Industry offers insight on Supreme Court decision


Most companies won't reach the annual sales thresholds that trigger automatic collection, but they would still have to start tracking sales in every sales tax jurisdiction. However, the Supreme Court's latest decision is expected to clear the way for other states to follow in South Dakota's footsteps.

"HOM welcomes the ruling by the Supreme Court".

He wrote that "each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the states".

Since 1992, brick-and-mortar stores have faced a crushing disadvantage because they were adding sales tax to the cost of their items while many online retailers were not. The losers, said retail analyst Neil Saunders, are online-only retailers, especially smaller ones. And on the high end, California could collect additional state sales taxes between $1 billion and $1.7 billion per year.

"The idea of a sales tax is to fund local government", Tamny said. The ruling upheld a South Dakota law that exempts sellers with $100,000 or less in sales in the state.

"The whole point of this whole exercise from states and localities is to get more tax money in their coffers so that's going to come out of consumers' pocket books", Melugin said. The compliance costs, along with the sales taxes themselves, will raise the cost of online commerce, burdening consumers and limiting the growth of internet business. Betty Lou Kranz initially anxious about being able to stay in business if she had to track tax rates in hundreds of jurisdictions where her Port Jervis, New York-based company, The Pretzel Princess, sells candy and snacks. Would retroactive enforcement of other state's laws be permissible? Even Wayfair, one of the defendants in the Supreme Court Case, already collects sales tax on 80% of orders.

Essentially, e-commerce businesses and online retailers now must charge a 4.5% sales tax on revenues exceeding $100,000 or more than 200 transactions within the state, just as they would if the sale was generated in a bricks-and-mortar store. They are linked to databases that track tax rates in the 45 states that charge sales tax, and in the thousands of counties and municipalities that have their own taxes.

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The burden will fall disproportionately on small businesses.

A milestone decision by USA lawmakers could soon force Canadian online retailers to pay sales taxes on products sold into the US, part of a long-awaited ruling that will have a ripple effect across Canada's e-commerce sector.

Big chains have been collecting sales tax nationwide because they typically have physical stores in whatever state a purchase is being shipped to.

The tax compliance software and services are created to work with the programs retailers use to process their sales transactions. The Small Business & Entrepreneurship Council advocacy group said in a statement, "Small businesses and internet entrepreneurs are not well served at all by this decision". Writing for the majority however, Justice Anthony Kennedy observed that "Statutes of this sort are likely to embroil courts in technical and arbitrary disputes about what counts as a physical presence". After the Supreme Court's decision was announced, shares in Wayfair and Overstock both fell.

The Trump administration backed South Dakota in the case, urging that Quill be overturned or at least limited to catalog sales. He also called it a "Great victory for consumers and retailers", though consumers will ultimately be paying more and businesses weren't uniformly cheering the decision.

The Court held that a physical presence was no longer necessary to satisfy the substantial nexus requirement, casting its prior holding in Quill as "flawed on its own terms" and the physical presence rule as "artificial in its entirety".