Get ready for more sales taxes on online purchases

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane  AP

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane AP

That's a big issue, considering that e-commerce sales in the USA were $435.5 billion a year ago, vs. $180 billion in mail-order sales in 1992 when the court issued its first ruling on interstate sales and taxes. While retailers were not required to collect sales tax, that tax was technically still owed. Quill Corporation v North Dakota decided that a company could not be charged state sales tax in a state that it did not have a physical presence. Dissenting justices were John Roberts, Stephen Breyer, Sonia Sotomayor, and Elena Kagan. "Over 10,000 jurisdictions levy sales taxes, each with [different rules]".

The ruling will hit small businesses the hardest, but they may not be felt right away.

Peters authored the internet sales tax legislation in 2016 that was the basis for Thursday's ruling in South Dakota v. Wayfair. After the decision was announced, shares in Wayfair and Overstock both fell, with Wayfair down more than 3 percent and Overstock down more than 2 percent. The stock was last off 0.7 percent and was among the biggest drags on the benchmark S&P 500 stock index. Big online retailers have, in many cases, managed to avoid paying sales tax when selling goods to consumers because previously, courts said that a company must have a physical presence in the state to be taxed.

In recent years, brick-and-mortar retailers, including bike retailers, had supported federal legislation that would create a nationwide system to collect state taxes.

Some proponents of overturning Quill include major retail trade organizations such as the National Retail Federation and Retail Industry Leaders Association.

But a state finance official said the Department of Revenue does not anticipate taking any immediate administrative action or issuing additional guidance in light of the Supreme Court decision. The old rule enabled online commerce to boom and helped drive an explosion of small businesses that sell their wares.

"Consumers will quickly feel the negative effects as those businesses dry up or are forced into the arms of Internet giants", said Chris Cox, NetChoice outside counsel.

"Will states step forward and pass laws similar to South Dakota?" asked Annette Nellen, director of the Masters in Science in Taxation program at San Jose State University, on Thursday. That led to the legal challenge of Quill Corporation v.

The Supreme Court justices ruled 5-4 that states could collect sales tax from internet sales. Forty-five of the 50 states impose sales taxes.

A November 2017 report by the U.S. Government Accountability Office estimated that MA could gain an estimated $169 million to $279 million in additional tax revenue if it could tax all remote sellers. South Dakota does not collect income tax, and therefore relies heavily on sales taxes to keep its coffers full.

"It certainly clears up any confusion, clears up some of the rhetoric", said Rep. Jay Kaufman, D-Lexington, chairman of the Committee on Revenue.

"Today's decision culminates years of tireless work by the retail community to reverse a pre-internet era rule that distorts free markets and puts local brick and mortar stores at a competitive disadvantage with their online-only counterparts".

Another potential consumer impact: If all states require businesses to collect sales taxes, individual taxpayers wouldn't have to figure out our use taxes come tax time.

The biggest e-tailer in America, Amazon, now collects sales tax in the 45 states that charge sales tax, though it does not collect taxes on items sold by third-party sellers.

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