Thanks to a 1967 Supreme Court ruling that said states couldn't force mail-order catalogs to collect sales tax unless that company had a physical location in the state, online retailers have been able to skirt the issue of collecting sales tax.
But taxpayers could raise challenges, including the argument that collecting sales tax for previous sales could subject the seller to double taxation if the customer had already paid sales tax.
"The old physical presence rule created these pockets where businesses were structuring and locating in states where they didn't have a lot of sales so they could sell online and sell across the border, not having to collect sales tax", North Dakota Tax Commissioner Ryan Rauschenberger said. Congress, as the court acknowledged, could enact a broad-based law for state sales tax collection.
The National Retail Federation trade group has hailed the Supreme Court's sales tax decision as a "major victory". States have been trying to get this fixed for several years, especially as online retail has encroached on brick-and-mortar sales.
In addition to being a win for states, the ruling is a win for large retailers, who argued the physical presence rule was unfair. "But that tax shelter isn't going to last much longer". He said the court had other legal tools to ensure that sales taxes don't become an "undue burden" on small businesses and startups.
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For example, the popular electronics seller B&H only charges sales tax in NY and New Jersey, where it has a physical presence . The top court in the U.S. has ruled that states can force online companies to collect sales tax from their customers.
"Trump Store could have been collecting sales taxes on its bathrobes and slippers and golf balls all along, but it made a business decision not to do so and, until now, states had limited options for requiring tax collection", he said.
"So many of us who sell on platforms like Etsy are juggling all the time, families and businesses, or potential businesses along with day jobs", says von Braun, whose Etsy shop sells original artwork.
"New York and California would likely have to make some pretty big changes", said John Buhl of the Tax Foundation.
"I would really love for our government to get behind the idea of small business and when you do something like this it does not encourage small business", Keyton said. He said that the court's decision would result in "48 to 58 million dollars that South Dakota can use for education, healthcare, and infrastructure".
What happens next? IL has on the books a provision identical to South Dakota's, so it should be able to move quickly to require sales tax in most online transactions.
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Starting next year shoppers will have to pay sales tax for all online purchases.
The tax compliance software and services are created to work with the programs retailers use to process their sales transactions. "The playing field will be evened for local businesses who have been collecting and paying sales tax".
A case study Vince Kadlubek was originally happy enough when he heard of the Supreme Court ruling.
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. "And it's about time".
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Meanwhile, all the money from the exchange is now being moved to a cold wallet to tighten up the security. It didn't provide details of the attack, but it did say it will cover any losses for its users.