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

Supreme Court closes online sales tax loophole

In a decision with billion-dollar implications for online retailers and their customers, the U.S. Supreme Court ruled Thursday that states may require Internet retailers to collect sales tax and send it along to state treasuries.

The U.S. Supreme Court has announced their decision on the S. Dakota v. Wayfair case, overturning the long-standing rule that states could not tax businesses or sellers outside of that state's borders. They said local tax laws vary widely across the nation and calculating sales taxes for 10,000 local taxing jurisdictions remains a daunting task.

Soon after the South Dakota law passed, South Dakota took it to court with retailers Newegg, Wayfair and Overstock, alleging that the companies failed to comply with their state sales tax laws. Customers were generally supposed to pay the tax to the state themselves if they don't get charged it, but the vast majority didn't.

If you enjoyed the illicit thrill of avoiding the 6.25 percent IL sales tax on internet purchases of running shoes or steaks, you'll mourn the court's opinion in South Dakota v. Wayfair.

Now, states can push ahead with legislation requiring companies to collect and remit sales taxes for goods bought online elsewhere. The internet has changed retailing, and Justice Anthony Kennedy, who wrote the new decision, said, "each year, the physical presence rule becomes further removed from economic reality". Small and medium size businesses are most negatively impacted These business are faced with a huge problem because compliance is complicated.

Lauren Boggs Meslar has been selling patterned paper straws, hemp gift cords and other lifestyle goods on Etsy since 2012, relying on sales from the Etsy shop and her own e-commerce website to "help pay the bills" for her family.

The court ruling mainly affects small vendors, including those who did business on big platforms like Amazon marketplace, eBay, and Etsy, says Joseph Bishop Henchman, executive vice president at the Tax Foundation, based in Washington, D.C. Some states have exemptions for collecting sales tax. "While we don't know how much this will specifically mean for our sales tax revenue, we are certain it will have a positive impact on our sales tax revenue".

We've seen that over the decades: Since 1970s, sales tax rates have gone up by a couple of points on average around the country, but sales tax collections have stayed about flat as a share of the economy. That essentially shifts more of the tax burden and the responsibility for funding government functions from public education to social services to Floridians who buy locally and away from those who buy online.

Some big-time retailers, such as Wal-Mart, already collect sales taxes because they have stores in all 50 states. Previously, these businesses had to charge state sales taxes on top of their base price in what many consider an unfair advantage since online retailers largely ignored the requirement.

Walls think people understand the importance of keeping brick and mortar businesses for our communities. He estimates his practice loses more than $75,000 in sales annually to online stores.

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