Supreme Court ruling may boost Virginia tax income by $300M


In a 5-4 ruling, the US Supreme Court has overturned a 1992 decision that prevented state and local governments from collecting taxes from retailers who lack a "physical presence." . These small retailers will be less impacted by an uptick in prices as they will be able to pass that on to the consumer. They argued it is an unfair and heavy burden to require them to collect varying taxes charged by more than 10,000 jurisdictions across the country.

Director of the West Virginia University Bureau of Business and Economic Research John Deskins says the 1992 Supreme Court ruling was based on catalog sales not internet sales. Small businesses may have to figure out how to comply with various state sales tax laws, though there are software options to help. Amazon who was not mentioned in the case does charge sales tax in states that impose it but only on products sold from their own inventory.

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A statement from the large retailer Target said: "We are pleased the Court's ruling will close the loophole that has allowed online-only retailers to avoid collecting and remitting sales taxes while still requiring local businesses to do so". Republican state lawmaker Jeff Partridge, who sponsored the provision in the teacher pay measure, said he's looking forward to the "prospect of a tax cut for the citizens of South Dakota". But as Justice Anthony Kennedy wrote in Thursdays majority opinion, " the administrative costs of compliance, especially in the modern economy with its internet technology, are largely unrelated to whether a company happens to have a physical presence in the state.

Previously, companies without a physical presence in a state were exempt from sales tax collection requirements. North Dakota decision it replaces. "States are already confronting the complexities of defining physical presence in the Cyber Age", he wrote.

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"There's no reason you should have to pay sales taxes in one scenario and not the other", Deskins said.

A case study Vince Kadlubek was originally happy enough when he heard of the Supreme Court ruling. It sent the law back to South Dakota's highest court to be revisited. States also will no doubt welcome the ruling as it should increase their revenues from sales taxes. Antitax groups and retail platforms including eBay and Etsy supported the defendants. Perhaps most importantly, the state law does not permit sales tax collection for past purchases, meaning that businesses don't have to worry about a huge tax bill that they never anticipated. Because many e-commerce companies do not collect state sales taxes on purchases, they have had an advantage over brick-and-mortar businesses that do collect it.

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