Supreme Court Sales Tax Decision

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I might be dating myself a little here but ever since I started learning tax law (you know like back in the stone age when Amazon had yet to turn a profit and Google wasn’t a verb) the 1992 Quill Corporation v North Dakota decision held sway on the lack of sales tax of most internet purchases.  The ruling basically said that unless a company had a substantial presence in a state (warehouses, employees, etc), it did not not have to collect and remit sales tax.  This meant that a company based in Colorado making an online sale to an individual in New York didn’t have to assess sales tax. With online retail sales exploding (Amazon had $119 billion in revenue in 2017), traditional brick and mortar retailers have been crying unfair advantage with many states saying they’re losing millions or billions in tax revenue.  The sales tax playing field may start to become a little more even and states may see more sales tax revenue with the most recent Supreme Court Ruling in South Dakota v Wayfair.

Image result for south dakota v wayfairSouth Dakota v Wayfair came to the Supreme Court because of a South Dakota law put in force May 1, 2017 that required vendors with over $100,000 in sales and making over 200 transactions in the state to collect and remit sales tax.  The Supreme Court ruling in favor of South Dakota means the state can start collecting sales tax from major online retailers in 30-90 days.  This ruling effectively opens a new can of worms for sales tax and online sales and I’m sure we’ll soon see other states enact similar laws (at least 20 have similar laws enacted or in the works).

What does this mean for the future of Internet sales?  Right now the small individual seller on ebay or Etsy is still safe from the intensive administrative task of keeping track of multiple taxing districts but time will tell how long that lasts.  Large online retailers will more than likely have to follow Amazon’s lead of collecting sales taxes on direct sales. Hiding behind the 1992 Quill decision is no longer an option but more direction from the court and legislature is needed.

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