States can now force you to pay online sales tax


Amazon and eBay's third-party vendors, for example, are often cited as an example of small retailers that could suffer from changes to the tax structure.

The 5-4 ruling Thursday is a win for states, who said they were losing out on billions of dollars annually under a two decades-old Supreme Court decisions that affected online sales tax collection.

States have argued that they are missing out on a serious chunk of revenue, while brick-and-mortar retailers say they are at a disadvantage compared with e-commerce companies because they have to charge sales tax at the time of purchase.

Numerous largest online retailers, such as Amazon, already pay sales taxes because they have enough of a physical presence in most states through their network of warehouses and distribution facilities to qualify as taxable by states.

The Supreme Court decided the previous tax structure in Quill Corp. v.

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In response to the ruling, the stocks of several internet retailers, including Amazon, eBay and Wayfair, all dropped.

Shares of Amazon are up 49% since the beginning of 2018.

Most states would need to pass legislation before seeking to collect the additional taxes, although some have already enacted laws or regulations similar to South Dakota's.

"Rejecting the physical presence rule is necessary to ensure that artificial competitive advantages are not created by this court's precedents", Kennedy said. South Dakota's governor has said his state loses out on an estimated $50 million a year in sales tax that doesn't get collected by out-of-state sellers.

Not only does allowing states to collect these new taxes on consumers have the potential to raise online prices, it could also harm some businesses. First, the Act applies a safe harbor to those who transact only limited business in South Dakota. 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.