The US Supreme Court finally ruled on the sales tax case from South Dakota. The case as you may recall was a direct challenge to the status quo that exempted sellers from having to collect sales taxes from buyers in states where the seller had no physical presence.
The old regime has been a great boon to internet commerce and a source of huge frustration for states that want to get their hands on more taxes. It has also hurt local businesses who have difficulty competing against online sellers even without the absence of sales taxes charged on internet purchases.
And it certainly was a big benefit to consumers.
However, the ruling in South Dakota v Wayfair, Inc is the proverbial brick through the window.
In a ruling that reversed its position since 1992, the court sided with South Dakota and allows that states have broad powers to tax sales within their state from out of state sellers with no physical presence in the state. Done!
Spoiler Alert: Look for all 50 states to immediately jump on the bandwagon and pass laws that require sales taxes to be collected on internet based sales. This will be a huge headache for retailers that could easily find themselves responsible for collecting and paying sales taxes in all 50 states and at varying rates depending on which county or city their customers may live in.
By: Paul Scholz, CPA
Managing Partner, Onisko & Scholz, CPAs