Supreme Court rules states can force online shoppers to pay sales tax

The Supreme Court rules against Wayfair and other online retailers and overturns ban on the collection of online sales taxes. Jenny Kane  AP

The court overturned a longstanding rule that states can collect sales taxes only on transactions if the retailer has a "bricks and mortar" presence in that state.

The Supreme Court on Thursday ruled that states can collect sales tax from all retailers, even if those retailers do not have a "physical presence" in their state - ultimately paving the way for states to collect sales tax from online retailers.

In a blow to huge billion dollar online retailers such as Amazon and eBay, the Supreme Court has ruled that states can impose a tax on goods and services ordered online.

However, under the new ruling, NY consumers would have to pay sales tax even though Newegg has no physical storefront in the Empire state.

Justice Anthony Kennedy wrote that the previous decisions were flawed. In a note Thursday, Goldman Sachs analyst Blake Taylor said that most major retailers already pay sales taxes online and states may be slow to pursue the small number of retailers that do not yet do so. "There is a chance here that it raises prices for consumers by passing on this tax increase".

The New York State Department of Finance says it's reviewing the decision, so it's unclear when our 8.875% sales tax will officially kick in. For instance, the tax now could be collected from S.C. shoppers who shop online at outdoor retailer L.L. Bean. This was due to 50 years' worth of legal rulings which prevented states from charging sales tax on purchases made from out-of-state retailers.

You will soon likely be paying more in taxes for online purchases.

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Legislation to begin collecting online sales tax beginning July 1 was blocked by a filibuster earlier this year. Thursday's decision overturned that ruling, saying that the omnipresent nature of internet commerce calls for an updated tax structure.

Amazon isn't the only Seattle company indirectly impacted by the Supreme Court decision. In other words, the plaintiffs have one more opportunity to make any other Commerce Clause challenges to the law (aside from physical presence) and until we know what they opt to do, enforcement must wait. "The main issue is the competition between online retailers and brick and mortar retailers", Miller said.

But NetChoice, a trade association for e-commerce firms, warned small businesses would have trouble complying with the different tax requirements in each state. That software, too, can be an added cost. The lineup of justices on each side of the case was unusual, with Roberts joining three more liberal justices and Ginsburg joining her more conservative colleagues. "The Internet's prevalence and power have changed the dynamics of the national economy", he wrote in the majority opinion. Marketplace sellers weren't previously required to automatically collect sales tax on their sales, and the ruling may hurt their sales.

Big Supreme Court win on internet sales tax - about time!

In a statement, Wayfair said it did not expect the ruling to have "any noticeable impact on our business", since it already collects state taxes on roughly 80 percent of orders.

Stocks of online retailers were down significantly immediately following the ruling. Shares in large chains with more stores traded higher.

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