The Supreme Court ruled Thursday that state governments to compel retailers beyond their borders to collect sales-tax revenue from consumers - a move which could rock online shopping.
Beginning in 2014, as part of a compromise, Tennessee started collecting sales tax from online Amazon purchases because the behemoth online retailer had a physical presence in state with warehouses and distribution centers in Chattanooga, Lebanon and Murfreesboro. "Now everybody is going to be collecting sales tax whether you order from Amazon or anywhere online". That's a question on many minds after Thursday's Supreme Court ruling in South Dakota v Wayfair (see EcommerceBytes' article, "Supreme Court Throws Out Longstanding Sales Tax Rule-Book", published on Saturday).
You'll have to pay up if the state you live in passes laws that require online retailers to collect sales tax, says Joseph Bishop-Henchman, the executive vice-president of the Tax Foundation. NY and California's rules are more complex, and those states have sought to increase sales tax collection by using broader definitions of what it means to do business within their borders. The Court noted that the law had three features created to prevent discrimination against or undue burdens upon interstate commerce: it had a safe harbor for those transacting limited business in the State; it was not retroactive; and the State was a member of the Streamlined Sales and Use Tax Agreement, which has been adopted by more than 20 States to standardize taxes to reduce administrative and compliance costs. Small and medium size businesses are most negatively impacted These business are faced with a huge problem because compliance is complicated.
"This will increase our ability to collect", said Scott, who is a member of the firm's Administrative & Regulatory Practice Group.
Even before that change, Pennsylvania got $202 million of online sales tax revenue in 2017 - 2-1/2 times as much as it did in 2014, when it received just $81.2 million, according to information the Pennsylvania Treasury provided to Reuters. Small businesses may have to figure out how to comply with various state sales tax laws, though there are software options to help.
Sales tax collection in Florida already has been evolving.
"It is going to squash the entrepreneurship, I just can not stress that enough", Christy Keyon, who owns Bird and Bean Coffee House and Naomi and Olive Gift shop said. The ruling authored by Justice Anthony Kennedy revived a 2016 law that required larger out-of-state e-commerce companies to collect sales tax a law that retailers fought in court.
Most sales taxes are called "sales and use tax", because consumers generally have a legal obligation to report and pay use tax when sales tax isn't collected on a sale. He believes the new ruling will "level the playing field" for brick and mortar stores in West Virginia. They are linked to databases that track tax rates in the 45 states that charge sales tax, and in the thousands of counties and municipalities that have their own taxes.
"It really is a disadvantage to local brick and mortar stores". He estimates his practice loses more than $75,000 in sales annually to online stores.
Georgia state officials have been pushing for more internet retailers to pay taxes in recent years.