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States can now force you to pay online sales tax

24 June 2018

US states could reap billions in online sales tax revenue and buttress their budgets after the nation's top court ruled on Thursday that e-commerce companies could be forced to collect the money, even if they have no physical presence in a state. This overturns a decision from 1992 that mandated that states could levy taxes on businesses only if they had a brick-and-mortar presence within that state's borders. States that don't have laws governing online sales tax are likely to move quickly to follow South Dakota's approach, including its threshold of $100,000 in sales, said Gary Botwinick, a lawyer at Einhorn, Harris, Ascher, Barbarito and Frost in New Jersey.

The Supreme Court says states can now tax online sales.

"New Hampshire's lack of a sales tax is a competitive advantage for our state, and this decision will unfairly punish small businesses that are the backbone of our economy", U.S. Senator Maggie Hassan said in a statement.

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Shoppers were generally supposed to pay the sales tax to the state themselves, but most didn't, says Gerald Storch, who was CEO of department store operator Hudson's Bay and now runs a retail consulting firm. States also argued against the previous statute, saying it reduced their potential revenue from sales taxes as more consumers turned to digital shopping options.

Rep. Tom Reed, R-N.Y., said he supported the ruling's creation of a level playing field between online sellers and physical retailers. The use tax Many states have a use tax equivalent to the sales tax that applies to online purchases but most online businesses do not comply with it.

Sales tax collection in Florida already has been evolving.

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"I've been seeing a lot of Chicken Little 'the sky is falling, the sky is falling, '" says Sueanne Shirzay, who operates a shop on Etsy and her personal website selling handmade jewelry.

In fact, the unfair burden has been on local retailers who have been collecting sales taxes. IL residents are required to pay state sales tax if the site doesn't add it. When you create a way for people to avoid the tax, you distort their behavior (pushing them to buy online when they might otherwise buy in a store) and you reduce tax collections. Under the agreement, retailers can use a sales tax compliance service of their choice without charge for transactions in the participating states, according to Craig Johnson, executive director of the Streamlined Sales Tax Governing Board. "It's vital we continue getting that and that we continue getting growth, not just stagnant collections each year", Jennings said at the time.

Walls think people understand the importance of keeping brick and mortar businesses for our communities. "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". He estimates his practice loses more than $75,000 in sales annually to online stores.

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States can now force you to pay online sales tax