Supreme Court state tax: Online purchases may be getting a tad more expensive in the States. Previously, states weren’t allowed to collect sales tax from online retailers if that retailer had no physical presence in the state itself. All of that is about to change though.
The Supreme Court has now ruled that states can collect sales tax from online retailers even if no physical store is present in the state. This overturns a 1992 Supreme Court decision that had originally barred states from doing so.
What does this mean for consumers? Unfortunately, it means higher prices for online products due to the additional state sales tax that can now be implemented (the same as it would be if you bought the item in a brick-and-mortar store).
The 1992 law was ruled as an outdated law that allowed for “a judicially created tax shelter.”
“The Internet’s prevalence and power have changed the dynamics of the national economy,” explained Justice Anthony Kennedy. “The expansion of e-commerce has also increased the revenue shortfall faced by States seeking to collect their sales and use taxes.”
The transference of sales largely from brick-and-mortar to online retail has caused much hassle for states. Because they can’t collect as much sales tax on purchases coming from online retailers, states are not gaining as much money to then be able to put back into the state. As much as $13.4 billion could have been collected by states last year if sales taxes were applicable to online purchases.
The new law will only apply to those companies earning over $100,000 in sales in states. And for those bigger companies, it may not be a change at all. The larger online retailers, such as Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), already charge sales taxes across states, because they have a large enough physical presence throughout the country for all taxes to be applicable to them.
The online retailers that will most be affected by this new ruling are mid-range retailers, which includes many home furnishing websites, or any business that doesn’t have a very widespread physical presence. For products like furniture, electronics, and jewelry, people may start shopping locally again, explained retail analyst Sucharita Kodali. And this move may spell “bad news” for a huge number of online retailers.
What do you think about the Supreme Court state tax ruling? If you have to pay a state sales tax for a product, would you still buy it online (where you may also be paying for shipping) or would you switch back to brick-and-mortar purchases?
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