NRF applauds online sales tax decision

Virginia Carson
June 25, 2018

The Supreme Court ruled Thursday that state governments to compel retailers beyond their borders to collect sales-tax revenue from consumers - a move which could rock online shopping.

That's a question on many minds after Thursday's Supreme Court ruling in South Dakota v Wayfair (see EcommerceBytes' article, "Supreme Court Throws Out Longstanding Sales Tax Rule-Book", published on Saturday). Now consumers do almost 10% of their shopping online, a share that will grow exponentially in the future.

"The physical presence rule has always been criticized as giving out-of-state sellers an advantage".

The Trump administration sided with larger retailers with brick-and-mortar stores or warehouses throughout the country, like Apple and Amazon, who have argued that the old ruling unfairly targeted them since they have physical locations in multiple states, letting smaller vendors get away without paying state taxes. The bill would have taken effect if the Supreme Court or Congress had acted to allow such collections, as the high court did Thursday. At that level of sales, with a state sales tax rate of 4.5 percent, it would yield $253 million in revenues. He said the legislation would be tailored to fit within the Supreme Court ruling. The Supreme Court heard the case in April of this year and decided in South Dakota's favor. "As much as I like the internet, real harm has been done", says Mike Brey, owner of two Hobby Works stores in Maryland.

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The Illinois law takes effect on October 1, and it's built on legislation passed in South Dakota that is the focus of the recent Supreme Court decision.

"For retailers who do most of their selling of goods online, if you have more than 2,000 transactions within the state or $100,000 worth of sales, you're required to collect sales tax from IN residents and remit it to the state of IN", the state representative said. In Wayfair v. South Dakota, the Court concluded that the "sales tax nexus" previously articulated by the Court in Quill v. In other words, the plaintiffs have one more opportunity to make any other Commerce Clause challenges to the law (aside from physical presence) and until we know what they opt to do, enforcement must wait.

Sellers that use eBay and Etsy, which provide platforms for smaller sellers, also haven't been collecting sales tax nationwide.

More than 40 states had submitted testimony in favor of upholding the South Dakota law. Online sellers that haven't been charging sales tax on goods shipped to every state range from jewelry website Blue Nile to pet products site Chewy.com to clothing retailer L.L. Bean.

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The tax compliance software and services are created to work with the programs retailers use to process their sales transactions. Five states don't charge sales tax. As the court opinion notes, online retailers from out of state essentially offer lower prices because so few consumers voluntarily pay the sales tax themselves.

"Remote sellers will be required to collect and remit sales tax to North Dakota only if they make a minimum of either 200 sales or $100,000 in sales per year in North Dakota, even if they don't have a physical presence here".

Unlike the local option sales tax, which is sent back to the counties where the sales took place, Grandy said the current online sales taxes collected by retailers located in the state are remitted based on population.

"The world has changed", she said with a smile. Must sellers immediately begin collecting sales tax for all states and all localities?

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