States can collect sales tax from online sellers even if those companies don’t have a physical presence in the state, The Supreme Court ruled Thursday morning in a case with far-reaching implications for the future of online commerce. The ruling potentially means thousands of small businesses that never collected sales tax except in their home states will be responsible for tax in some 10,000 state and local jurisdictions nationwide.
Thursday’s ruling comes after President Donald Trump’s criticism of Amazon.com Inc (AMZN.O) on issues including taxes. Marty Jackley, the state’s attorney general, defended the law by claiming that South Dakota was “losing millions for education, healthcare and infrastructure” and that the unfair playing field was hurting its citizens.
For a better understanding of how the ruling could impact consumers and businesses in the Chicago area, reach out to local legal experts. The focus in e-commerce has shifted to speed of delivery in recent years, and as competition heats up, online retailers have had to locate their warehouses and distribution centers closer to population centers.
The new ruling will force online retailers to pay billions more in taxes, dealing a blow to smaller companies that were previously exempt from state taxes. About half its sales involve goods owned by millions of third-party merchants, many of which don’t collect taxes.
Joe Henchman, who runs the state tax policy project at the Tax Foundation*, a conservative think-tank that supports the Wayfair decision, has been talking with officials from states who are looking to tax online sales in a way that complies with it.
“This will go a long way to ensure local businesses are on a level playing field with online retailers”, he said. Online prices are still likely to be lower than in-store, simply because online sellers have lower infrastructure and labor costs.
The surprising ruling ended years of legislative battles as it overturned a 1992 decision. “The internet is ingrained as part of commerce today”. After years of congressional inaction, the decision brings cities one significant step closer toward achieving Main Street fairness.
Even with the Court’s favorable decision, JA will continue to push Congress to pass federal legislation in order to create a universal federal framework for sales and use tax collection, versus a state-by-state solution.
They will have to examine and retrofit operations to determine where they have to collect tax, whether their goods are taxable, and how they will handle tax computation, filing, and remittance, consultants said. The department said it would provide guidance to retailers within 30 days. The Quill court ruled that the catalog seller didn’t have to collect sales tax from North Dakota residents. Republican state lawmaker Jeff Partridge, who sponsored the provision in the teacher pay measure, said he’s looking forward to the “prospect of a tax cut for the citizens of South Dakota”.