Supreme Court ruling on online sales taxes draws interest

Pool  Getty Images

Pool Getty Images

After states and traditional retailers have grumbled about this situation for years, South Dakota finally chose to do something to change it.

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. 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.

The Supreme Court ruled that states can require online businesses to collect sales tax, even if that business doesn't have a physical footprint there. This reverses the Court's 1992 decision that state's could only collect sales tax from online retailers with a physical presence in that state, such as a warehouse or office building.

The decision could lead to individual state sales tax laws, or Congress could step in to make more uniform regulations.

Sellers that use eBay and Etsy, which provide platforms for smaller sellers, also haven't been collecting sales tax nationwide.

Camera gear is about to get more expensive for most online shoppers in the United States.

"It now allows that store to compete against a big online retailer who wouldn't have to collect and remit sales tax", said Phelan.

But the Supreme Court ruled that the previous court case was no longer relevent in the modern broadband era. A Department of Revenue official said no state windfall was expected by the ruling.

Sales tax collection previously followed that is commonly known as the physical presence rule. They often don't have the resources to handle the patchwork of sales taxes across multiple states, according to the retailers, while larger outlets like Amazon don't have that problem.

E-commerce retail sales accounted for only 8.9% of national retail sales in 2017, and sales taxes are generally not a majority of states' general fund revenue.

Some states will still have to pass new legislation to demand tax from out-of-state orders, and that isn't always guaranteed.

In Kansas, it could mean an extra $200-million to spend on education, senior services, roads - whatever lawmakers decide. Experts say it won't really affect big stores like Amazon because they already collect a sales tax.

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