Get ready for more sales taxes on online purchases

UPROXX  Shutterstock

UPROXX Shutterstock

Now, rivals will be charging sales tax where they hadn't before.

CNET reports that this overturns a standing 1992 decision that prevented states from collecting sales tax from online retailers that had no physical presence in their state.

First, the court did not rule out the possibility that states may not collect taxes on all online purchases, given the negligible size of some transactions. The court said at the time the requirements would be too much of a strain on businesses.

An analysis by Barclays found that Louisiana would get an estimated 3 percent bump in total tax receipts if it begins forcing out-of-state online retailers to collect sales taxes. Representatives of the state argued that the rule needed to be reconsidered in the age of online shopping.

The Supreme Court ruled 5-4 in favor of South Dakota.

Stocks of online retailers were down significantly immediately following the ruling.

The decision could generate "hundreds of millions of dollars" in new revenue for NY state, according to Joseph Bishop-Henchman, vice president of the Tax Foundation think tank.

That lawsuit has yet to materialize. Marketplace sellers weren't previously required to automatically collect sales tax on their sales, and the ruling may hurt their sales.

The ruling opens the door for some New Hampshire-based retailers to be forced to collect sales tax from their online customers living in other states.

Floyd County businesses must collect a 7-percent sales tax, with 4 percent of that earmarked for the state. North Dakota, which said mail orders from out-of-state companies didn't have to add sales tax.

States that rely more heavily on sales tax - as opposed to personal income tax, for instance - "are the big winners here and could see real budget gains if they follow South Dakota's example", said Fitch Ratings analyst Stephen Walsh. "For a long time, we've been pointing out a real unfairness in the fact that mega online sellers like Wayfair or Amazon or Jet were not paying the sales tax".

This led to an interesting scenario a few months ago when Connecticut's Department of Revenue Services (DRS) sent some Newegg customers an unexpected tax bill.

"The chessboard just looks a lot different now", said Stephanie Martz, general counsel for the National Retail Federation, which includes 18,000 businesses large and small.

New Hampshire's congressional delegation has also loudly warned about the impact this ruling could have on small businesses.

Etsy said it hopes that Congress will "create a simple, fair federal solution for microbusinesses", like the people who sell items on Etsy's platform. However, Alaska and Montana allow individual individual cities to collect local sales taxes, according to the Tax Foundation.

South Dakota's suit stemmed from a law requiring sales taxes for any out-of-state seller that delivers more than $100,000 worth of goods.

The South Dakota law and others like it could yet face legal challenges on other grounds.

In testimony before the Florida House Ways & Means Committee in January 2017, analysts gave a rough estimate of $200 million in potential sales tax revenue resulting from applying the tax to more remote sales.

What money that could bring is unclear, he said. Rolfes is the top budget writer for Senate Democrats, who hold a majority in the chamber. Those retailers may face headaches complying with various state sales tax laws, though there are software options to help.

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