Online sellers consider how to comply with sales tax ruling

The east facade of the Supreme Court of the United States

States such as South Dakota, which have no income tax and rely heavily on sales taxes, stand to gain the most from the new ruling, according to a Barclays research note. Now states can force consumers to pay sales tax when shopping online. Now, thanks to a US Supreme Court ruling (PDF) on Thursday, they have to. Forty-five of the 50 states have sales taxes. Indiana Chamber of Commerce vice president of taxation and public finance, Bill Walz, says the change levels the playing field and will boost Indiana's sales tax base. It's good for the people.

The majority of U.S. states collect some sales tax on retail purchases, typically charging customers between 4% and 8% for each transaction.

Senator peters says the European Union is also taking a look at South Dakota's plan for taxing online sales. And Hinojosa warns the scales are always tipped against any new tax legislation. A bipartisan group of senators filed a brief in the case supporting South Dakota's effort to overturn the online sales tax ban, essentially acknowledging that the legislative body was too dysfunctional to fix the problem.

But NetChoice, a trade association for e-commerce firms, warned small businesses would have trouble complying with the different tax requirements in each state. "Our strategy of trying to make sure that the Supreme Court justices understood what effect and harm this was having on our main streets really carried the day", South Dakota Attorney General Marty Jackley said. State Representative Tim Brown (R-Crawfordsville) said only about one percent of people in IN actually paid an online sales tax a year ago.

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Otto said that Congress or state legislatures now need to set the threshold at which online retailers must collect taxes. And many other vendors, like Overstock, Wayfair and Newegg, haven't previously collected the tax, either.

"E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule", he wrote. The company maintains that it has been collecting tax in all 45 states which require it. That number could only rise if the South Dakota decision begins to take effect.

We're likely to see this issue addressed legislatively next session. Most of the states are in a budget crunch. But in a concurrence, Kennedy acknowledged the "startling revenue shortfall" suffered by the states because of the court's Quill decision and invited them to try to find a better case in which to present the issue to the high court. On the other hand, that also means Minnesotans would be paying $150 million more in sales taxes. IN supported the legal challenge led by South Dakota.

So the nation's highest court took another look at the matter and overturned its earlier ruling.

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