Published: Sun, June 24, 2018
Money | By Michele Stevens

SCOTUS rules states can collect taxes from online shopping transactions

SCOTUS rules states can collect taxes from online shopping transactions

Before Thursday's Supreme Court ruling, the only way a state could collect sales tax from online retailers is if the retailer had a physical presence in that particular state. Many big retailers, such as Amazon.com and Macy's, already collected sales tax for online purchases because they had warehouses or stores in those states. By early 2017, Amazon was collecting sales taxes in all states that have sales taxes, but it was doing so only for merchandise it sells directly, not for merchandise other retailers sell on its platform.

Gary Herbert is praising a ruling by the U.S. Supreme Court on sales tax collection from online purchases. B&H doesn't require that buyers pay sales tax if they place orders outside of NY or New Jersey, and while you're supposed to later pay those uncollected funds when tax time comes around, the vast majority of people don't.

The Supreme Court justices acknowledged that when the previous ruling was made, courts could not have envisioned the modern e-commerce economy we live in today. The law required out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and turn it over to the state.

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The 1992 decision eventually gave a huge boost to out-of-state online retailers in that they received a consistent state tax subsidy with every sale that their in-state and local competitors - brick-and-mortar and online alike - did not receive.

"This will increase our ability to collect", said Scott, who is a member of the firm's Administrative & Regulatory Practice Group. If people bought in stores they would have to pay the state tax anyway and it may be convenient and often cheaper still to buy online. Some states have exemptions for collecting sales tax.

"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. "While we don't know how much this will specifically mean for our sales tax revenue, we are certain it will have a positive impact on our sales tax revenue". When you create a way for people to avoid the tax, you distort their behavior (pushing them to buy online when they might otherwise buy in a store) and you reduce tax collections.

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"What this really does is it provides some fairness and equality to your local merchants".

David Campbell, CEO of TaxCloud, one of the companies that manufactures tax compliance software, also noted that how long it may take for states to weigh in isn't known, since some have part-time legislatures. The decision was seen as a victory for brick-and-mortar stores, which felt they were at a disadvantage to online outlets that did not need to collect the taxes.

eBay has always supported tax policy that is fair to entrepreneurs, artisans, and small businesses. North Dakota, deciding that companies should charge sales tax even in states where they have no physical location. But the promise of additional revenue from online sales taxes may push more states to join.

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