Supreme Court Rules States Can Require Sales Tax for Online Purchases

Supreme Court Rules States Can Require Sales Tax for Online Purchases

Supreme Court Rules States Can Require Sales Tax for Online Purchases

IL consumers will likely see sales tax charged on more online purchases after the Supreme Court loosened restrictions on states' ability to require retailers to charge the tax. He also had supported Nebraska joining with 33 other states and the District of Columbia a year ago in supporting South Dakota's case before the high court. The decision overruled a decades-old precedent that had protected out-of-state sellers from being required to collect such taxes.

"This is a disastrous decision for New Hampshire's economy and does not take into account the day-to-day challenges of running a small business", Sen. "New Hampshire small businesses do not have the time or resources to become tax collectors for other states".

Wayfair said that it "welcome [s] the additional clarity provided by the Court's decision today". Lawmakers in the state, which has no income tax, passed a law created to directly challenge the physical presence rule.

But it's undeniable that sales taxes represent a key source of revenue for state governments starved for funding.

On the flipside, USA states will benefit to the tune of somewhere between $8bn and $33bn annually in increased revenues.

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Chief Justice John Roberts dissented, along with Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan, saying USA lawmakers should take up the issue.

South Dakota wanted out-of-state retailers to begin collecting the tax and sued several of them: Overstock.com, electronics retailer Newegg and home goods company Wayfair.

Many large online retailers, including Amazon and Wal-Mart, already collect sales taxes because they have a large enough physical presence in each state to qualify as taxable by states. "Issues regarding smaller mom-and-pop retailers, and the amount of sales necessary to impose the collection obligation on them, would be decided on a case-by-case basis", he said.

All that is soon to change as today's landmark reversal gives states the authority to start demanding their fair share of internet sales tax. The 1992 decision predates e-commerce and once the internet came of age it accelerated the demise of mom and pop retailers on Main Street, he said on CNBC.

Some retailers argued it's unreasonable to expect businesses to monitor and comply with sales tax regulations in parts of the country where they have customers, but no operations.

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Today's ruling caused publicly traded e-commerce companies share prices to tumble, with Shopify, Etsy, Amazon, eBay, Alibaba all recording losses in midday trading on their respective US exchanges.

Some major online retailers, such as Amazon, have already agreed on their own to collect sales tax nationwide. Amazon.com Inc. shares fell as much as 1.9 percent before paring losses.

Until now, many sellers that have a physical presence in only a single state or a few states have been able to avoid charging sales taxes when they ship to addresses outside those states. North Dakota, that involved mail-order catalogs.

Brick-and-mortar stores for years have wrestled with the reality that their online competitors could effectively sell similar goods tax-free, and thus less expensively.

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The decision [PDF] will have a huge impact on American ecommerce, with large companies required to calculate, charge and hand over billions of dollars through dozens of different taxes.

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