State Sales-Tax Officials Rev Their Engines

UPROXX  Shutterstock

UPROXX Shutterstock

The Supreme Court ruled that states can require online businesses to collect sales tax, even if that business doesn't have a physical footprint there. "There are now significant complexities in the thousands of state and local sales tax laws, including different minimum thresholds, tax holidays, and product tax category rules. As a result, we do not expect today's decision to have any noticeable impact on our business, as it may on other retailers who do not now collect and remit sales tax".

An analysis by Barclays found that Louisiana would get an estimated 3 percent bump in total tax receipts if it begins forcing out-of-state online retailers to collect sales taxes.

Honestly, this shouldn't be surprising to anyone, but it's a bummer nonetheless. NY taxes shower caps and walking boots, but not swimming caps or hiking boots, says Avalara (AVLR), which makes automated tax software.

The case is South Dakota v. Wayfair, 17-494.

Amazon, by far the nation's largest online seller, is not a party to the case, since it now has a physical presence in many states, with warehouses, and pays the taxes.

Chief Justice John Roberts offered the dissenting opinion, along with Justices Stephen Breyer, Elena Kagan, and Sonia Sotomayor. He said that the court's decision would result in "48 to 58 million dollars that South Dakota can use for education, healthcare, and infrastructure".

"It effectively penalizes "brick-and-mortar" businesses that choose to locate, hire employees and invest in the State of Maryland", Franchot said. 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.

NetChoice, a trade association focusing on electronic commerce, all but guaranteed it would challenge Washington's law in the 9th Circuit Court of Appeals and hamstring the state's ability to collect the taxes it promised in its budget.

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.

Whatever lawmakers do, don't assume that the imposition of online sales taxes will sink e-commerce.

"The Indiana Chamber is very pleased to see today's Supreme Court decision to permit states to move forward with sales tax collection from online retailers", said Bill Waltz, vice president of taxation and public finance for the Indiana Chamber of Commerce.

"Today's decision culminates years of tireless work by the retail community to reverse a pre-internet era rule that distorts free markets and puts local brick and mortar stores at a competitive disadvantage with their online-only counterparts".

U.S. Senator Maggie Hassan, as well as Representatives Carol Shea-Porter and Annie Kuster, also issued statements criticizing the court's decision.

Not surprisingly, (AMZN), Shopify (SHOP), Etsy (ETSY), Wayfair (W) and other e-commerce stocks dropped on Thursday. Online retailers argued that the law was unconstitutional, and the State Supreme Court agreed, but the US Supreme Court overturned the state court ruling.

E-commerce sales in the fourth quarter of 2017 increased to $119 billion, up more than 3% from the previous quarter and almost 17% from a year earlier, according to U.S. Census Bureau data.

Thursday's victory for South Dakota would seem to flip the script, with states less interested in enacting some sort of national legislation, and online vendors perhaps more interested. "We heard stories from major retailers in King County that told us they were a display room for online shoppers". Here in IN, former Gov. Mitch Daniels' administration agreed not to seek the sales taxes in exchange for Amazon locating several warehouses in the state.

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