Supreme Court sides with online sales tax

Cornelia Mascio
Giugno 22, 2018

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On Thursday the Supreme Court reversed more than half of a century of precedent.

Oklahoma and its local communities are positioned to scoop up more sales tax revenue from online retailers, supported by a U.S. Supreme Court decision Wednesday and state legislation set to take effect July 1.

State officials - including in SC, with its 6 percent sales tax - have argued they were losing out on millions - if not, in some cases, billions - of dollars in revenue a year under the Supreme Court's previous 1992 decision. "Clearing this hurdle puts Oklahoma in a position to collect much-needed new revenue to fund core government services". The internet retailers argued that allowing every state to collect taxes on online sales would cause confusion and unreasonable burdens in today's online-heavy retail economy.

Justice Anthony M. Kennedy wrote the majority opinion, joined by Justice Ruth Bader Ginsburg and the court's three most conservative justices.

The exact impact of the ruling on Florida's sales tax collections is unknown but it could be significant. 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".

At issue in the case was the constitutionality of a South Dakota law that requires out-of-state retailers to pay sales taxes if they make at least 200 sales or at least $100,000 in sales. Now, rivals will be charging sales tax where they hadn't before. That's because they typically have a physical store in whatever state the purchase is being shipped to. Thirty-one states already levy online sales taxes of some sort. Few people actually comply.

A 2011 report issued by the Indiana Fiscal Policy Institute found the state is likely losing about $77 million in sales taxes on these e-commerce transactions each year.

Supreme Court clears way for states to collect... It will eliminate the unfair disparity between locally owned retailers and their online competitors.

"Startups and small businesses may benefit from the physical presence rule, but here South Dakota affords small merchants a reasonable degree of protection", the ruling says.

Currently, businesses shipping a product to another state where it does not have a "physical presence" - a store, office or warehouse - are not forced to collect that state's sales tax.

The governor also expressed gratitude for some online retailers, including Amazon, which "already have agreed to collect Oklahoma sales tax on items sold directly through their companies".

Shares of Amazon, Overstock, Wayfair, Etsy and eBay fell in trading immediately after the ruling.

"We're reviewing the decision", was all agency rep James Gazzale said in an emailed statement. First, the Act applies a safe harbor to those who transact only limited business in South Dakota. On Twitter, President Donald Trump called the decision a "Big victory for fairness and for our country". "A virtual showroom can show far more inventory, in far more detail, and with greater opportunities for consumer and seller interaction than might be possible for local stores". South Dakota Attorney General Marty Jackley said South Dakota businesses will now have tax fairness and a level playing field.

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