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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: 4, Insightful) by VLM on Friday June 22 2018, @09:55PM (1 child)
Because they usually only have one tax rate, which varies slowly. Even high school kids can be taught to add 5.5% or whatever to every bill, or just hit the "tax" key on the register which is very easy to program with a constant rate.
Internet businesses serving a large area, especially small ones, will have a different tax rate and different remitting authority for quite possibly literally every single customer.
If you have 100K customers my state DoR will let your AS/400 minicomputer talk directly to theirs which I'm sure is very convenient for everyone except the AS/400 sysprogs, anything smaller and they're like F-off do it by hand on their website. So that's what I do. Its actually not that hard, although if I had to do it 49 times for other states I'd be getting pissed off. Its possibly the weirdest website I've ever used. They do have on-shore tech support although they only work 9-5 for password lockouts. My favorite feature is I have to submit annually (almost wrote anally) at my small scale and my account is locked after 6 months without a login, hilarious every friggin time. So I log in at the start and end of summer to reset the clock, just did that recently in fact. Looking forward to doing that 49 more times, gonna be such fun.
(Score: 0) by Anonymous Coward on Saturday June 23 2018, @11:58PM
It is function of the people who own the addresses... USPS. Check an address and USPS will tell you the rate. Ship with FedEX or UPS or USPS and tell them the value, they will check the address and tell you the rate and amount, and added to your the shipping "cost". Then they are collecting the tax, since they are actually the holding the product and giving it to the consumer. simple and easy.
PS: dod this on AS/400 that was validting the address with USPS and have a tax table from a big 4 company, with taxes rate by city, county and zip, updated monthly. We were good at it, the states' auditors all 50 states and terrioiries gave us flying colors. We ven built in error corrections, in cases of areas being re-zipped or rename - average simular names in near same zip for exmaple. We tested every address at least once every 90 days to update any zip+4 or new names, hence new tax rate possible. To us and the law... the "cash register" was in the truck in front of house. Just like any delivery truck.
Mostly good. screwed up on MTAs like Washington State that follow elementary school districts. But in the end it is, owner of the land that affects the tax rate. The land is know by addresses and those are owned by USPS.
OH. about 3 man-months to general case. Even if USPS was to handle it fully (and they should!
Federal Land do not pay State taxes
State Land do not pay County taxes
County Land do not pay City taxes
So in Arkansas where a city incorpates all the surrounding land. If the land is own by a "higher" authority... City Sale tax do not apply.