The 5-4 court opinion finally recognizes the impact of the internet and acknowledges commerce has changed since the court ruled in the 1960s and early 1990s that businesses had to have a physical presence in the state before the state could require them to collect state and local sales taxes. Now consumers do almost 10% of their shopping online, a share that will grow exponentially in the future.
But the ruling may not be a big blow to Amazon.com Inc (AMZN.O), which already collects sales tax on items it sells directly to consumers, nor will it bring much advantage to large chains like Walmart Inc (WMT.N), Target Corp (TGT.N) and other retailers with brick and mortar stores. Then in 2000, a national commission urged states to simplify their tax systems as a precursor to taxing remote sellers. But he said that any disruption of long-established rules governing a critical segment of the economy should be undertaken by Congress. Lawmakers in the state, which has no income tax, passed a law created to directly challenge the Supreme Court's 1992 decision. While the Supreme Court spoke approvingly of the law, it sent it back to South Dakota's highest court to be revisited in light of the court's decision. Consultants like Mark Grinis, partner, global real estate at EY, said he did not expect a surge in demand for stores even if prices ticked up for online businesses. More than 10,000 jurisdictions collect sales taxes, with differing rates and rules.More news: Gomez: Leaked England team gives Panama no advantage
A recent loosening of states' sales tax collection affects purchases of products online. This will create a new revenue stream from state and local governments. "These critiques underscore that the physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause", he wrote. Likewise, eBay now does not require sellers to collect state sales taxes.
He explained, "There are a small handful of states that may, in pretty short order, announce that they are enforcing existing economic nexus standards which, under the law, took effect immediately upon the Supreme Court Decision (North Dakota and Vermont)".More news: Virginia Restaurant Faces Backlash After Booting Out Sarah Sanders
The ruling is likely to prompt other states to try to collect sales tax on purchases from out-of-state online businesses more aggressively.
Owners who have never collected out-of-state sales tax will need to get up to speed.More news: Irish border agreement has to be part of Brexit deal, Juncker warns
The Supreme Court ruled Thursday that states can force online retailers to collect taxes from online sales. The law required out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and turn it over to the state. "Part of the biggest challenge for the sellers is to know in each particular state if its goods and services are subject to sales tax, because there's no uniform definition". Until that case is resolved, South Dakota has already enjoined itself from enforcing that law on any out-of-state retailers. The court corrected a fundamental unfairness in sales tax collections, and state legislators have an obligation to follow up.