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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: 2) by Immerman on Saturday June 23 2018, @01:23AM

    by Immerman (3985) on Saturday June 23 2018, @01:23AM (#697072)

    Which in turn is the reason there's pressure to normalize the sales tax, at least for interstate sales. If the states all agree to set an interstate sales tax of, say, 8.45%(the current average combined state and local rate) for transactions that don't otherwise require the seller to collect tax, then it would simplify things immensely, and everyone could potentially win (well, except the buyers who are currently illegally dodging sales tax)

    As a private seller selling a few things, you probably wouldn't have to worry about it - you're probably technically required to collect sales tax at a yard sale too, but nobody does, and nobody cares. Do you currently make sure to collect the appropriate tax when the auction winner ends up being from your own state? But if you make a business out of it, then yes, you need to deal with collecting the appropriate taxes. Presumably ebay and others would step up and offer automated tax handling. Perhaps for a modest fee, or perhaps because they're pressured by states to do so automatically on all tansactions. It's not exactly difficult anymore, just tedious and a little time consuming to collect the information and keep it up to date. I could even see the fallout of this ruling being establishing a (legally) definitive federal database with sufficient information to translate any delivery address into a breakdown of the state (and possibly local) taxes due. Sync your bookkeeping app to it every so often, and actually pay the taxes due on time, and you've covered your ass.

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