U.S. Supreme Court Expands Internet Sales Tax
Most shoppers who buy goods from a physical retail store pay state sales tax on those purchases. Some online shoppers have enjoyed online shopping without paying that tax because online retailers are generally have not been required to collect sales tax if they do not have a physical presence in the customer’s state.
However, on June 21, 2018, the Supreme Court of the United States widened the stream of state tax revenue from online sales with its decision in South Dakota v. Wayfair Inc. This decision overruled 26 years of precedent. Relying on the Commerce Clause of the Constitution, this ruling upheld a South Dakota law declaring that out-of-state retailers must collect sales tax for online purchases and remit that money to the state where the purchase was made. For example, if a South Dakota online shopper purchases goods from a company with no physical residence in South Dakota, this new law requires that company to collect sales tax on those goods and pay the sales tax to South Dakota.
The South Dakota law applies to retailers who deliver more than $100,000 in sales of goods or have more than 200 transactions per year in that state. It mainly affects online shoppers of large online retailers such as Wayfair and Overstock. Online shoppers at Amazon and Walmart are unlikely to be affected because they already charge sales tax for online purchases in almost every state. Indiana and many other states are now likely to seek more sales tax revenue from internet retailers, using current legislation or new laws following the South Dakota approach upheld in South Dakota v. Wayfair Inc.
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