E-commerce: SCOTUS ends tax-free online shopping
“You’ll soon be paying more in taxes for online purchases,” said Ben Fox Rubin in CNET.com. The Supreme Court ruled 5-4 last week that states can force retailers beyond their borders to collect sales tax revenue from consumers, overturning a decades-old decision that only required companies to collect sales tax in states where they had a physical footprint. All this time, if retailers didn’t collect sales tax, consumers in, for instance, New York were ostensibly responsible for sending in the necessary taxes if they bought a product from a company in, say, Utah—“something that most people never do.” Brick-and-mortar retailers rejoiced at the South Dakota v. Wayfair ruling, saying the court had finally “leveled the playing field,” said Joyce Rosenberg in the Associated Press. But the change also angered many small online businesses, which say their expenses and compliance costs could now skyrocket, because they will be responsible for sales tax in some 10,000 state and local jurisdictions nationwide.
It’s about time this bizarre loophole was finally closed, said Josh Barro in BusinessInsider.com. In 1992, when SCOTUS first ruled on the issue, mail-order sales totaled roughly $180 million. Last year, digital retailers sold half a trillion dollars’ worth of goods. States have been losing out on an estimated $8 billion to $33 billion in uncollected revenue per year. Ensuring our tax system is “a little less broken” is a positive outcome for all of us, “even if it means missing out on deals from time to time.” However, “this doesn’t mean that websites will all of a sudden start collecting sales tax,” said Alana Semuels in The Atlantic. So far, this ruling only covers South Dakota, which passed a law requiring retailers that sell $100,000 worth of goods in the state, or process more than 200 separate sales, to collect tax. It’s still unclear what the implications are for other states, or for “the people who shop in them.” Thirty-one states currently have internet taxation laws, but their rules “may be more restrictive than South Dakota’s law, and so may not hold up in court.”
Lest you think Amazon is now in trouble, I expect CEO Jeff Bezos will “lose zero sleep,” said Jordan Weissmann in Slate.com. “The fact is that plenty of big players in online retail were already collecting sales tax on many, if not most, of their sales.” That includes Amazon, which applies sales tax on all the items it sells directly to customers. It didn’t always do so, and you can argue that its yearslong tax dodge was key to its incredible growth. But as it has expanded, “its vast network of fulfillment centers” has made the company subject to states’ tax jurisdiction. That’s one reason this decision “won’t fundamentally change Americans’ shopping habits.” But it did hand Amazon another opportunity “to squash potential competitors,” said James Freeman in The Wall Street Journal. The businesses most hurt by this ruling will be the millions of small-business owners who sell on marketplaces like Amazon, eBay, and Etsy, who now have to navigate thousands of different tax rules. That’s yet another advantage for Amazon, which could find a new opportunity in offering mom-and-pop online shops a tax-collection service—for a fee, of course. Just one more way “Washington is now helping the tech giant prevent upstarts from challenging its position.” ■