Supreme Court To Rule On Sales Tax Of Online Purchases

Supreme Court To Rule On Sales Tax Of Online Purchases

In 2017, an audit of the Federal Government Accountability Office indicated that states missed the opportunity to collect some $13.7 billion due to the Supreme Court law on state tax for online purchases. North Dakota, which says retailers only have to collect sales tax in states where they have a physical presence. Numerous sales on Amazon's and Walmart's sites are actually done by smaller retailers using those sites as their platform.

Should you pay sales tax on your online purchases?

As Dealerscope reported earlier this year, the Supreme Court announced it would review a 25-year-old case that has the potential to dramatically alter ecommerce here in the United States.

Based on a prevailing Supreme Court law, retailers can be forced to collect taxes only in states where the company has physical presence.

President Donald Trump has claimed Amazon doesn't collect sales taxes, even though the company does. "The "economic presence' test set forth in this case is a far better yardstick for State authority over absentee retailers and will ensure that large online retailers are playing by the same rules as their brick and mortar counterparts".

The Trump administration will join the oral argument in favor of online retailers being required to collect sales taxes everywhere. But other online sellers, from 1-800 Contacts to home goods site Wayfair, can often sidestep charging the tax.

South Dakota sued top online retailers Wayfair, Overstock, and Newegg, for failing to comply to the said state tax law.

And while the issue is portrayed as one of fairness for small brick-and-mortar retailers that have to compete against online retailers, experts say those small retailers could be among the ones that get hurt.

Initially meant to regulate catalog-based sellers, the ruling has been challenged again and again by states seeking to claim their fair shake of online sales.

But small businesses that sell online say the complexity and expense of collecting taxes nationwide could drive them out of business.

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