Court Shakes Up Tax Landscape for Online Sales
Friday, June 22, 2018
By Ed Nawotka (for Publishers Weekly) --
Yesterday, the U.S. Supreme Court overturned the precedent set in 1992 following from the ruling in the case of Quill Corp. v. North Dakota that allowed internet companies with no physical presence in a state, otherwise known as “nexus,” to forgo collecting sales taxes. The review of the law was prompted by South Dakota suing online retailers Wayfair, Overstock.com and Newegg for violating a 2016 law that said retailers who have $100,000 in sales or 200 separate transactions in the state have “economic nexus,” and are, indeed, required to collect taxes.
In the 5-4 ruling, Justice Kennedy wrote that “Last year e-commerce retail sales alone were estimated at $453.5 billion. Combined with traditional remote sellers, the total exceeds half a trillion dollars,” and said that the law requirement of a physical presence in a state, “limited States' ability to seek long-term prosperity and has prevented market participants from competing on an even playing field."
In 2017, the National Conference of State Legislatures cited more than $17 billion in lost sales taxes each year due to the law.
Yesterday’s ruling, in effect, leaves a void in the way in which many states will collect sales taxes; some states, such as Washington, Pennsylvania, Colorado and the aforementioned South Dakota have laws in place governing taxation of online sales, while others will need to pass laws governing taxation of online sales. Forty-five states have sales taxes, while five — Alaska, Delaware, Montana, New Hampshire Oregon – do not; in addition, many states allow local sales taxes to be levied by city or municipality, further complicating the matter.... (read more here)
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