Published: Mon, June 25, 2018
Money | By Hannah Jacobs

Online Retailers Lose State Tax Subsidy

Online Retailers Lose State Tax Subsidy

But in the years since, states have argued they were missing out on tax revenue as online sales accelerated.

Supreme Court clears way for states to collect...

"It's great to have an even playing field for business and not only that, but sales tax is really important to our communities and important to our state". "It's exciting to have it overturned, but it's disappointing to not have a law in place". "Other states will have to enact statutes that incorporate economic nexus standards, and statutes take time".

Gov. Pete Ricketts was among those opponents, although he had been seeking a compromise at the time the bill failed. Kennedy also said that the rule makes no sense, and that "this Court should not maintain a rule that ignores these substantial virtual connections to the State".


In recent years, brick-and-mortar retailers, including bike retailers, had supported federal legislation that would create a nationwide system to collect state taxes.

"There are nuances to every opinion", he said. But for 65 percent of them, online sales accounted for 5 percent or less of their revenue. That essentially shifts more of the tax burden and the responsibility for funding government functions from public education to social services to Floridians who buy locally and away from those who buy online.

Justice Anthony M. Kennedy, who wrote the majority decision, said the previous ruling unfairly disadvantaged traditional brick-and-mortar stores.

But many smaller online retailers are women, minorities, veterans and people with disabilities who have taken advantage of the protections granted by the Supreme Court and Congress over the years.


The high court ruled in 1967 and again in 1992 that companies without a physical presence in a state did not have to collect sales taxes. That's because they typically have a physical store in whatever state the purchase is being shipped to. Prior to the ruling, if you lived in NY and bought a TV from a retailer like Newegg - which has no physical stores in NY state - you wouldn't have to pay sales tax on your purchase. Those dollars are expected to provide $200 million a year for the IL state treasury according to estimates by the Department of Revenue. Likewise, eBay now does not require sellers to collect state sales taxes. "In South Dakota, based on how the law was written the fact that the case was technically remanded to state court likely means that the new standard is not immediately enforceable". North Dakota lawmakers a year ago passed a bill requiring out-of-state sellers to remit sales tax, treating them as if they have a physical presence in the state.

FILE PHOTO: The U.S. Supreme Court is seen after the court revived Ohio's contentious policy of purging infrequent voters from its registration rolls, overturning a lower court ruling that Ohio's policy violated the National Voter Registration Act, in Washington, U.S., June 11, 2018.

The top court in the U.S. has ruled that states can force online companies to collect sales tax from their customers.

The law specifically protects small businesses from collecting sales taxes if they have less than $100,000 in sales or fewer than 200 transactions in the state. The state conceded in court, however, that it could only win by persuading the Supreme Court to do away with its physical presence rule. North Dakota, a 1992 case, had held that physical presence was necessary.


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