SCOTUS rules states can collect taxes from online shopping transactions

Supreme Court closes online sales tax loophole

The 5-4 decision made by the U.S. Supreme Court on Thursday, June 21, will now allow states to collect sales taxes from online businesses whether they have a physical location in that state or not.

But taxpayers could raise challenges, including the argument that collecting sales tax for previous sales could subject the seller to double taxation if the customer had already paid sales tax.

The cases the court overturned said that if a business was shipping a customer's purchase to a state where the business didn't have a physical presence such as a warehouse or office, the business didn't have to collect sales tax for the state. Congress, as the court acknowledged, could enact a broad-based law for state sales tax collection.

The Supreme Court decision "will certainly change how states look at these laws but we may see states trying to see if their versions could survive even if they are less simplified and direct than South Dakota's law", Joseph Bishop-Henchman, an executive vice president at the Tax Foundation, said in a blog post. The ruling was praised by some in the retail industry for clarifying how sales taxes should be handled in the ecommerce era.

"(Local option sales tax revenue) is 24 percent of our general fund budget. 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".

Georgia state officials have been pushing for more internet retailers to pay taxes in recent years.

Lauren Boggs Meslar has been selling patterned paper straws, hemp gift cords and other lifestyle goods on Etsy since 2012, relying on sales from the Etsy shop and her own e-commerce website to "help pay the bills" for her family.

"The Supreme Case opens the opportunity for Oklahoma to craft more laws in the future that applies to a broader range of entities that are out of state", she said.

Chief Justice John Roberts wrote in dissent that the sales tax issue should have been left to Congress to decide.

Second, Hawaii is not a member of the Streamlined Sales Tax Agreement and can not be a member unless its laws are amended significantly.

For several years, Norman businesses have said all they want is a level playing field when competing with online sales.

The 16 states with laws similar to South Dakota's, including IN and ME, are less likely to be challenged. Sellers who use eBay and Etsy, which provide platforms for smaller sellers, also aren't required to collect sales tax nationwide.

Other internet companies opposed the law, saying the thousands of variances in local and state tax laws create an accounting nightmare for business owners. But it's also "much bigger than that", Jackley said.

TrumpStore.com now collects sales taxes in just four states. She recalled Thursday that she started looking at this issue in 1992, when the Supreme Court in Quill v. Back then, "I was a junior in high school", she said, adding that her youngest son just finished his junior year in high school.

The decisions had resulted in some companies not collecting sales tax on every online purchase.

"The world has changed", she said with a smile.

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