Sales-Tax Ruling Poised to Hit Small Businesses Hard

Sales-Tax Ruling Poised to Hit Small Businesses Hard

Sales-Tax Ruling Poised to Hit Small Businesses Hard

The 5-4 ruling Thursday is a win for states, who said they were losing out on billions of dollars annually under two decades-old Supreme Court decisions that impacted online sales tax collection.

South Dakota's case was supported by 35 states and the federal government and saw the Supreme Court undo a 1992 ruling in which it had held that the mail-order company Quill did not have to collect sales taxes in North Dakota.

In 2016, South Dakota passed a law requiring any retailer that conducts at least 200 transactions or has at least $100,000 in annual sales within its borders to collect sales tax, regardless of whether the business has a location in the state.

"Prior to today, Quill required that, to force out-of-state retailers to collect tax on sales to residents of the state, the out-of-state retailer had to have a physical presence in the state", said Jon Barooshian, a partner at law firm Bowditch.

In Illinois, whether a shopper is charged sales tax at online checkout has depended on whether the retailer had a large enough physical presence in the state to trigger collection requirements, such as maintaining a store, office or warehouse.

For the full story, head on over to CNN Money. South Dakota was backed by the Trump administration in the case.

A November 2017 report by the U.S. Government Accountability Office estimated that MA could gain an estimated $169 million to $279 million in additional tax revenue if it could tax all remote sellers. The ruling "is a nightmare for American businesses and small online sellers, who will now have to comply with the different tax rates and rules" of each jurisdiction, said a statement by US Reps. 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.

"E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule", he wrote.


South Dakota Gov. Dennis Daugaard called Thursday's decision a "Great Day for South Dakota", though the high court stopped short of greenlighting the state's law. For example, the popular electronics seller B&H only charges sales tax in NY and New Jersey, where it has a physical presence. Over time, that changed, based on whether of not the retailer had a physical presence in the state the item was being shipped to.

However, FOX 13 reported last month that the Utah Tax Commission has been quietly inking deals with a number of online retailers to get them to collect taxes.

Etsy, the online marketplace where many artists and small business owners sell their wares, also filed a brief.

Earlier this year, Iowa legislators approved expanding sales tax to digital goods like e-books, subscription services like Netflix, ride-sharing apps like Uber and physical goods purchased online. Chief Justice John Roberts dissented, saying Congress should be the one to decide on the issue.

Online sellers may have to change their practices around collecting online sales tax after the Supreme Court ruled in a key online sales tax case.

But a state finance official said the Department of Revenue does not anticipate taking any immediate administrative action or issuing additional guidance in light of the Supreme Court decision.

The Supreme Court's ruling was praised by a number of retail groups, organizations representing state and local governments, right-leaning think tanks such as the Tax Foundation and American Enterprise Institute, and a bipartisan group of lawmakers. "New Hampshire small businesses do not have the time or resources to become tax collectors for other states".

State Sen. Peters, a Republican, has always been active in pushing for a system that forces retailers to collect state sales taxes.

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