Online Sales Tax Laws Went Into Effect in 10 States
Ten states will start collecting sales tax from out-of-state online retailers, thanks to a series of new laws created in response to the South Dakota vs. Wayfair case the U.S. Supreme Court decided in June. In deciding the case, the Supreme Court overturned a ruling (Quill Corporation vs. North Dakota) that said the Constitution bars states from requiring businesses to collect sales tax, unless they have a physical presence, or nexus, in the state. The statutes and regulations of the laws put into effect on Oct 1. vary state by state, but most set minimum thresholds about sales and transactions. The laws only apply to online retailers that do not have a physical presence in the taxing jurisdiction. The states implementing the new laws are Alabama, Illinois, Indiana, Kentucky, Massachusetts, Michigan, Minnesota, North Dakota, Washington and Wisconsin. Connecticut and Iowa have also passed laws that go into effect soon. Thirty-two states have now passed statutes or regulations to require sales tax collection by remote sellers. Congress also is considering several bills that would establish a framework for state collection schemes.
Total Retail's Take: It's hard to believe that this day has finally come. Ever since e-commerce and online shopping became a popular part of our culture, brick-and-mortar retailers have long complained that they're disadvantaged by having to charge sales tax, while many of their online competitors do not. States have also said that they're missing out on tens of billions of dollars in annual revenue. On the other hand, online-only retailers and brands, which will now be required to collect sales tax in states in which they may not have a physical presence, have argued that the software and processing capability required to collect and remit sales tax for 13,000 jurisdictions would have a significant negative impact on their businesses. Now that the laws have gone into effect in 10 states, online-only retailers are going to have to make some big changes to their checkout processes. We will be watching the fallout from these new laws and how they affect online retailers.