The Surpreme Court overturned a 1992 ruling set by the case Quil v North Dakota in which it made it illegal for states to charge sales tax on internet purchases if the selling company did not have a physical location in the area. Now, thanks to a 2018 South Dakota v. Wayfair Inc ruling, this exemption is no longer relevant. “Now, following the court’s decision, states can start charging sales tax on internet purchases even when a retailer has no physical presence in that state. ”
While many brick and mortar operations are praising the decision considering this a way to even the playing field, the truth is that it won’t. Even with an increase in price, people will still flock to online retailers versus places with physical locations. This means that the only people truly helped in this instance our those within government departments. According to Supreme Court Justice Anthony M. Kennedy, “the Quill decision caused states to lose annual tax revenues of up to $33 billion.”
Less than a year after simplifying the tax code with the Republican tax reform, online sales tax could introduce a new tax system even more complex than anything we’ve ever seen. “As Supreme Court Chief Justice John Roberts wrote in his dissenting opinion, items like deodorant with antiperspirant are taxed in Texas at a rate of 6.25 percent, while deodorant without antiperspirant is not taxed at all. And yarn sold to residents of New Jersey is exempt from sales tax so long as it is designated as yarn for sweaters and not another type of fabric-based product.”
And this will hurt small businesses the most by far. Figuring out the appropriate sales tax for an online business selling 20 or 30 states will now mandate that every owner is aware of what items they have and how it can be taxed. This doesn’t include the fact that businesses may have “to account for the over 10,000 state jurisdictions that govern sales tax across the country.”
Now with this new law about to take shape it is absolutely necessary for Congress to create legislation that makes sales tax as simple as possible. But with a split Congress, this does not seem like it could happen. While we figure out if companies like Amazon or eBay will be responsible of the actual tax filing for selling items online, we do know that everyone, small businesses and consumers alike, will now see an increase in online purchasing prices.