NRF Says Supreme Court Sales-Tax Ruling Levels the Playing Field


The US Supreme Court. Jim Watson AFP Getty Images

In its 5-4 ruling against a coalition of online retailers (Newegg, Overstock, Wayfair), the justices reversed an earlier 1992 ruling that had for years prevented states from requiring businesses with no "physical presence" in the state to collect sales taxes.

State officials - including in SC, with its 6 percent sales tax - have argued they were losing out on millions - if not, in some cases, billions - of dollars in revenue a year under the Supreme Court's previous 1992 decision. States had no viable way to track down everyone who wasn't paying their sales tax, which is why they wanted to force retailers to collect it regardless of where they were located.

Only five states do not collect a statewide sales tax.

Shares in the online marketplace Etsy fell more than 2% after the decision.

State director Mike Hickey of the National Federation of Independent Businesses said his members are split on the sales tax 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", he wrote.

Small online businesses may be exempt, but just where the line will be drawn is unclear.

The South Dakota statute limits sales tax collection to online retailers that ship $100,000 or more of goods or services into the state, or have 200 transactions with South Dakota customers in a year.

Tucker's bill establishes a threshold for when online retailers have to collect and remit sales taxes.

Oklahoma Taxpayers Unite! has less than a month to file a new petition and gather more than 41,000 signatures for a statewide vote on repealing the tax hikes. "You've got to have a modern sales tax, so we don't have to have any other kind of tax that people don't want", Calabro said.

It's likely that Congress will take up some form of legislation to unify sales tax collection efforts. The money will flow straight to the local or state governments; Minnesota alone could net between $132 million and $206 million in revenue annually, according to a U.S. Government Accountability Office report that analyzed 2017 figures. The company maintains that it has been collecting tax in all 45 states which require it. Missouri officials believe this law will bring in an extra $275-million more in sales taxes every year.

Local small business owners are weighing in after the U.S. Supreme Court made a landmark decision regarding sales tax. Texas alone contains over 1,200 municipalities, all of which may contain differing sales tax rates.

The new rules could make it harder for small online retailers to remain independent, since many lack the infrastructure to handle a complex array of taxes applied in over 9,000 jurisdictions, Bloomberg notes.

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