A Supreme Court Ruling Could Make Your Online Purchases More Expensive

They ruled unanimously in that case that the Constitution prohibits states from imposing a sales tax on out-of-state retailers that do not have a brick-and-mortar presence in the state. If it becomes apparent that the Court's Commerce Clause decisions prohibit the States from exercising their lawful sovereign powers, the Court should be vigilant in correcting the error.

Keep in mind that despite online retail's explosive growth, the internet still accounts for less than 10% of all retail sales in the US, according to the Census Bureau.

Dominic Calabro, president of Florida TaxWatch, a business-oriented advocacy group, cited Florida's heavy reliance on the statewide 6 percent sales tax as a major source of operating revenue for state services.

The Supreme Court decision is considered a win for retailers that do in-person sales, known as brick-and-mortar businesses.

"As in so many other areas, technology has evolved faster than the law and left us with at times freakish, unfair results", she said.

Estimates have states missing out on $8 to $13 billion just past year. A key sticking point for New Hampshire lawmakers has always been that the state's businesses remain exempt from any nationwide requirement.

One thing's for sure: Consumers who live in one of the five states without a sales tax won't be affected by the Supreme Court's ruling. And as Sen. Maggie Hassan noted Thursday, that is an advantage the state isn't keen on losing. Dissenting justices were John Roberts, Stephen Breyer, Sonia Sotomayor, and Elena Kagan. See Sales Taxes Report 22 (indicating that "costs will likely increase the most for businesses that do not have established legal teams, software systems, or outside counsel to assist with compliance related questions"). "Over 10,000 jurisdictions levy sales taxes".

The burden will fall disproportionately on small businesses.

"Startups and small businesses may benefit from the physical presence rule, but here South Dakota affords small merchants a reasonable degree of protection", the ruling says.

Not surprisingly, Amazon.com (AMZN), Shopify (SHOP), Etsy (ETSY), Wayfair (W) and other e-commerce stocks dropped on Thursday. Amazon shares were trading down slightly after the news.

At the same time, the ruling means that online retailers - large and small - will soon have to comply with almost 10,000 different tax jurisdictions across the country in the 45 states that impose sales taxes.

"Quill creates rather than resolves market distortions", the ruling says. As the justices acknowledged Thursday, however, the court back then "could not have envisioned" a world in which e-commerce sales have revolutionized the dynamics of the national economy.

"Consumers will quickly feel the negative effects as those businesses dry up or are forced into the arms of Internet giants", he added.

The Trump administration had urged the justices to side with South Dakota.

Some states will still have to pass new legislation to demand tax from out-of-state orders, and that isn't always guaranteed.

In the majority opinion, Justice Anthony Kennedy cited studies that estimate that states lose between $8 billion and $33 billion a year from untaxed online sales.

U.S. Senator Maggie Hassan, as well as Representatives Carol Shea-Porter and Annie Kuster, also issued statements criticizing the court's decision.

  • Arturo Norris