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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: 3, Interesting) by VLM on Friday June 22 2018, @08:05PM (24 children)
One of the benefits of being late is the whole things been hashed out elsewhere.
1) The decision was based on equal punishment, if locals have to pay, remotes should have to pay.
2) However there are two other criteria for taxation which are not being discussed. One is equal representation "no taxation without representation" I have no ability to influence ... South Dakota ... if they have stupid tax policies, yet I'm being farmed for taxes. Kinda like the colonies and Great Britain and tea taxes back in the old days.
3) The other criteria carefully being ignored is if I live in ... Illinois (which I don't, although I visit for business "often"), then the state "deserves" a cut of sales revenue for facilitating the sale via those beautiful roads and professional police supervision and so forth. But I ship some stuff to ... South Dakota, what has SD ever done for me, especially pre-sale? If I use a private carrier like UPS, the government of SD ha done approximately NOTHING to help me, thus deserving no tax revenue. IRL I just got back from a nice business lunch and my state deserves a cut of the restaurant's revenue because the gov provided roads and police and fire coverage and restaurant food inspections mean its unlikely I'll die of food poisoning and the EPA keeps the air clean around the restaurant and all kinds of useful big government things... now I ship some ebay crap to South Dakota, what exactly has SD done for me to facilitate the transaction... nothing? The feds invented the Zip Code decades ago, thats about it? This is mobster style protection money, not fair taxation.
(Score: 2) by VLM on Friday June 22 2018, @08:13PM (1 child)
Oh and a side dish of previous discussion is the court stated the feds can't tell the states how to apply state taxes.
The feds were applying a common sense rule to all states.
The ruling does not mean states MUST implement stupid laws, it merely means the feds can't stop states from implementing stupid laws.
You KNOW what poorly governed states like CA or IL or NY will do, vs intelligently governed states, now that the feds leash is off. So the real effect long term is likely to be increased rate of capital flight and job loss in nanny / leftist states. And that's where most of the politicization comes into play in the discussion. IL will be declaring bankruptcy "soon" regardless what they do for a variety of interesting demographic reasons, and the auditors will not permit them not to tax the hell out of any victims left in IL, so expect massive economic growth in neighboring states, and thats where the discussion turns into boring bashing politics. The usual suspects doing boosterism for C(r)ook county and Skokie vs the usual suspects doing boosterism for Milwaukee or Lake Geneva or whatever.
(Score: 2) by frojack on Friday June 22 2018, @08:40PM
Well there are constitutionally mandated ways whereby the Feds can tell the state how to apply taxes. Article 1, section 10 for example.
No, you are mistaken. I've always had this sig.
(Score: 1, Interesting) by Anonymous Coward on Friday June 22 2018, @08:26PM
Which is older--mail-ordering or local sales tax?
Mail order (pre-internet) has been going on for a good while, the Sears catalog used to deliver to the local railroad depot before there were were interstate roads.
Any guesses if the big mail order companies lobbied for this type of sales tax "exemption", way back when?
(Score: 2) by Alfred on Friday June 22 2018, @08:34PM (8 children)
But then I think a little it sounds more like a tariff than a sales tax really. And can I argue I am being taxed if I don't cut a check to the state? On any receipt there is a line item for sales tax but I am still paying the vendor, not the state. The vendor pays the taxes later, it is still an indirect tax upon me though. In that normal sales tax that line item is really more of a "sorry customer, the state requires me to rape you this way so don't blame me" line item. It just depends on where you want to say who is responsible for what transaction so they can take credit for being taxed.
Yeah I wouldn't want to live in Illinois either.
(Score: 2) by frojack on Friday June 22 2018, @08:48PM (1 child)
Several states already demand taxes on things purchased out of state. See https://dor.wa.gov/find-taxes-rates/use-tax [wa.gov]
Buy a lamp in Oregon: Pay Washington when you bring it home to Seattle.
Buy a Desk from your Neighbor in Seattle, take it across the hall to your apartment: Pay the state of Washington a use tax.
Of course everybody ignores it, but its on the books. Register your car as you move into the state? Oh, you have to pay a use tax too. That one you can't escape.
No, you are mistaken. I've always had this sig.
(Score: 3, Informative) by AthanasiusKircher on Friday June 22 2018, @11:27PM
It's not just "several" states. It's basically every state that has a sales tax. If you aren't already paying use tax on goods you order from out-of-state (and live in a state with a sales tax), you likely are in violation of tax law in your state.
I think I've paid use tax every year. I'll admit I'm not crazy diligent about it, but I estimate the goods I import and pay tax as required.
This ruling does very little in most states in terms of your required tax obligation -- it's just shifting the burden of collection to retailers (who are less able than consumers to cheat and just not pay the taxes as required).
(Score: 3, Funny) by VLM on Friday June 22 2018, @09:17PM (5 children)
Yeah and the sophistry against it is already spinning up along the lines of if you don't want South Dakota to screw you over, just refuse to do business with South Dakota residents. The "taxation without representation" should only apply to your local unavoidable environment.
I got a guy on another site to explode in rage against me by running along the lines of "OK don't do business with SD" "Well, what if a gay couple in SD ask you to bake them a wedding cake so now you can't legally refuse to do business with them?" and the guy went freakin nuts, which was kinda funny. Maybe he was half of a gay couple living in South Dakota, I donno, I certainly didn't intend to be personal.
When I was a kid "no" was something you said about drugs, sex was fun, and nobody much cared who did what with who for businesses. Now drugs are legal, sex requires verbal and written consent "yes", and businesses are not allowed to say "no".
(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.
(Score: 2) by Alfred on Monday June 25 2018, @03:40PM
"I'm refusing service based on geography not a protected class."
Bonus points for trolling that wouldn't have been trolling without their ignorance.
(Score: 2) by frojack on Friday June 22 2018, @08:35PM
Both States (and, arguably, some of the in-between states as well) have done about the same to enable your sale.
However no state or city justifies taxes based on services they provide. They don't need to. They can tax absolutely anything they want.
Same is true of the small communities in which buyer and seller are located. Its not just STATE taxes, its also about LOCAL sales tax.
The exemption was purely of practical basis in the past, as I've posted elsewhere in this thread. Both ends see a taxable event.
But the seller can't be expected to know rates and rules of all tax jurisdictions.
Part of the original reasoning for such exemptions goes back to Article I, Section 10, clause 2 [wikipedia.org] of the United States Constitution, which limited the imposition of taxes upon the exports of one state by another state. However, there is no language or history defining exactly what Exports mean. The courts way back in the past applied the prohibition to all sales between states as well as exports.
Only later (the 1960s did they suddenly decide it only referred to EXPORTS from the US to a foreign country, (which from an interior state would necessarily have to flow through another state).
However that interpretation made no sense at the time the constitution was written because there were no land-locked states at that time. Clearly the framers meant that tariffs and taxes could not be imposed at state borders upon the exports from other states to the taxing state.
If such were imposed for inspection of cargo purposes, the money was to flow to the US Treasury, and not the taxing state. The wiki article explains the evolution of this clause over a hundred years. There were ties to slavery issues as well. Historically it has been ignored, as the issue never really arose.
States and cities tax sales. It never mattered where the buyer lived until now. But now Both ends want to impose taxes on the same sale.
No, you are mistaken. I've always had this sig.
(Score: 2) by bob_super on Friday June 22 2018, @08:43PM (3 children)
> If I use a private carrier like UPS, the government of SD ha done approximately NOTHING to help me
Are you shipping to a person who has water/electricity/internet, using a carrier which uses an airport, storage facility, and local roads ?
Maybe, just maybe, some of those actors paid less tax than the state needs to maintain this infrastructure they use (as low taxes or tax breaks), based on the idea that whatever they buy will be taxed to maintain the infrastructure that allows the sale to happen. Maybe. Hypothetically. In a non-narrow-minded world not too far from you, it has been known to happen.
(Score: 2) by VLM on Friday June 22 2018, @09:35PM (2 children)
Naw I am shipping to someone who has less utility for a stack of money than for the thing I'm shipping them. I didn't ask for an analysis of their DNA or religious beliefs before deciding them worthy of permitting them to bid on ebay or WTF.
If their DOT is poorly run such that they got potholes, 1) they should fix that, not feed the beast by taking my money 2) they theoretically have representation to fix that, but I don't.
More concretely and realistically, Chicago is a shitty and expensive place to live, yet its not my fault nor do I have any influence at all whatsoever over the Chicago government's mismanagement. No matter how many hoops I'm forced to jump thru at the point of a gun, making my life miserable far far away from Chicago isn't going to give the citizens of Chicago the better leadership they deserve. Where you can substitute any other blue hell for Chicago, it doesn't matter other than its the closest blue hell to me.
Its possible to consider that laws should depend on reality and technology. The fact that saloons don't have hitching posts to tie up your horse while you drink after a long day of cowboys and indians is not a legal disaster to be fixed and patched up, its an anachronism. Likewise if your government is dumb enough to try to finance itself and its infrastructure based on a 1950s economy while the calendar is 2018, that should entirely be their problem not mine.
This "sales tax thing" isn't a problem for all states, only a problem for poorly run states stuck in the past. The more they try to duct tape and baling wire dumb ideas to keep operating like its 1950 despite it being 2018, the worse the crash will be when they inevitably fail and capitulate into modern reality, meanwhile a lot of effort is wasted by people who don't deserve the punishment and don't even live there.
(Score: 2) by bob_super on Friday June 22 2018, @10:46PM (1 child)
Nice near-offtopic rambling. Couldn't quite figure out how to mod that mess.
In a nutshell, for the government to get money, they can tax three things:
1) What people have
2) What people earn
3) What people spend
The balancing and tradeoffs between those three does fill a mid-size library. Any suggestion that there is a simple answer, and anyone not on your side is mismanaging and dumb, flies in the face of reality.
(Score: 2) by VLM on Saturday June 23 2018, @12:24AM
"Willful lack of cooperation with inevitable technological progress is ..."
There comes a point where a government need to cooperate with modern reality.
If brick and mortar is dying along with sales tax revenue, being part of the problem by being a PITA to everyone living in the future instead of the past, simply isn't smart management.
"The old ways don't work anymore, so I'll just give everyone not living in the past a headache, that'll fix the problem"
(Score: 2) by Immerman on Friday June 22 2018, @08:52PM (2 children)
>3)...
Except if you're selling online to someone in another state you're still NOT going to be paying any taxes - sales taxes are levied on the *customer* not the business. The business is just responsible for collecting them and delivering them to the appropriate governments in exchange for being allowed to do business in the region. In fact, any time you buy something from out of state online or by mail you are legally required to pay the appropriate sales tax to your local governments - the fact that nobody actually does this is the reason for the push to make internet retailers collect the taxes as the cost of doing business.
(Score: 2) by Spamalope on Saturday June 23 2018, @12:02AM (1 child)
Before this, I could sell to someone out of state without a problem.
Now... I know my state has literally thousands of sales tax districts. Thousands. The tax rate varies. You have to track and pay taxes to each entity. If you're a fixed business, then it's just your local tangle of 2-5. But if you sell across the state, you must have some sort of automation just to figure out who the hell to pay. And you get audited.
So I just want to sell some old crap out of the house. I have to know in detail the sales tax laws of all the tens of thousands of sales tax districts because I don't know who the hell will bid on the ebay auction? WTF?
(Score: 2) by Immerman on Saturday June 23 2018, @01:23AM
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.
(Score: 3, Insightful) by NewNic on Friday June 22 2018, @09:35PM (3 children)
You are not *paying* the tax. You are merely collecting it. The buyer is paying.
lib·er·tar·i·an·ism ˌlibərˈterēənizəm/ noun: Magical thinking that useful idiots mistake for serious political theory
(Score: 2) by VLM on Saturday June 23 2018, @12:18AM (2 children)
The cost of compliance is NOT free...
(Score: 2) by NewNic on Saturday June 23 2018, @12:55AM (1 child)
Just another cost of doing business. Not a tax.
lib·er·tar·i·an·ism ˌlibərˈterēənizəm/ noun: Magical thinking that useful idiots mistake for serious political theory
(Score: 0) by Anonymous Coward on Saturday June 23 2018, @08:06AM
Since today you owe me 50% of your income. It's not a tax, just a cost of doing business.