The U.S. Supreme Court ruled in a 5-4 decision Thursday that online retailers can now collect sales taxes on out-of-state purchases.
In 2016, South Dakota Governor Dennis Dugerd said his state is losing about $ 50 million a year in sales taxes, as many online retailers are not physically in the state.
Forsyth Mayor Eric Wilson says the ruling is a win-win for local governments. That precedent dates to 1967, when the court said mail-order retailers were obligated to collect sales taxes only in states in which a company had a physical presence, such as a retail store or distribution center.
Honestly, this shouldn't be surprising to anyone, but it's a bummer nonetheless. The South Dakota Supreme Court invalidated the law because Quill Corp. v. He said retail stores have essentially become showrooms for things he buys online and he will keep shopping online if he can still get a better price.
The Supreme Court decision "will certainly change how states look at these laws but we may see states trying to see if their versions could survive even if they are less simplified and direct than South Dakota's law", Joseph Bishop-Henchman, an executive vice president at the Tax Foundation, said in a blog post. The use tax Many states have a use tax equivalent to the sales tax that applies to online purchases but most online businesses do not comply with it. According to the Chicago Tribune, Illinois can collect more sales tax thanks to a Supreme Court ruling on the matter. North Dakota, a 1992 case, had held that physical presence was necessary. That could bring $500 million or more in additional sales tax revenue to Florida, and the Legislature should require that the tax be collected. "The Court should not act on this important question of current economic policy, exclusively to expiate a mistake it made over 50 years ago".
Justice Anthony Kennedy, who wrote the majority opinion, said the physical presence rule put brick-and-mortar businesses at a disadvantage, because they had to charge sales taxes but Internet retailers did not.
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Nevertheless, the Court stopped short of giving its full blessing to the South Dakota law, stating that the taxpayers had made other challenges to the law and those need to be addressed by the state courts first.
Another reason behind the limited impact is that some smaller companies have been charging sales tax in recent years, even though they weren't required to. Until that case is resolved, South Dakota has already enjoined itself from enforcing that law on any out-of-state retailers.
Second, Hawaii is not a member of the Streamlined Sales Tax Agreement and can not be a member unless its laws are amended significantly.
Meanwhile, the biggest players like Amazon have had little choice but to establish true physical presences (warehouses and such) and start collecting tax in all or virtually all states.
An analysis by Barclays found that Louisiana would get an estimated 3 percent bump in total tax receipts if it begins forcing out-of-state online retailers to collect sales taxes. If people bought in stores they would have to pay the state tax anyway and it may be convenient and often cheaper still to buy online.