Saturday, 21 July, 2018

Shopping online? Now you will have to pay taxes

The Latest Small companies may have to charge sales tax Supreme Court decides online sales tax issue
Oscar Goodwin | 22 June, 2018, 18:29

"With the incredible evolution of technologies and the growth of internet sales, this Supreme Court ruling will help level the playing field between our Hoosier-based companies that operate retail stores and out-of-state companies that sell products and services online in our state".

The court's 5-4 ruling, issued Thursday, overturns a 1992 decision that held states can only tax businesses with a physical presence in the state.

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.

Likewise, advocates for the state's mom-and-pop stores - which primarily make sales in brick-and-mortar outlets, not online - say that two-decade-old decision harmed small business owners. Even though the effective date of the decision is today, Rauschenberger is unsure when online retailers will be on the hook. They added that the lack of sales tax was leading to "significant revenue losses", especially in states where a lack of income tax didn't give them many alternatives. Brick-and-mortar retailers have argued that online retailers have an unfair advantage. Residents are now obligated to pay a use tax on out-of-state online purchases.

IL consumers are supposed to pay use tax to the state if sales tax isn't charged on a purchase, but experts say underreporting is an issue.

"Amazon's third-party business should be minimally affected in the long term from states imposing taxes on online sales, as the impact is equal across the e-commerce ecosystem." said Jitendra Waral, an analyst at Bloomberg Intelligence.

Shares of large internet sellers tumbled in midday trading on June 21 after the US Supreme Court said those merchants could be required to collect sales tax in US states where they don't have a physical presence. Consumers were supposed to voluntarily pay sales taxes on remote purchases, although it rarely happened. See Sales Taxes Report 22 (indicating that "costs will likely increase the most for businesses that do not have established legal teams, software systems, or outside counsel to assist with compliance related questions"). North Dakota, which held that only those businesses with a physical presence in a state had to collect sales taxes from customers in that state. For example, the popular electronics seller B&H only charges sales tax in NY and New Jersey, where it has a physical presence.

For this case, South Dakota v Wayfair Inc., Justice Ruth Bader Ginsburg joined Justices Samuel Alito, Neil Gorsuch, Anthony Kennedy, and Clarence Thomas to deliver the majority opinion.

The ruling is a victory for big chains with a presence in many states, since they usually collect sales tax on online purchases already.

The Massachusetts law went into effect, but was challenged in court by a company, Crutchfield Corporation, which said it violated federal law.

"This is a great day for South Dakota". Likewise, eBay now does not require sellers to collect state sales taxes.

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