Published: Mon, June 25, 2018
Money | By Ethel Goodwin

Favorable U.S. tax ruling gives limited boost to big-box retailers

Favorable U.S. tax ruling gives limited boost to big-box retailers

Robert Dauffenbach, director of the Center for Economic and Management Research at the University of Oklahoma, showed what could be in store for Oklahoma after the Supreme Court ruled states could make laws for the collection of online sales taxes from internet retailers. North Dakota - that had blocked states from compelling retailers with no "physical presence" in that state to collect sales taxes.

The U.S. Supreme Court on Thursday ruled that states may require online retailers to collect sales tax revenue from online consumers who live in their states.

Brick-and-mortar specialty outdoor retailers have been at a competitive disadvantage against internet sellers who do not always collect sales tax.

Three large online retailers, Wayfair, Overstock and Newegg, challenged the law in court Thursday and lost.

But in the years since, states have argued they were missing out on tax revenue as online sales accelerated.

The 5-to-4 decision overturned a 1992 decision, Quill vs.

"It is going to squash the entrepreneurship, I just can not stress that enough", Christy Keyon, who owns Bird and Bean Coffee House and Naomi and Olive Gift shop said.

Wayfair said it already collects sales taxes on 80 percent of its USA orders. When it comes to online shopping, this resulted in the states missing out on a lot of tax when something was purchased from an out-of-state company.

The Trump administration had urged the justices to side with South Dakota. "It's going to revive Main Street South Dakota and Main Street America".

The ruling is a victory for big chains with a presence in many states, since they usually collect sales tax on online purchases already. South Dakota, and held that "physical presence" is not necessary before States can validly apply their taxing powers to businesses that have neither persons nor property in a State but nevertheless conduct substantial business in that State. It sent the law back to South Dakota's highest court to be revisited.

While the decision does not significantly change the fortunes of big chains or e-commerce retailers, the impact from the decision is likely to be felt by smaller online businesses. Until that case is resolved, South Dakota has already enjoined itself from enforcing that law on any out-of-state retailers.

HBK's Tax Advisory Group (TAG) will provide updates about the decision as they become available.

The case is South Dakota v. Wayfair, 17-494.

"We are expecting the various States to start issuing statements and guidance for their in-state sellers, as well as to serve as notice to out-of-state sellers, regarding that states understanding of the ruling, relative to the states' current statutes". One is for retail sales, one is for wholesale sales, and one is for insurance commissions. "That legislation, which the Indiana Chamber strongly supported, has our state perfectly poised to fully implement an online sales tax law and trigger the tax collection". "As a result, we do not expect today's decision to have any noticeable impact on our business, as it may on other retailers who do not now collect and remit sales tax", spokeswoman Susan Frechette said.

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