Supreme Court Sides With States On Online Sales Taxes

US Supreme Court Online shoppers can be forced to pay sales tax

US Supreme Court Online shoppers can be forced to pay sales tax

According to the General Accountability Office, prohibitions against collecting sales taxes from online retailers cost states as much as $13.4 billion a year ago. North Dakota - that had blocked states from compelling retailers with no "physical presence" in that state to collect sales taxes.

Up until the high court's ruling Thursday, retailers were not required to collect sales tax from consumers unless they had a physical presence in the shopper's state.

In anticipation of the ruling, IL lawmakers included language in budget bills passed last month to allow the state to begin collecting sales tax from a broader swath of online purchases. Etsy and Wayfair are down over 5% (Wayfair initially dipped by almost 10% but has inched up a bit); eBay has dropped by almost 2%. USA Today points out that most of the top 20 e-commerce sellers already collect sales taxes in most states because they have warehouses or local showrooms there or because state laws can successfully reach them.

"(The prior decision) puts both local businesses and many interstate businesses with physical presence at a competitive disadvantage relative to remote sellers", Justice Anthony Kennedy wrote for the majority.

Justices John Roberts, Stephen Breyer, Elena Kagan, and Sonia Sotomayor dissented in the ruling.

In a blow to huge billion dollar online retailers such as Amazon and eBay, the Supreme Court has ruled that states can impose a tax on goods and services ordered online.

A 5 to 4 ruling from the Supreme Court will change that, but Kevin McCarthy with the Arizona Tax Research Association says the impact won't immediately be felt in Arizona.

Yesterday, the Supreme Court decision in Wayfair v.

Although it is the poster child for big e-commerce, Amazon wasn't involved in the lawsuit and the immediate decision doesn't affect the company dramatically.

The case the court ruled on has to do with a law passed by South Dakota in 2016. This will add a new layer of complexity for small businesses that were previously selling without sales tax, but the specific rules will vary by state. Amazon collects sales tax for products that it sells directly, but third-party vendors that sell goods on the site may not collect sales tax. The decision means that South Dakota can now dictate some of the business operations of firms that have no representation in the South Dakota legislature.

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