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Supreme Court rules in favor of online sales tax

24 June 2018

In a decision with billion-dollar implications for online retailers and their customers, the U.S. Supreme Court ruled Thursday that states may require Internet retailers to collect sales tax and send it along to state treasuries.

Shares of Amazon and other online retailers fell Thursday morning after the Supreme Court ruled that states could require tax collection on digital sales. They said local tax laws vary widely across the nation and calculating sales taxes for 10,000 local taxing jurisdictions remains a daunting task. A number of states have already legislation that will trigger sales tax collection should the Supreme Court decision allow it, as it has. B&H doesn't require that buyers pay sales tax if they place orders outside of NY or New Jersey, and while you're supposed to later pay those uncollected funds when tax time comes around, the vast majority of people don't.

The US Supreme Court ruled in favour of South Dakota. Some did this to avoid having to provide state governments with their customer data so that the state could charge consumers directly, says Stephen Kranz, a partner at the law firm McDermott Will & Emery. Kennedy also noted the existence of software that "may make it easier for small businesses to cope" with compliance.

Starting next year shoppers will have to pay sales tax for all online purchases.

This week's court decision lets states close that loophole and will ultimately lead to a more rational tax system - which will be good for the public, even if it means missing out on deals from time to time. "With our state's growing economy, I don't want to reach into West Virginians' pockets when we don't need to", he said. The NRF had argued in a friend-of-the-court brief a year ago that there's a wide variety of software available to automatically collect the sales tax owed.

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"As to who will have to collect, once that case is decided, it seems their economic nexus definition, or what we are now referring to as a de minimus threshold for interstate commerce, which is any retailer with more than 200 transactions or $100,000 of sales into South Dakota over the trailing 12 months". For example, if you buy a laptop or printer from Newegg or a loveseat from Overstock you should budget for state sales tax. The decision was seen as a victory for brick-and-mortar stores, which felt they were at a disadvantage to online outlets that did not need to collect the taxes.

President Donald Trump has also criticized Amazon, whose founder, Jeff Bezos, also owns The Washington Post, saying the online retailer does not collect any sales tax.

"The Trump Store has been a clear victor under what the court just labeled 'a judicially created tax shelter, '" Davis said. Brick-and-mortar gets some relief.

While almost impossible to determine how much revenue Johnson City or Washington County loses to online sales, state officials estimate Tennessee loses between $200 million and $450 million annually. Online sellers that don't charge sales tax on goods shipped to every state include jewelry website Blue Nile, pet products site Chewy.com and clothing retailer L.L. Bean.

Supreme Court rules in favor of online sales tax