In a ruling that could benefit Nebraska and Iowa tax coffers, the U.S. Supreme Court says states can force online shoppers to pay sales tax.
The case that triggered this new decision was South Dakota v. Wayfair, which was caused by the state's efforts to enforce a law allowing it to collect taxes on merchants that make over 200 transactions with state residents or draw in at least $100,000 in business annually.
How will this affect your wallet?
eBay has always supported tax policy that is fair to entrepreneurs, artisans, and small businesses. The court corrected a fundamental unfairness in sales tax collections, and state legislators have an obligation to follow up. They are linked to databases that track tax rates in the 45 states that charge sales tax, and in the thousands of counties and municipalities that have their own taxes. Five states don't charge sales tax. "I think that needs to be part of the discussion is that the potential of these new sales tax dollars could create a situation where we could lower taxes in other areas", Hawk said. North Dakota, that states could not extend their taxing authority to companies that had no stores, warehouses or "physical presence" within the state.
But many smaller online retailers are women, minorities, veterans and people with disabilities who have taken advantage of the protections granted by the Supreme Court and Congress over the years.
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The 1992 decision 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. Attorney General Marty Jackley said it was a win for South Dakota and for "Main Street businesses across America that will now have a level playing field and tax fairness".
What it means for out-of-state retailers is that sales tax nexus is no longer exclusively based on a physical presence standard.
While some online sellers recently have started collecting sales taxes, others, like L.L. Bean, do not. Bob Krist, the Democratic candidate for governor, said Ricketts' actions delayed the state from getting needed revenue. Gov. Pete Ricketts, a Republican, has until now opposed legislation to have the state require out-of-state online retailers to collect the tax, saying it was unconstitutional until the Supreme Court or Congress decided otherwise. Sen. Until that case is resolved, South Dakota has already enjoined itself from enforcing that law on any out-of-state retailers.
The Trump administration had urged the justices to side with South Dakota. "Eliminating the physical nexus standard is good news for all retailers because it negates or the states' need to enact confusing and controversial laws (such as Massachusetts' cookie nexus law) in efforts to bypass Bellas Hess and Quill and get remote retailers to collect sales tax legally due".
"This is a great day for South Dakota".