Shopping online? Now you will have to pay taxes

Doris Richards
June 22, 2018

Following an earlier indication by the court in 2015 that it would reconsider the Quill decision, the South Dakota legislature chose to charge companies that deliver more than $100,000 worth of goods or services or have more than 200 separate transactions within the state its 4.5 per cent sales tax.

Many internet retailers had leaned on the Quill decision to avoid paying sales tax in states where they didn't have a physical presence. Others may need to wait until 2019 for their legislatures to act.

Noah Berger, president of the Massachusetts Budget and Policy Center, a liberal-leaning think tank, said the likely result of the ruling is that Massachusetts' existing rules will take full effect, without the threat of a legal challenge, and more online retailers will begin collecting sales tax in Massachusetts.

The states that are likely to see the biggest percentage increase in revenue are Louisiana, Tennessee, South Dakota, Oklahoma and Alabama, according to the Barclays research. Louisiana is beefing up its efforts to collect taxes on purchases made from out-of-state in...

Rauschenberger says there is more housekeeping that needs to be done before the state collects.

"Just because you can now constitutionally ask someone to collect your tax doesn't mean that happens tomorrow", said Verenda Smith, deputy director of the Federation of Tax Administrators.

South Dakota's case was supported by 35 states and the federal government and saw the Supreme Court undo a 1992 ruling in which it had held that the mail-order company Quill did not have to collect sales taxes in North Dakota.


Writing for the majority, Supreme Court Justice Anthony Kennedy said the prior decisions had been flawed. Lawmakers in the state, which has no income tax, passed a law created to directly challenge the physical presence rule. This decision overturned a 1992 ruling, which allowed these platforms to use the internet as a tax-free haven. Thirty-one states responded by pushing the envelop with laws taxing internet sales. "I again call on Congress to level the field for small businesses and retailers in Oklahoma and across the country by implementing a fair system for online sales tax". Wayfair already collects and remits sales tax on approximately 80 percent of our orders in the United States, a number that continues to grow as we expand our logistics footprint. Then there are the various state tax "holidays" meant to goose sales.

"This is a great day for South Dakota". The state's law also isn't retroactive.

The decision [PDF] will have a huge impact on American ecommerce, with large companies required to calculate, charge and hand over billions of dollars through dozens of different taxes. Deb Peters, a Republican and chief author of South Dakota's law. In fact, 52 percent of the state's general-fund revenue - which pays for schools, prisons and social services, among other programs - comes from retail sales and use taxes, according to a 2016 report.

"The Court should not act on this important question of current economic policy, exclusively to expiate a mistake it made over 50 years ago", Roberts said.

The Minnesota Department of Revenue said it will provide guidance within 30 days.

"It effectively penalizes "brick-and-mortar" businesses that choose to locate, hire employees and invest in the State of Maryland", Franchot said. A "physical presence" could count as a store or headquarters, or other facility.

Other reports by Iphone Fresh

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