Supreme Court ruling says states can now tax online purchases

Supreme Court closes online sales tax loophole

The Supreme Court ruled Thursday that states can require online retailers to collect sales tax on purchases that come from states where they don't have any shops, offices or warehouses.

For a better understanding of how the ruling could impact consumers and businesses in the Chicago area, reach out to local legal experts.

By overturning a ruling that had made much of the internet a tax-free zone, the court delivered a victory to South Dakota and effectively blessed its model of collecting sales tax from online retailers.

With the larger sites having to pay sales taxes, smaller businesses have a bit more of an even playing field, especially if they have tech-savvy local marketing ads on Google and content-rich sites that attract prospective customers.

Honestly, this shouldn't be surprising to anyone, but it's a bummer nonetheless. As consumers shifted away from brick and mortar business and took their purchase power online, states lost billions in annual tax revenue. The South Dakota Supreme Court invalidated the law because Quill Corp. v. The losers are small online retailers who could be devastated by new compliance costs.

The court ruling mainly affects small vendors, including those who did business on big platforms like Amazon marketplace, eBay, and Etsy, says Joseph Bishop Henchman, executive vice president at the Tax Foundation, based in Washington, D.C.

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If you enjoyed the illicit thrill of avoiding the 6.25 percent IL sales tax on internet purchases of running shoes or steaks, you'll mourn the court's opinion in South Dakota v. Wayfair. The decision in Thursday's South Dakota vs Wayfair ruling uses economic nexus with minimum thresholds as the standard for substantial nexus. The law required out-of-state sellers who do more than $100,000 of business in the state or more than 200 transactions annually with state residents to collect sales tax and turn it over to the state. "Most states still need to pass laws or issue regulations that will allow them to use the expanded tax collection authority the court just granted". 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. The Supreme Court heard the case in April of this year and decided in South Dakota's favor.

The tax compliance software and services are created to work with the programs retailers use to process their sales transactions.

Only five states do not have a state-wide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.

But taxpayers could raise challenges, including the argument that collecting sales tax for previous sales could subject the seller to double taxation if the customer had already paid sales tax. OH has even asserted that online retailers have a "presence" in the state that obligates them to collect taxes if they put cookies on their customers' computers.

Ed Teisanu, a 39-year-old sales manager in Minnesota, doesn't think a new tax will change his buying habits, which is a mix of in-store and online.

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