If you’re like millions of people, you do at least some of your shopping online. There’s the convenience, the quick delivery, and the savings from the lack of sales taxes.
Well the Supreme Court may have just put an end to all that. In a 5-4 decision that overturns precedent, the court said states can begin collecting sales taxes from online retailers. Is this ruling right or wrong for America?
In 1992, the state of North Dakota tried to force a Delaware software company to pay sales taxes on sales to customers in North Dakota. In the case called Quill Corporation verses North Dakota, the Supreme Court ruled that since Quill had no physical presence, North Dakota the state could not collect a sales tax.
But in a new case brought this time by South Dakota against Overstock.com, Wayfair and Newegg, South Dakota argued that online retailers are “bleeding dry” small mom-and-pop retailers on the main streets of South Dakota, because mom and pop must collect sales taxes while Amazon, Overstock and the others do not. The court agreed, saying a physical presence is not necessary in order for the state to collect sales taxes.
A ruling that was overdue
Nobody wants to pay more in taxes, but this change may have been a bit overdue. After all, when tax laws were created there was not much in the way of online shopping.
Therefore, the idea of not charging taxes for companies that were not actually in the state made sense. Even if some sales were made, there were not nearly enough to make much of an impact. But as the internet continued to grow and more retailers made most of their sales online, regulations that were set up even 20 years ago ended up being somewhat obsolete.
While this sounds like it will not be a good thing, there is still plenty that has to play out before we know the ruling's true impact. Many of the top online retailers have already been collecting taxes, so it's likely you won't necessarily notice a change.
Furthermore, this ruling was based on an issue in South Dakota, where the state wanted to collect taxes from online stores who have more than $100,000 in annual sales or 200 transactions in the state.
The ruling sets a precedent, yes, but for now it only affects South Dakota. Assuming any other taxes follow a similar model as what South Dakota asked for, smaller businesses could find themselves exempt from sales taxes.
So now, after 26 long years, small town America is finally on an equal footing with big tech retailers.