Wayfair ruling allows online sales taxes, but there’s no rush

Wayfair ruling allows online sales taxes, but there’s no rush

South Dakota wanted out-of-state retailers to begin collecting the tax and sued several of them: Overstock.com, electronics retailer Newegg and home goods company Wayfair. Many big retailers, such as Amazon.com and Macy's, already collected sales tax for online purchases because they had warehouses or stores in those states.

The Supreme Court handed down a ruling Thursday granting states broad authority to require online retailers to collect sales tax on purchases in states where they have no physical presence - a potential win for struggling brick-and-mortar stores. "Now everybody is going to be collecting sales tax whether you order from Amazon or anywhere online". This latest Supreme Court ruling said that earlier decision was obsolete in an era of explosive e-commerce. Etsy and Wayfair are down over 5% (Wayfair initially dipped by almost 10% but has inched up a bit); eBay has dropped by almost 2%.

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.

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"Each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States", wrote Justice Anthony M. Kennedy, who delivered the opinion for the court.

Broader taxing power will let state and local governments collect an extra $8 billion to $23 billion a year, according to various estimates.

"Rejecting the physical presence rule is necessary to ensure that artificial competitive advantages are not created by this court's precedents", Kennedy said. Roberts argued that the decision isn't one that should be decided by the Supreme Court. Attorney General Marty Jackley said it was a win for South Dakota and for "Main Street businesses across America that will now have a level playing field and tax fairness". Small businesses may have to figure out how to comply with various state sales tax laws, though there are software options to help. Prior to the ruling, if you lived in NY and bought a TV from a retailer like Newegg - which has no physical stores in NY state - you wouldn't have to pay sales tax on your purchase. The decision means that South Dakota can now dictate some of the business operations of firms that have no representation in the South Dakota legislature.

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