Small business owner says online sales tax ruling levels playing field

Small business owner says online sales tax ruling levels playing field

Small business owner says online sales tax ruling levels playing field

The suit (South Dakota v. Wayfair) was brought by 40 states that claim the old rule had cost them billions in lost tax revenue.

In 2016, South Dakota Governor Dennis Dugerd said his state is losing about $ 50 million a year in sales taxes, as many online retailers are not physically in the state.

Most states now have some kind of sales tax, though the amount-and what items or services are taxed-varies widely from state to state. The 5-4 decision strikes down a 1992 case that restricted states from collecting sales tax from retailers that do not have a physical presence in their state. Supreme Court reversed course Thursday, saying states can charge sales tax for online purchases.

"Some states may keep their current tax collection laws in place, in which case collection rates are likely to increase, but others may have to modify their laws significantly to comply with today's decision", Goldman Sachs analyst Blake Taylor said in a research note.

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Small Sellers Hit Hard by Supreme Court Sales Tax Ruling
The dissenting opinion was written by Chief Justice John Roberts, joined by Stephen Breyer, Sonia Sotomayor, and Elena Kagan. The ruling means that states may now seek to tax more of those sales, Moody's analyst Charlie O'Shea said.

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In response to the ruling, the stocks of several internet retailers, including Amazon, eBay and Wayfair, all dropped. However, this only applies to items from its own inventory, not those from third-party sellers. Customers were generally responsible for paying the sales tax to the state themselves if they weren't charged it, but most didn't realize they owed it, and few paid.

Shoppers were generally supposed to pay the sales tax to the state themselves, but most didn't, says Gerald Storch, who was CEO of department store operator Hudson's Bay and now runs a retail consulting firm. Marketplace sellers weren't previously required to automatically collect sales tax on their sales, and the ruling may hurt their sales. The decisions made it more hard for states to collect sales tax on certain online purchases, and more than 40 states had asked the high court for action.

The court's conservative wing argued that the previous ruling was sufficient to protect the rights of states, but the Trump administration urged the court to side with South Dakota and expand tax collection powers. Lawmakers have avoided the issue for years, in part because they didn't want to be seen increasing taxes, but the court's decision may give them cover to finally establish a coherent set of rules. Legislators in their 2017-19 state operating budget raised an estimated $432 million through a partial expansion of online sale taxes. As consumers shifted away from brick and mortar business and took their purchase power online, states lost billions in annual tax revenue.

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