Favorable U.S. tax ruling gives limited boost to big-box retailers

Jenny Kane  Associated Press

Jenny Kane Associated Press

Ellen praised the ruling, which overturns a 1992 Supreme Court decision that said retailers have to collect taxes on sales only in states where they have a physical presence, such as a warehouse or a call center. Big online retailers have, in many cases, managed to avoid paying sales tax when selling goods to consumers because previously, courts said that a company must have a physical presence in the state to be taxed.

The decision came on a South Dakota suit against Wayfair.com, with the state claiming the company should collect sales taxes on sales in the state. Large retailers including Apple, Macy's, Target and Walmart, which have brick-and-mortar stores nationwide, already generally collect sales tax from their customers who buy online. That case involved Colorado's attempt to collect taxes from online retailers indirectly by making them report sales to the state.

In a blow to huge billion dollar online retailers such as Amazon and eBay, the Supreme Court has ruled that states can impose a tax on goods and services ordered online.

Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group, said the ability to apply the sales tax to more internet sales will keep the state's tax structure in sync with the evolving economy.

The department indicated that businesses now collecting sales taxes should continue, but it is unclear when online sellers will need to begin collecting the taxes.

"It's just not feasible for us to do business with South Dakota while also complying with these new rules", said founder and CEO Vladimir Gendelman in a statement. The ruling could easily improve revenue in states that have taken a hit from online sales.

Chief Justice John Roberts echoed our stance in his dissent, stating "The burden will fall disproportionately on small businesses". Although technically consumers are required to pay sales tax on all purchases, it is practically impossible to collect without the retailer applying it at the point of sale. "Here in California, we already pay sales taxes on Amazon transactions".

The Supreme Court said the physical presence rule was "unsound and incorrect". Physical stores have always had to charge sales tax, but many online retailers have been able to undercut them by ignoring sales tax.

For as long as internet shopping has been around, the issue of sales tax has been a hot-button issue.

"Any adjustment to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress", Roberts wrote.

State Sen. Dan Watermeier of Syracuse, who sponsored the legislation, said it would allow Nebraska to collect an estimated $30 million to $40 million over the next year, helping ease the state budget crunch.

Today's ruling caused publicly traded e-commerce companies share prices to tumble, with Shopify, Etsy, Amazon, eBay, Alibaba all recording losses in midday trading on their respective US exchanges.

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