Online Retailers Lose State Tax Subsidy, by Wolf Richter

Online retailers will now have to collect the sales taxes their brick-and-mortar competitors have to collect. From Wolf Richter at wolfstreet.com:

Up to $13 billion in 2017. Brick-and-mortar gets some relief. Consumers not amused.

The US Supreme Court ruled today that states may require out-of-state online retailers to collect sales taxes on merchandise they sell in that state. The decision overturned its 1992 ruling – Quill Corp. v. North Dakota – that had blocked states from compelling retailers with no “physical presence” in that state to collect sales taxes. At the time, two years before Amazon was founded, the internet was dogged by “worldwide wait” dialup, and the idea consumers would buy everything from shoes to couches on the internet was remote.

The 1992 ruling eventually gave a huge boost to out-of-state online retailers in that they received a consistent state tax subsidy with every sale that their in-state and local competitors – brick-and-mortar and online alike – did not receive. At first, online retail was just a minor sideshow, but after a quarter century of booming, it has become the place to be, and the squealing from all sides about the tax subsidy has been deafening for years.

It amounts to big bucks. The Government Accountability Office estimatedthat state and local governments could have collected between $8 billion and $13 billion in sales taxes in 2017 “if states were given authority to require sales tax collection from all remote sellers.”

In today’s ruling, authored by Justice Anthony Kennedy, the Court sided with South Dakota, which had passed a law in 2016 that required large out-of-state online retailers to collect sales taxes on merchandise sold in the state. Online furniture retailer Wayfair, along with Overstock.com, and online electronics retailer Newegg sued to block the law and won in lower court.

To continue reading: Online Retailers Lose State Tax Subsidy

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