A Supreme Court Ruling Could Make Your Online Purchases More Expensive

Yuri Gripas  Reuters

Yuri Gripas Reuters

The state enacted a law requiring out-of-state sellers to collect and send it sales taxes, but only if they deliver more than $100,000 of goods or services into the state or make 200 or more transactions.

The Supreme Court overrules the Quill case, which previously set the precedent for collecting sales tax from online sellers. Online retailers sued over the scheme, and the Supreme Court allowed the case to proceed.

"It remains to be seen what the exact fiscal impact of this (court) decision will be", said Rick Reames, a former head of the state's Revenue Department.

That means New Yorkers will have to add the tax on more than half of all Amazon purchases that are now tax-free.

The tax is 6.25 percent. Local governments could also get in on the action, though the mechanics of making that happen could be trickier, an LFC economist said. It will leave shoppers with lighter wallets but is a big financial win for states.

The ruling stems from a dispute between three online retailers and the state of South Dakota, which passed a law in 2016 that required firms doing a certain amount of business in the state to collect sales tax from customers.

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The decision is largely viewed as a victory for states and local businesses. A bipartisan group of senators filed a brief in the case supporting South Dakota's effort to overturn the online sales tax ban, essentially acknowledging that the legislative body was too dysfunctional to fix the problem.

But Nebraska won't be able to start collecting sales taxes from online retailers until next year at the earliest, after an Internet sales tax bill fell victim to a filibuster this year. Now, under this new decision, even if a company doesn't have a store, warehouse, or office in a state, its internet sales to that state's residents can be taxed. He was joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil M. Gorsuch.

Justice Anthony Kennedy wrote that the rule "each year. becomes further removed from economic reality and results in significant revenue losses to the states".

Worse still, the rule produces an incentive to avoid physical presence in multiple States.

Large retailers including Apple, Macy's, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from their customers who buy online. Consumers were supposed to voluntarily pay sales taxes on remote purchases, although it rarely happened. States also argued against the previous statute, saying that it reduced their potential revenue from sales taxes as more consumers turn to digital shopping options. "I again call on Congress to level the field for small businesses and retailers in Oklahoma and across the country by implementing a fair system for online sales tax".

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