Online sales tax ruling could add $150 million to Minnesota’s coffers

Alonzo Simpson
June 22, 2018

That's even though Floridians already are technically supposed to pay sales tax on online purchases.

The effect is expected to be positive and widespread because 45 states impose sales taxes and until now were barred from requiring those companies to collect remote sales taxes.

Writing for the majority opinion, Kennedy reasoned that much has changed since the original 1992 ruling. "While we believe the court was not the ideal venue for creating this level playing field, we expect that today's decision will bring clarity and certainty to this issue". Forty-five of the 50 states have sales taxes.

Amazon, which was not involved in the Supreme Court case, collects sales taxes on direct purchases from its site but does not typically collect taxes for merchandise sold on its platform by third-party vendors, representing about half of total sales.

States that rely more heavily on sales tax - as opposed to personal income tax, for instance - "are the big winners here and could see real budget gains if they follow South Dakota's example", said Fitch Ratings analyst Stephen Walsh.

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Kennedy cited estimates that said mail-order sales in the United States totaled $180 billion in 1992, whereas e-commerce retail sales alone a year ago totaled $453.5 billion. But in recent years, several Supreme Court justices suggested the moment was ripe to review the 1992 decision, prompting South Dakota to pass a law forcing online stores to collect a 4.5% sales tax if sales and employee count hit a certain threshold.

The law specifically protects small businesses from collecting sales taxes if they have less than $100,000 in sales or fewer than 200 transactions in the state.

It's clear that the court's decision will mean extra cash for states. Now the legislature should consider going back into session to broaden that law and "eliminate the disadvantage retailers with physical locations in CT have long struggled to overcome", said Senate Republican President Pro Tempore Len Fasano. Avalara helps companies around the world comply with sales tax laws using automation software. The previous decision was Quill Corp. v.

Roberts said he agreed that a 51-year-old case partly affirmed by Quill was wrongly decided, but he opposes discarding the physical presence rule because the internet economy has grown in reliance on it. Justices Breyer, Sotomayor, and Kagan signed on to Chief Justice Roberts' dissent. Because many e-commerce companies do not collect state sales taxes on purchases, they have had an advantage over brick-and-mortar businesses that do collect it. "The largest physical retailers are now also the largest online retailers". And it sued Wayfair, Overstock.com and Newegg, which won in lower court decisions. Shares in large chains with more stores traded higher.

In South Dakota alone, a state with a population of less than 1 million people, The Department of Revenue estimates that the state government could take in up to $58 million annually. On Twitter, President Donald Trump called the decision a "Big victory for fairness and for our country". "It's a drain on our economy and a drain on our main streets and our local sellers", said Jon Hurst, president of the Retailers Association of MA.

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