Etsy sellers confront unknowns after Supreme Court ruling

Joanna Estrada
June 24, 2018

"Vets all over the country have lost a lot of income for a long time", says Dr. John de Jong, owner of Newton Animal Hospital in MA and president-elect of the American Veterinary Medical Association.

The Supreme Court said the physical presence rule was "unsound and incorrect". Consumers were supposed to voluntarily pay sales taxes on remote purchases, although it rarely took place. The decision reverses a 1992 Supreme Court ruling in Quill vs. Kosewicz pays $3,600 a year for tax collection software to handle payments and reports to her home state, Washington.

The ruling is sure to elate the state's small retailers.

Estimates have states missing out on $8 to $13 billion just a year ago. The results were published in the April 1 issue of BRAIN.

"The old physical presence rule created these pockets where businesses were structuring and locating in states where they didn't have a lot of sales so they could sell online and sell across the border, not having to collect sales tax", North Dakota Tax Commissioner Ryan Rauschenberger said.

The decision, in which South Dakota prevailed over the online furniture retailer Wayfair, immediately sent ripples through the internet shopping industry sending shares tumbling in Amazon, eBay, Etsy and others. But in recent years, several Supreme Court justices suggested the moment was ripe to review the 1992 decision, prompting South Dakota to pass a law forcing online stores to collect a 4.5% sales tax if sales and employee count hit a certain threshold.

"The physical presence rule has always been criticized as giving out-of-state sellers an advantage", the ruling says. "States are already confronting the complexities of defining physical presence in the Cyber Age", he wrote.

States have not been able to collect taxes on online transactions unless a business had a physical presence in the state.

The ruling also concerns some small business advocates, who see it as government interference in business. Kennedy wrote that the rule "limited States' ability to seek long-term prosperity and has prevented market participants from competing on an even playing field". The estimate represented between 2 and 4 percent of total state and local sales tax collections in 2016, the analysts said.

The decision also effectively acknowledged the profound shifts in the American retail landscape.

The online stores have contended that charging sales tax would be "burdensome" for small- to mid-sized shops.

That's because lawmakers in Olympia have already moved to expand online sales-tax collections in bits and pieces.

Watch for this story to be updated later Thursday with reaction from the bike industry.

Other reports by Click Lancashire

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