Thursday's Wayfair Supreme Court decision could mean state legislatures can now force online retailers to start preparing for new rules in the sales tax world.
In 2016, South Dakota Governor Dennis Dugerd said his state is losing about $ 50 million a year in sales taxes, as many online retailers are not physically in the state. This overturns a decision from 1992 that mandated that states could levy taxes on businesses only if they had a brick-and-mortar presence within that state's borders. Customers were generally supposed to pay the tax to the state themselves if they don't get charged it, but the vast majority didn't.
Nevertheless, the court stopped short of giving its full blessing to the South Dakota law, stating that the taxpayers had made other challenges to the law and those need to be addressed by the state courts first. The newspaper reports that retailers say the ruling is long overdue. Then he heard that it could mean collecting sales tax revenue from other states as well. Reaction to the ruling is mixed Companies with a physical retail presence in states have cheered the decision since before they were at a competitive disadvantage with online sellers.
Neil Saunders, managing director of the research firm GlobalData Retail, predicted that consumers could pay as much as $15.2 billion a year in additional taxes. To be compliant with the Streamlined Sales Tax Agreement, a state must administer one tax rate.
States also still must announce dates by which retailers must be in compliance, says Scott Peterson, a vice president at Avalara, a manufacturer of tax collection software. He said the court should not be doing the work of Congress, even if its earlier precedents were wrongly decided.
Roberts said this amount is up in the air, but it could be enough additional revenue to make a difference. The court gave South Dakota a victory, knocking aside the physical-presence rule as arbitrary and obsolete in the digital age. South Dakota, and held that "physical presence" is not necessary before states can validly apply their taxing powers to businesses that have neither persons nor property in a state but nevertheless conduct substantial business in that State. The nonpartisan Government Accountability Office estimated last year that collecting sales tax on all remote sales could bring state and local governments in Florida anywhere from $486 million to $758 million a year.
Sales tax collection in Florida already has been evolving. "The playing field will be evened for local businesses who have been collecting and paying sales tax". Many small online sellers may use Amazon's platform as it will collect and remit sales tax for them.
The case is South Dakota v. Wayfair, 17-494.
While almost impossible to determine how much revenue Johnson City or Washington County loses to online sales, state officials estimate Tennessee loses between $200 million and $450 million annually.
"I've been seeing a lot of Chicken Little 'the sky is falling, the sky is falling, '" says Sueanne Shirzay, who operates a shop on Etsy and her personal website selling handmade jewelry.