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SCOTUS rules states can collect taxes from online shopping transactions

24 June 2018

The Supreme Court decision ruled local governments can now decide if an online retailer that sells goods into the state, that don't have a physical presence, would have to register as a dealer and collect taxes. However, consumers have the option to shop online, pay no sales tax, and get the item cheaper which is not fair to local stores, Deskins said.

A new law that goes into effect in January says companies that do at least $250,000 in online business or have at least 200 separate sales purchases must pay sales tax to the state.

You'll have to pay up if the state you live in passes laws that require online retailers to collect sales tax, says Joseph Bishop-Henchman, the executive vice-president of the Tax Foundation.

The US Supreme Court ruled in favour of South Dakota.

"If you are a local business that also has an online presence and you have a sale in California or Georgia, you are going to have to invest in a software program or do a lot of bookkeeping because you are going to have to pay sales tax in every state that you ship too".

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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.

While this ruling is beneficial to state governments, it stands to have a negative impact on retailers and consumers alike. Kennedy also noted the existence of software that "may make it easier for small businesses to cope" with compliance.

"This will increase our ability to collect", said Scott, who is a member of the firm's Administrative & Regulatory Practice Group. Now, on most of their online purchases there will be sales tax.

Second, Hawaii is not a member of the Streamlined Sales Tax Agreement and can not be a member unless its laws are amended significantly.

"I don't have to travel anywhere and typically online prices are still lower than retail stores", Teisanu said. Must sellers immediately begin collecting sales tax for all states and all localities?

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Washington, Florida, South Dakota, Nevada and Tennessee get more than half of their total revenues from sales taxes, meaning big gains could be in store.

We asked some vendors of sales-tax services for their advice.

"They've been getting an unfair advantage for 20 years". When you create a way for people to avoid the tax, you distort their behavior (pushing them to buy online when they might otherwise buy in a store) and you reduce tax collections.

The state government also is expected to receive hundreds of millions of dollars through online sales tax, according to estimates from Georgia State University's Fiscal Research Center.

The cost can be reduced for retailers who sell to customers in the 24 states that participate in the Streamlined Sales Tax Agreement, a plan aimed at simplifying tax collection. At first, online retail was just a minor sideshow, but after a quarter century of booming, it has become the place to be, and the squealing from all sides about the tax subsidy has been deafening for years.

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SCOTUS rules states can collect taxes from online shopping transactions