Author Topic: Supreme Court: States can require out-of-state retailers to collect sales tax  (Read 1288 times)

Offline Mr. Bill

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Courthouse News, 6/21/18: Supreme Court Cuts Path for States to Tax Online Retailers

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Reversing decades of precedent, the Supreme Court on Thursday held states may force online retailers to collect and remit sales tax on transactions even if they do not have a traditional storefront in the state.

The 5-4 ruling reverses the high court’s holdings in the 1967 case National Bellas Hess v. Department of Revenue of Illinois, and the 1992 case Quill Corporation v. North Dakota.

Writing for the majority, Justice Anthony Kennedy said the rule that retailers must have a physical presence in a state in order for a state to compel them to collect and remit sales tax “is an incorrect interpretation of the commerce clause.”

He also called the regime “an extraordinary imposition” by the court on the rights of the states to collect taxes. ...

Offline archer

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lovely. more taxes to the govs...

Offline Alan Georges

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lovely. more taxes to the govs...
Can't say that I like it either.  The only silver lining is that local stores (and yes, big box brick-and-mortar stores too) now have the playing field somewhat more level with online retailers.

In a just world, the states would step up and drop their sales taxes across the board by some percentage so the whole deal is revenue neutral.  I'm not exactly holding my breath for that to happen.

Offline Mr. Bill

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I saw it pointed out (somewhere) that, in the Internet age, this will be easy, because you'll just give the delivery address to a database, and it'll spit out the current sales tax rate.  Cool, except for a few things:
  • This presupposes the states will jointly set up such a database.  (Or else it'll be left to private industry to do so, for which they'll undoubtedly charge a fee.)
  • There's still no simple way to pay the collected taxes, which means that businesses will have to file up to 45 state tax returns and possibly local tax returns.
  • It's not just the tax rate, it's also what is taxed.  If I build a website for my local roofer, my state charges zero sales tax on the service, but if I build a website for Jack, Texas charges 80% of its standard sales tax rate.

This is going to be very difficult for small businesses to deal with.

Offline fritz_monroe

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My state has been fighting for this for years.  I would bet that MD will be one of the first to have it set up. 

Offline iam4liberty

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Excellent WSJ front page article with details on per state effects.  For non-subscribers it is worth buying today's edition or reading it at the library/coffee shop.

Offline Mr. Bill

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The Verge, 6/22/18: Supreme Court’s internet sales tax ruling may be a nightmare for small businesses

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...At the heart of the matter is how the ruling will be clarified in further litigation and what exemptions there may be for small businesses now that the Supreme Court has bounced the decision back to the lower courts. Because the Supreme Court simply overruled the Quill decision and did not make constitutional the South Dakota law that initially raised the issue, the case may be litigated for years to come to figure out how to account for the over 10,000 state jurisdictions that govern sales tax across the country. That is, unless congressional legislation supersedes the state court decisions. ...

Offline Morning Sunshine

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Legal Insurrection quotes Justice kennedy's decision:
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The Court’s focus on unfairness and injustice does not appear to embrace consideration of that current public policy concern. The Court, for example, breezily disregards the costs that its decision will impose on retailers. Correctly calculating and remitting sales taxes on all e-commerce sales will likely prove baffling for many retailers. Over 10,000 jurisdictions levy sales taxes, each with “different tax rates, different rules governing tax-exempt goods and services, different product category definitions, and different standards for determining whether an out-of-state seller has a substantial presence” in the jurisdiction….

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The burden will fall disproportionately on small businesses. One vitalizing effect of the Internet has been connecting small, even “micro” businesses to potential buyers across the Nation….

If he is correct, and this filters down to every jurisdiction that collects a sales tax on widgets, gadgets, and sugary drinks, a lot of small online sellers will go out of business.

Offline Carl

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This is going to be very difficult for small businesses to deal with.

The burden on most small internet operations will cause them to most likely go out of business due to over-regulation.

I guess I should have read all the way down before my reply....we appear to agree with the ' burden of government'

Offline David in MN

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I hate to tell the truth but why would the courts support small business? These are the same assholes who mandate I do an annual "inventory" and report to them the value of the maple burl I cut from a tree at the cabin. Tax laws are literally written to be impossible to follow.

They don't want us having our own businesses... much less if they are cash. It's far easier to get the pound of flesh from an employee whose boss must submit the W2.

These are, after all, the jerks who would assess a VAT that I would have to calculate before and after running a piece of walnut through the planer. Whoops, my "inventory" just went from rough cut to finish cut. Better keep track of that value!

Hey it's not like these are the type to execute you on the roadside and bill your family for the cartridge. What's a little blood money between friends?

Offline iam4liberty

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Very few small businesses handle their own payment processing.  The payment intermediaries (PayPal, credt card processor's) will integrate it in.  it will be automated just like shipping costs which are much more complicated as each item is different.  see here for example: https://developer.paypal.com/docs/classic/paypal-payments-standard/integration-guide/ProfileAndTools/#calculate-sales-tax-automatically.  States are already setting up automated filings accepting what is collected by this software.  So biggest cost to small business will be in being less competitive with physical stores.

Biggest loser will be consumers in states without sales tax as they will adopt them.  From radio apparently Oregon is rushing through legislation behind the scenes at the city and county level to avoid backlash to the state officeholders!  It is a backdoor for them to implement a tax.  Delaware and Alaska politicians are considering similar moves.

Offline kckndrgn

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I saw it pointed out (somewhere) that, in the Internet age, this will be easy, because you'll just give the delivery address to a database, and it'll spit out the current sales tax rate.  Cool, except for a few things:
  • This presupposes the states will jointly set up such a database.  (Or else it'll be left to private industry to do so, for which they'll undoubtedly charge a fee.)
  • There's still no simple way to pay the collected taxes, which means that businesses will have to file up to 45 state tax returns and possibly local tax returns.
  • It's not just the tax rate, it's also what is taxed.  If I build a website for my local roofer, my state charges zero sales tax on the service, but if I build a website for Jack, Texas charges 80% of its standard sales tax rate.

This is going to be very difficult for small businesses to deal with.

While I agree small businesses are going to be hurt, but there are already services that provide sales tax for each state/county/city.  The company I work for is an MLM and as such we collect and pay sales tax based on our distributors sales.  We receive a monthly CD from a company that provides us with up to date tax rates.
Yes, as a midsize to large company we can do this, we have the capability to incorporate these taxes into our business seamlessly.  This will not be the same for a small mom & pop type company.

Of course, this also allows a small mom & pop type tech company to help the small mom & pop stores.

Offline DrJohn

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What will most likely happen is that small businesses will refuse to sell to certain jurisdictions, depending on the tax status of the said state and the number of historical sales to customers in in that state.  I am sure there will be a way to estimate if it is worth dealing with VT sales tax or not depending on overall sales volume.  I can see living in VT, that many small online retailers will be off limits to me.