On June 21, 2018, the Supreme Court passed South Dakota v. Wayfair. It was a 5-4 majority, and it means that states may charge tax on purchases made from out-of-state sellers. This new ruling has overturned Quill Corp v. North Dakota, which prevented states from collecting any sales tax from online sales back in 1992.
Since Quill Corp v. North Dakota was passed twenty-five years ago, there’s been an extreme increase in interstate sales via electronic devices. According to the Government Accounting Office, states lost over $13 billion in taxes they could not collect last year.
Up until now, online retailers were not required to charge consumers a sales tax on out-of-state sales, unless the retailer had a physical presence in the state where the buyer was located.
In a recent article regarding this new ruling, The New York Times wrote: “Americans have done more and more of their shopping online in recent years, drawn by the promise of low prices, wide selection, and buy-from-home convenience. But e-commerce has also had another edge: Many of those sales taxes were, in effect, tax-free.”
Another reason South Dakota v. Wayfair passed is to level the playing field between brick-and-mortar stores and online retailers. Online retailers will be required to collect sales taxes from customers in individual states, even if they do have a physical presence in those states.
According to Entrepreneur, states can now choose to tax most internet sales as well as most mail orders. While all fifty states are not currently taxing across state lines, it’s only a matter of time before each state applies this next tax because it will increase state revenues.
What do you think of all of this? Have you thinking about adding an ecommerce section to your website? Contact Sperling Interactive today for a consultation.