the 26 years since our nation's highest court last ruled on this issue", Holcomb said. Customers were generally responsible for paying the sales tax to the state themselves if they weren't charged it, but most didn't realize they owed it and few paid. Meanwhile litigation is sure to ensue over various state and local laws, tax collection enforcement and definitions of business and product exemptions. Because of Wayfair, state government officials could close an estimated gap of $169 million to $279 million in tax revenue that had been lost to sales by companies operating over the internet.

Third, if taxes are the price people pay for government goods and services, the bulk of the costs associated with a sale are associated with the seller's jurisdiction, not the buyer's.

Grover Norquist, president of the anti-tax group Americans for Tax Reform, said in a statement, "Today the Supreme Court said yes - you can be taxed by politicians you do not elect and who act knowing you are powerless to object". In a 5-4 ruling, the Court upheld a South Dakota law requiring any merchant, online or otherwise, to collect and remit a 4.5% sales tax if they conduct more than 200 transactions in the state or have more than $100,000 in annual sales. Many will face additional costs associated with obtaining software or services created to help them collect the taxes and remit to the appropriate state authorities. If a company doesn't expect to reach the threshold in a state, it may decide not to collect tax. Concurring with the majority opinion, new Justice Neil Gorsuch wrote that the ruling is meant to "rightly end the paradox of condemning interstate discrimination in the national economy while promoting it ourselves". Chief Justice John Roberts echoed our stance in his dissent, stating “The burden will fall disproportionately on small businesses. The ruling will allow states to collect sales taxes from online retailers. Kennedy also pointed out to the existence of SAS and tools that "may make it easier for small businesses to cope" with the new compliance. After the Supreme Court's decision was announced, shares in Wayfair and Overstock both fell. Plenty of retailers still do not collect the tax and consumers aren't keeping track to pay it on their income taxes. The reason is that Hawaii's general excise tax has three separate tax rates. The South Dakota Supreme Court invalidated the law because Quill Corp. v.

The Court held that a physical presence was no longer necessary to satisfy the substantial nexus requirement, casting its prior holding in Quill as "flawed on its own terms" and the physical presence rule as "artificial in its entirety".

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