SCOTUS ruling has huge implications for online shopping

While online marketplaces eBay and Etsy see the issue as a big retailer versus small seller issue, the NRF says today’s ruling creates a fair and level playing field between online merchants and local retailers.

The tax is 6.25 percent.

“Remote sellers will be required to collect and remit sales tax to North Dakota only if they make a minimum of either 200 sales or $100,000 in sales per year in North Dakota, even if they don’t have a physical presence here”.

But the move could impact thousands of smaller retailers in MA and across the country as they try to comply with a labyrinth of differing state and local rules.

The case originated from a lawsuit that the state of South Dakota had filed against four online retailers, including the online furniture retailer Wayfair.

The decision is largely viewed as a victory for states and local businesses. It was your responsibility to pay sales tax on your untaxed online purchases at the end of the year, but virtually no one did that.

“The Court’s decision provides no hard-and-fast rules for states to follow”, says Carl Davis, research director at the Institute on Taxation and Economic Policy, in Washington, D.C.

Allowing some online retailers off the hook in collecting sales taxes put small local businesses at a disadvantage, Kadoun said. Five states don’t charge sales tax.

Two popular companies named in the Supreme Court decision – home-goods retailer Overstock.com and electronics merchant Newegg.com – now collect no NY sales tax because they have no physical offices here. Instead, consumers themselves were expected to voluntarily submit the required taxes-and many did not.

Justice Anthony M. Kennedy, who wrote the majority decision, said the previous ruling unfairly disadvantaged traditional brick-and-mortar stores. Kennedy wrote that the rule “limited States’ ability to seek long-term prosperity and has prevented market participants from competing on an even playing field”. Amazon, Walmart, Target, Costco, Sears and some others already collect state sales taxes on online orders from buyers in states that impose sales taxes. Furthermore, because most of the larger catalog and online retailers are based in Florida and Pennsylvania-two states with no tax on cigars-the move to collect additional taxes would be dramatic.

Without that, there’s theoretically nothing stopping a state from copying South Dakota’s laws and insisting that all online retailers above a certain size collect sales tax.

The legal issue goes back to 1967, when the Supreme Court ruled that a state couldn’t require an out-of-state retailer to collect a use tax unless the retailer had enough contacts with the state.

Governor Pete Ricketts reacted to the ruling.