Supreme Court Rules States Can Charge Online Shoppers Sales Tax

Alex Wong  Getty Images

Alex Wong Getty Images

A major U.S. Supreme Court ruling out Thursday could force New Hampshire businesses to collect a sales tax on behalf of other states.

The Supreme Court of the United States ruled Thursday that online retailers can add state tax to their sales, even if they do not have a physical location in that state.

"At this time, the Department is reviewing the ruling and its impact on Florida sales tax", a Revenue spokeswoman said.

Honestly, this shouldn't be surprising to anyone, but it's a bummer nonetheless.

"States can tax it".

Louisiana, Tennessee, South Dakota, Oklahoma and Alabama all stand to reap the highest gains as a percentage of their current revenue, the research found. Thanks to Amazon's nationwide network of warehouses, the company already collects sales tax for the majority of states. Justices Breyer, Sotomayor, and Kagan signed on to Chief Justice Roberts' dissent. "Whatever salience the adage "third time's a charm" has in daily life, it is a poor guide to Supreme Court decision-making".

Rep. Annie Kuster, D-N.H., said "this misguided ruling will subject them (small businesses) to thousands of taxing jurisdictions and burdensome red tape across the country". States also argued against the previous statute, saying that it reduced their potential revenue from sales taxes as more consumers turn to digital shopping options. If it becomes apparent that the Court's Commerce Clause decisions prohibit the States from exercising their lawful sovereign powers, the Court should be vigilant in correcting the error. Other states are now expected to pursue sales tax on out-of-state online purchases, with more legal fights likely. Georgia's law applies to companies that do at least $250,000 worth of sales or 200 transactions a year in the state.

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The market isn't thrilled about this decision. President Donald Trump, who has bashed online retail powerhouse Amazon.com Inc and whose administration backed South Dakota, said on Twitter.

Quill imposes the sort of arbitrary, formalistic distinction that the Court's modern Commerce Clause precedents disavow in favor of "a sensitive, case-by-case analysis of purposes and effects". Wayfair, Amazon.com, Overstock, Etsy, Shopify, and Blue Apron were all down in the 30 minutes following the ruling, with Wayfair falling as much as 9.5 percent.

"When the day-to-day functions of marketing and distribution in the modern economy are considered, it is all the more evident that the physical presence rule is artificial in its entirety", Justice Anthony Kennedy wrote. That led Daniels to announce a new deal with Amazon to start collecting the sales tax on purchases in 2014.

"In 1992, it was estimated that the States were losing between $694 million and $3 billion per year in sales tax revenues as a result of the physical presence rule", the justice wrote.

Now it's up to Congress to figure out a system for interstate commerce that's simple enough for small businesses to manage while still allowing states to determine how taxes will be collected.

South Dakota asked the Supreme Court to overrule their 1992 decision in a case called Quill. North Dakota reaffirmed that out-of-state vendors did not have to collect sales taxes. They have very different needs and challenges than larger online retailers and we are encouraging them to sign a petition that tells policy makers to support microbusinesses like theirs.

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