Photo courtesy of John Brighenti
Last Thursday, the Supreme Court, in a pretty close decision, changed the commercial construct for sales tax. Prior to this ruling, states could not collect sales tax from companies not physically present in the state. Now states can require companies, with “substantial nexus” in the state, to collect and remit sales tax to the said state.
How Does This Affect Small Businesses?
Deborah White, a general counsel for the Retail Industry Leaders Association, stated it the best: “This ruling clears the way for a fair and level playing field where all retailers compete under the same sales tax rules whether they sell merchandise online, in-store, or both.”
What About Consumers?
Consumers will likely see a rise in costs online.
The US Accountability Office estimated that if states were able to collect sales tax from remote sellers in 2017, they would have collected $13 billion.
The decision, South Dakota v. Wayfair, Inc., overruled prior court rulings dating all the way back to 1992 and 1967.
The ruling does not require states to actually collect sales tax from remote sellers, it is just an option.
Learn more about the ruling in Neil Amato’s article, “A new playing field for business.”
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