Supreme Court’s sales tax ruling could boost Washington budget

Joanna Estrada
June 23, 2018

CNET reports that this overturns a standing 1992 decision that prevented states from collecting sales tax from online retailers that had no physical presence in their state.

Stock prices for major online retailers fell after the decision was announced. Big-box retailers like Walmart, Target, and Costco, on the other hand, recorded modest gains.

The United States Supreme Court ruled Thursday that states may now require online retailers to collect state sales taxes.

Mike Neal, president and CEO of the Tulsa Regional Chamber, issued a prepared statement supportive of the court decision that will create a "stronger, more resilient economy for Oklahoma".

"That has meant about $300 million in lost revenue every year, including $160 million for the state, $112 million for cities and $24 million for counties", Neal said.

The majority overruled a 1992 decision holding that the Constitution's dormant commerce clause bars states from collecting sales taxes from retailers without a brick-and-mortar presence in the state.

The court ruled that businesses can be required to collect sales taxes even when they don't have a physical presence, such as a warehouse or office, in the state where the purchase is made.

But the Supreme Court ruled that the previous court case was no longer relevent in the modern broadband era.

In 1992, the court "did not have before it the present realities of the interstate marketplace, where the Internet's prevalence and power have changed the dynamics of the national economy", Kennedy wrote.

You will soon likely be paying more in taxes for online purchases.

Most of the top 20 online sellers already collect taxes in almost all states, either because they have added local showrooms or warehouses, or because of state laws.

Last year, South Dakota orders reached about $85,000, or $15,000 shy of the new $100,000 threshold, Gendelman said. The ruling should also eliminate the need for the kind of workarounds that MA regulators have recently devised to snare more online vendors, such as arguing that Internet "cookies" constituted a physical presence, a policy Kennedy cited as he dispensed with the physical-presence test. Wayfair Inc., an online retailer of home goods and furniture that challenged the South Dakota law, had more than $4.7 billion in net revenue in 2017, according to the opinion. It ruled that economic activity in a state is a better measure of relevance for purposes of taxation than physical presence. For instance, the tax now could be collected from S.C. shoppers who shop online at outdoor retailer L.L. Bean. For example, the popular electronics seller B&H only charges sales tax in NY and New Jersey, where it has a physical presence. The firm already collects sales tax on the goods it sells directly, but it does not always do so for products sold by independent merchants using its platform. He argued, "Any adjustment to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress".

Other reports by Click Lancashire

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