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posted by martyb on Friday June 22 2018, @07:51PM   Printer-friendly
from the everybody-self-reports,-right? dept.

https://www.npr.org/2018/06/21/606463186/with-billions-at-stake-supreme-court-rules-states-may-tax-online-retailers

The U.S. Supreme Court ruled Thursday that states can require retailers to collect and remit sales taxes on out-of-state purchases. The 5-to-4 decision reversed decades-old decisions that protected out-of-state vendors from sales tax obligations unless the vendor had a physical presence in the state.

Those earlier decisions, one half a century ago, the other a quarter-century ago, date back to a time when mail-order sales were relatively small and online sales were all but nonexistent. As the justices acknowledged Thursday, however, the court back then "could not have envisioned" a world in which e-commerce sales have revolutionized the dynamics of the national economy.

Writing for the five-justice majority, Justice Anthony Kennedy said that the previous decisions "were flawed," and in the modern economy, they "create, rather than resolve market distortions." In today's context, he said, the physical presence rule is "an extraordinary imposition by the judiciary on the states' authority to collect taxes and perform critical public functions."

Furthermore, Kennedy said, the previous decisions effectively functioned as a "judicially-created tax shelter" for out-of-state retailers, and put local businesses at a "competitive disadvantage."

The problems with these earlier decisions, Kennedy said, were made "all the more egregious" by technological innovation. "The Internet's prevalence and power have changed the dynamics of the national economy," he wrote in the majority opinion.

[...] The decision was a victory for South Dakota, which, like some other states, has no income tax and relies on sales taxes to fund most of the state's services. Because of dramatic fall-offs in state sales taxes, the state in 2016 enacted a law to test the physical presence rule. Three large online vendors, Wayfair, Newegg, and Overstock, challenged the law in court, and lost on Thursday.

[...] "The chessboard just looks a lot different now," said Stephanie Martz, general counsel for the National Retail Federation, which includes 18,000 businesses large and small. "Now our members are going to be able to figure out how to construct their businesses without worrying about whether putting a distribution center on this side of a state line or that side of the state line will result in a different tax implication."

While the court made clear that the states do not have unlimited power to require sales tax collection, "The court blessed South Dakota's law," said Carl Davis, research director for the Institute of Taxation and Economic policy.

The law specifically protects small businesses from collecting sales taxes if they have less than $100,000 in sales or fewer than 200 transactions in the state. The state also provides sales tax collection software for free for any business that wants it, and using that software immunizes the business from audit liability. Perhaps most importantly, the state law does not permit sales tax collection for past purchases, meaning that businesses don't have to worry about a huge tax bill that they never anticipated.


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  • (Score: 1, Insightful) by Anonymous Coward on Friday June 22 2018, @09:48PM (1 child)

    by Anonymous Coward on Friday June 22 2018, @09:48PM (#696991)

    For all practical purposes, it is rock solid. The Supreme Court will have to overrule itself for the situation to change. Quill vs North Dakota kept online trade open for the last 25 years, but now "things have changed because internet", and states can now effectively levy import tariffs.

    It is the stupidest possible resolution. A federal sales tax or sales tax being paid according to the rules of the seller's site would have been more logical and preferable.

    This will be a drag on 2nd and 3rd tier commerce sites and a gift to giants like Amazon who can afford to negotiate with states on taxation.

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  • (Score: 2) by HiThere on Saturday June 23 2018, @06:10PM

    by HiThere (866) Subscriber Badge on Saturday June 23 2018, @06:10PM (#697288) Journal

    They don't just need to negotiate with states, they also need to negotiate with cities, counties, utility districts, etc.

    The last time I checked the local sales rate is was the sum of about 5 different agencies, each with a quite small share, and, of course, the state with the largest share. But the local rates only apply locally, not outside the areas served by the particular agencies.

    I don't like sales taxes, but they're a whole lot better than bonds, where you end up paying endless interest.

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