New Ruling on Intenet Tax Could Negatively Impact Your Smallbiz

In June 2018 the Supreme Court ruled that States could collect Internet Sales Tax.

The ruling comes from the SOUTH DAKOTA v. WAYFAIR, INC., ET AL.

The decision overturned previous rulings in 1967 and 1992 in which the court ruled that Illinois and North Dakota could not force the collection of sales taxes from sellers with no presence in those states.

In 1998 Congress passed the Internet Tax Freedom Act which prevented the collection of Internet Sales Tax.   It prevented statutes from collecting Internet Sales Tax from companies that did not have a physical presence in that state. 

It became the burden of individual consumers to pay the sales tax [at the end of the year] to their respective states if their states required it.  Many consumers did not comply with that rule. 

In order to force the collecttion of taxes many states began to pass laws requiring consumers in their states to pay Internet sales tax and passed laws that define what it means for a business to have a presence in their states. 

More than 20 states define a seller's physical presence as including any affiliated website. Ten states require out-of-state sellers to notify buyers and inform states of the unpaid sales taxes.  Today the top 100 Internet Retail Sellers remit about 90 percent of the taxes owed.  They include large retailers such as Amazon, eBay, etc.

So, what happens next.  States will be implementing laws to start taking advantage of this new tax source.  It is now up to Congress to step in and provide clear Internet Sales Tax rules with a strong protections for small business. 

Sources:
Supreme Court Ruling: SOUTH DAKOTA v. WAYFAIR, INC., ET AL.
Internet Tax Freedom Act

By Bill Williams