Supreme Court lets states force online retailers to collect sales tax

Pool  Getty Images

Pool Getty Images

Nebraska Gov. Pete Ricketts said his administration is "analyzing" Thursday's U.S. Supreme Court decision about online sales taxes. Three large online vendors, Wayfair, Newegg, and Overstock, challenged the law in court, and lost on Thursday.

"This is neither the first, nor the second, but the third time this court has been asked whether a state may obligate sellers with no physical presence within its borders to collect tax on sales to residents", Roberts wrote.

The 5-4 ruling is widely seen as a victory for brick-and-mortar stores, which previously said online retailers' ability to avoid sales-tax collection gave them an advantage. Legislative action has been stalled while the Supreme Court was deciding this case.

"It's a great day for South Dakota and Main Street America", said South Dakota Attorney General Marty Jackley. Consultants like Mark Grinis, partner, global real estate at EY, said he did not expect a surge in demand for stores even if prices ticked up for online businesses.

The decision could lead to individual state sales tax laws, or Congress could step in to make more uniform regulations.

Shopping online is about to get more expensive.

The case originated from a lawsuit that the state of South Dakota had filed against four online retailers, including the online furniture retailer Wayfair. In North Dakota for example a seller can sell up to $100,000 or 200 transactions with no tax.

Regardless of where new sales tax laws come from, small sellers are likely to be seriously affected.

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Recent attempts at the Roundhouse to impose the state's gross receipts tax on internet vendors have failed - one proposal was line-item vetoed by Gov. Susana Martinez previous year - but lawmakers from both political parties have described the measure as a fairness issue that could help local businesses. Some states have exemptions for collecting sales tax.

Enzi says the Supreme Court's decision Thursday is a win for those brick-and-mortar stores that support local communities and the state and local governments that rely on sales and use taxes to provide essential services.

In South Dakota, lawmakers in 2016 boosted the state's sales tax rate from 4 percent to 4.5 percent, but required the increase to be scaled back if the state could ever collect from out-of-state online retailers. But the court found it is "unworkable" to apply a rule based on physical offices to online sales, saying it caused more confusion as some states maintained that even allowing users to download an app in their state counted as a "physical presence".

Second, Hawaii is not a member of the Streamlined Sales Tax Agreement and can not be a member unless its laws are amended significantly.

Sites such as eBay and Etsy, which serve as a marketplace for individual merchants and small businesses, said that having to collect taxes across the country would put their sellers at a disadvantage.

"The world has changed", she said with a smile.

For small businesses, local advertising may now more effectively draw consumers away from the e-Commerce giants.

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