Online shopping prices likely to rise after new sales tax ruling

US-POLITICS-SUPREME COURT

Georgia residents will have to pay sales tax on almost all online purchases following a U.S. Supreme Court decision Wednesday in a South Dakota case.

Despite the hit to your wallet, Minnesota Retailers Association President Bruce Nustad said the Supreme Court's ruling will help local businesses compete with third-party sellers, who previously could steal away customers by offering the same products at a lower price without sales tax.

The Supreme Court's 5-4 decision overruled a 1992 ruling that found the Constitution didn't allow states to require businesses to collect sales taxes unless they have a substantial connection to the state.

- New Hampshire online retailers could be on the hook to collect sales tax from dozens of states and thousands of localities after the U.S. Supreme Court Thursday upheld South Dakota's online sales tax law.

The court said that law effectively incentivized businesses to "avoid physical presence" in states and led to "a judicially created tax shelter". Large retailers including Apple, Macy's, Target and Walmart, which have brick-and-mortar stores, already generally collect sales tax from their customers who buy online.

The legal issue goes back to 1967, when the Supreme Court ruled that a state couldn't require an out-of-state retailer to collect a use tax unless the retailer had enough contacts with the state. After the decision was announced, shares in Wayfair and Overstock both fell, with Wayfair down more than 3 percent and Overstock down more than 2 percent. In those states, it is the responsibility of the seller to collect taxes and remit them to the state.

Chief Justice John Roberts, writing the dissenting opinion, agreed with Kennedy in that Quill was wrongly decided, but he wrote that Congress should make any necessary changes, rather than the court. "The burden is going to higher on SMBs because of the admin work required for each state - there is /will be software to simplify this, but nonetheless the impact is going to be greater on the smaller/high growth e-commerce companies", the investor said.

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In Massachusetts, you don't have to pay the 6.25% sales tax on clothing and food, but you do for luxury items like jewelry.

Most states would need to pass legislation before seeking to collect the additional taxes, although some have already enacted laws or regulations similar to South Dakota's.

Taxes on TV services is not new. He argued that the court should not regulate e-commerce. Forty-five of the 50 states impose sales taxes. Residents are now obligated to pay a use tax on out-of-state online purchases.

"When the day-to-day functions of marketing and distribution in the modern economy are considered, it is all the more evident that the physical presence rule is artificial in its entirety", Justice Anthony Kennedy wrote.

Sellers that use eBay and Etsy, which provide platforms for smaller sellers, also haven't been collecting sales tax nationwide.

He isn't sure how much money the city could raise by extending its sales tax online; according to the city's just-approved FY19-20 budget, it expects to earn about $47 million from existing physical sales taxes each year (excluding marijuana and alcohol).

The vast majority of sales are still done through brick-and-mortar stores that have always been subject to sales tax.

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