Client Tip for August 2018: New Sales Tax Ruling Impact Online Retailers
NEW SALES TAX RULING IMPACT ONLINE RETAILERS
Last year approximately 9% of all retail sales of $452 billion was through e-commerce.
As more and more consumers shop online, the brick-and-mortar stores are having a harder time competing. Consumers are shopping online partially for the convenience and partially to save money due to not having to pay sales tax.
To help alleviate this gap, the U.S. Supreme Court in June ruled 5 – 4 in favor of allowing states to collect sales tax from online retailers. This overturned a prior ruling “1992 Quill Corp” requiring a physical presence in a state before states could require businesses to collect sales tax. Physical presence in a state includes not only a building located in the state but it might be just having a sales rep in the state. The court did not set any specific standards for states to impose before sales tax can be required to be collected.
Many states will have to make changes to their sales tax laws to take advantage of the new ruling. Hopefully the states will include minimum dollars and/or number of transactions online sellers will need to transact in the state in order to be subject to collecting sales tax. Be sure to watch for additional updates on this new ruling. If your business is involved in online retailing you definitely should consult with our tax department to avoid a state claim for back taxes not collected from your customers.
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