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Supreme Court Rules That States Can Impose Sales Tax On E-Commerce Brands
A recent ruling by the Supreme Court is going to change the way e-commerce interacts with the economy forever. The Supreme Court has just overruled the decision of the 1992 Quill Corp v. North Dakota case, over the course of the recent South Dakota v. Wayfair. It was the 1992 case which determined that state taxes could only be charged when the company in question has a legitimate, physical presence in the state. This is going to change, and it is going to be a dramatic change for e-commerce brands.
The more you understand this issue, the easier it will be to see why many are looking at this as a considerably gamechanger.
Sales Tax On E-Commerce Brands?
The ruling by the Supreme Court in 1992 defined the relationship between e-commerce brands and sales taxes. Since that time, the ruling has made it clear in no uncertain terms that e-commerce brands do not need to pay sales taxes, as long as they do not have a physical presence in the state. This physical presence could be defined in a number of ways. It could be in the form of an office, a warehouse, or anything else that might qualify.
However, things are going to be different. The recent decision in South Dakota v. Wayfair have now indicated that the states can now demand sales taxes from e-commerce brands. Regardless of whether or not the e-commerce brand has a physical presence in the state, the state can impose these sales taxes.
At first glance, this Supreme Court decision should strike you as monumental. We are talking about billions and billions of dollars from one year to the next. We are essentially talking about a deep, long river of revenue that has remained untouched for a literal generation.
Of course, some brands have been paying sales taxes for years. Companies such as Walmart, Target, and Amazon.com have been collecting sales taxes for quite some time, even in situations in which they did not have a physical presence in the state. The same cannot be said for brands such as Wayfair, Newegg, and Overstock.com. These companies have failed to collect sales taxes, which led to South Dakota taking Wayfair to court. It was argued that the 1992 decision no longer had any relevancy, since that decision pertained to mail order catalogs.
More than forty states, as well as the Trump administration, have argued that the 1992 Supreme Court ruling should be thrown out, since it can hardly understand the nuances and demands of the modern-day e-commerce world.
What can we expect from this decision to strike down the 1992 Quill Corp v. North Dakota case? There are at least two key factors that you are going to want to keep in mind.
The Future Of E-Commerce
While we can only speculate on what is going to happen next, there are nonetheless a few things that are likely going to occur. To be sure, states are going to love the chance to collect sales taxes from these e-commerce businesses. Once again, we are talking about billions of dollars each year. This could generate a considerable amount of money for any state that wishes to receive sales taxes. Not surprisingly, most of the states in the Union are in favor of this decision. The brick-and-mortar brands that are still standing in the present will likely benefit from this recent event, as well.
In the end, the only ones who may suffer to some degree are the customers. If you’re the kind of person who strives to always pay the lowest possible prices, this may suddenly make things a bit more difficult. The hit to your wallet likely won’t be massive, but it is going to be something you will notice pretty early on.
In the end, we can only guess as to where this decision is going to take us. It seems likely that Congress is going to have to deal with this subject at some point. There are also some who continue to argue that the courts should not be making a decision on such a crucial economic issue. These are the people who believe the issue should be settled by Congress. We shall have to wait and see.