Saturday, 20 October 2018
Latest news
Main » Battle over sales taxes on online purchases heads to Supreme Court

Battle over sales taxes on online purchases heads to Supreme Court

16 April 2018

Hodge said numerous Chamber members have expressed concern that online retailers that do not charge local sales taxes have an unfair advantage.

It passed a law requiring retailers with more than $100,000 in annual sales or more than 200 transactions in the state to pay a 4.5 percent tax on purchases. "They look at the final cost, of course, but shoppers are becoming more comfortable with the idea that these taxes should be collected and paid".

The professor said the growth of online sales is enough of a worry to the large retailers that a lot of them are developing hybrid systems where customers can make a purchase online and either ship it directly to the customer or to the local store where the customer can come in and pick it up.

Big retailers like Amazon and Walmart collect sales tax on all online sales in the 45 states with a statewide sales tax.

Texas Comptroller Glenn Hegar announced he would send cities, counties, transit systems and special objective taxing districts $651 million in local sales tax allocations for sales in February, 5 percent more than the previous year.

But numerous sales these small retailers get are through bigger sites like Amazon and Walmart. The court first adopted its physical presence rule on sales tax collection in a 1967 case dealing with a catalog retailer.

Courts following the dictates of Quill ruled against South Dakota, and the case quickly moved to the Supreme Court. But it's practically impossible for the state to get the tax revenue unless the company collects the money at the time of sale. "The younger a person is the more likely they are to buy things online", Jones said.

Represented at the court by Bethesda, Maryland, lawyer Eric Citron, the state said the modern economy requires a recognition that the court's 1992 ruling is obsolete.

At BookPeople, an independent bookstore in Austin, chief executive Steve Bercu says it has become increasingly hard to compete. But since 2017, Amazon has been collecting sales tax in every state that charges it. Third-party sellers that use Amazon to sell products make their own tax collection decisions, however.

"There is no conceivable, believable excuse for not collecting sales tax", he said.

The Trump administration will join the oral argument in favor of online retailers being required to collect sales taxes everywhere. "It's just a part of doing business". Kennedy has written that the 1992 case was "questionable even when decided" and "now harms states to a degree far greater than could have been anticipated earlier".

The logic holds even in this new economy, Wayfair and the other companies argue.

Jones said he suspects online sales will continue to grow exponentially. But as Amazon has grown, dotting the country with warehouses, it has had to charge sales tax in more and more places. Sellers on eBay and Etsy, which provide platforms for smaller sellers, also don't collect sales tax nationwide. Rather, the types of businesses in question include major ecommerce-only businesses like Wayfair, Newegg (#16 on our Top 101 Consumer Electronics Retailers list), and of which are cited in South Dakota's suit.

Battle over sales taxes on online purchases heads to Supreme Court