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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.
(Score: 2) by AthanasiusKircher on Friday June 22 2018, @11:40PM (3 children)
What are you going on about? You aren't paying the tax; the buyer is. The buyer is paying for the privilege of getting goods from out-of-state and importing them.
Before, the buyer likely had the same obligation to pay use tax, but the majority of people cheat and don't pay it on imported goods. So, before if you were an internet vendor, you might have gotten an apparent price advantage over a local vendor due to the tax evasion of some of your customers. Now, you just have to help them pay their taxes, like all responsible citizens should always have been doing.
(And no, I'm not a huge advocate for sales taxes or use taxes. I think they're mostly stupid and regressive. But I do obey tax law.)
(Score: 2) by VLM on Saturday June 23 2018, @12:38AM (2 children)
Ah I think I see some of the confusion between people who pay tax on the DoR website and others.
No, at least in my state, I calculate and pay the tax based on calculations of each transaction. Its a paperwork nightmare. Brick and mortar get services from the state in exchange, and being local they have representation in government however minimal. An internet reseller gets no representation and no government services, just the paperwork nightmare, in exchange for... well... nothing, really.
Perhaps a good analogy would be, I am totally chill with what services the state DNR provides and my elected official oversight of the DNR so I'm chill with paying for a fishing license. Now if I give you a fish sandwich for dinner and you live in another state, what is this BS of now I have to register and pay a fishing license for YOUR state, merely because your house is on one side or another of some arbitrary line that doesn't really mean anything to me? Certainly I have no representation in your state and your state provides me no service, and its really none of its business that I sold you a fish sandwich. If YOUR state doesn't like you buying fish sandwiches from me, YOUR state should fight you, not me, after all, it is YOUR state, not mine. YOUR state and where YOU live has nothing to do with my business of making fish sandwiches over here in MY state where I happily cooperate fully with my state. I mean, by definition, YOUR state is YOUR state, I should have no interaction or care about it. I'm all good with MY state, but now I need to get involved with rando orgs that I have nothing to do with directly, merely people I do business with are somehow related to them so that mysteriously obligates me, like the transmission of a bad STD. Like a bad mafia movie.
Actually I can make an even more horrific analogy. Lets say I have a restaurant and its 100% legal and inspected, because, sure, why not. Now, because you live in ... (making this up) NYC, you visit and eat a fish sandwich. Supposedly its a great idea that I now have to register with and cooperate with the NYC restaurant inspection department; after all, you live in NYC so somehow that means I need to follow their laws even though I don't live in their jurisdiction, have no election control over them, they provide no useful service to me... other than you happen to live there.
Oh even worse, lets say you visit my house which is compatible with all local building codes. But you're from NYC so that means I'm in serious legal trouble unless my drywall is inspected by the NYC housing inspectors, merely because you live there.
(Score: 2) by AthanasiusKircher on Saturday June 23 2018, @12:53AM
That's all a fair point and expressed more clearly than before, but you're still a bit odd for bringing up the "representation" thing when you're seeking as an outsider to export goods into another state.
The paperwork is most certainly a valid issue, which is why the appropriate response now is for Congress to finally act and make some basic uniform policy governing this stuff for small businesses that will make this work without an undue burden.
As much as I'm for federalism and leaving things to local government when appropriate, this is actually for once a direct on-point example of "regulating interstate commerce" that Congress is not only empowered to act on, but I'd say woefully neglecting its duty in not dealing with sooner.
(Score: 2) by frojack on Saturday June 23 2018, @06:46AM
I've heard it said that California is crazy merciless about this sort of thing, and will pursue you across state lines for licenses and taxes for even the remotest connection to California.
Buy a house in Arizona, and move there, but visit a customer in California, and they will be after you for income tax in Arizona for years. Just don't get picked up for speeding, because they will fins that bogus tax bill enough to hold you.
No, you are mistaken. I've always had this sig.