Supreme Court sales tax ruling to make online shopping more expensive

Remigio Civitarese
Giugno 23, 2018

The high court ruled Thursday to overturn The Supreme Court says states can force online shoppers to pay sales tax.those decisions.

The court, in a ruling authored by Justice Anthony Kennedy, revived a 2016 South Dakota law that required larger out-of-state e-commerce companies to collect sales tax, a mandate that the online retailers fought in court. 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.

Depending on estimates - this could mean a windfall of up to $34 billion in state and local sales tax revenues but more conservative estimates, which factor in that the majority of large internet retailers already collect sales taxes through voluntary agreements, put the estimates around $8 to $13 billion, notes Fitch. Justice Anthony Kennedy, who is largely credited for sparking the legal challenge, noted that in when Quill was originally decided there was $180 million in e-commerce sales versus $453.5 billion in retail e-commerce past year. That rule "prevented market participants from competing on an even playing field", Kennedy wrote.

The ruling should also eliminate the need for the kind of workarounds that MA regulators have recently devised to snare more online vendors, such as arguing that Internet "cookies" constituted a physical presence, a policy Kennedy cited as he dispensed with the physical-presence test. Investors in the online retail sector must be fearing a backlash from customers who will now be forced to pay more for their online goods. That's because they typically have a physical store in whatever state the purchase is being shipped to.

Washington, which relies heavily on sales tax for state programs and salaries, has tried for years to collect the taxes on the increasing volume of goods purchased online from merchants outside its borders. Then we have a handful of states who don't even charge sales tax at all.

Tucker's bill establishes a threshold for when online retailers have to collect and remit sales taxes. They added that the lack of sales tax was leading to "significant revenue losses", especially in states where a lack of income tax didn't give them many alternatives. The Supreme Court decision clears the way for states to unwind that competitive advantage.

Chief Justice John G. Roberts Jr. disagreed in his dissent. He argued that the court should not regulate e-commerce.

"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", Roberts wrote in a dissent joined by Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor. Lawmakers in the state, which has no income tax, passed a law created to directly challenge the physical presence rule. South Dakota took that as a prompt to change its state laws, demanding that retailers - whether online or with a physical presence - must collect taxes on their sales to state residents.

Shares of Amazon, Overstock.com, Etsy, Wayfair and other retailers fell after the ruling was announced. The issue has also been an irritant to state governments, deprived of billions of dollars a year at a time many are struggling to balance budgets. The Supreme Court sided with South Dakota 5-4, overturning a previous ruling, Quill Corporation v.

The Trump administration had urged the justices to side with South Dakota.

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