Now that the U.S. Supreme Court has determined states have the authority to require remote sellers to collect sales taxes the real policy work begins. The decision has raised questions for retailers, consumers and legislators.
Tax Foundation Executive Vice President Joe Bishop-Henchman has prepared a useful Q&A on the impact of the court’s Wayfair decision. It’s clearly written and answers the most common questions generated in the wake of Wayfair. For example,
Were internet purchases exempt from sales tax before this decision?
Internet purchases were not exempt from tax, but in many cases it looked that way to consumers. Internet sellers typically only had to collect a state’s sales tax from buyers if the company had property or employees in a state. As of 2018, state sales taxes are collected on about half of e-commerce.
Will this decision hurt e-commerce? Will my online purchases be more expensive now? Should I alter my shopping behavior? How does this decision impact small businesses versus big retailers?
E-commerce will now have to collect the same sales tax collected by all other retailers. As e-commerce’s strengths over brick-and-mortar are more about convenience, wider selection, and lower costs, it’s unlikely this decision will hurt large e-commerce firms. As sales tax collection on e-commerce grew from almost zero to half of all sales, e-commerce has continued to grow sharply.
A valid concern, however, is the ability of small e-commerce sellers to collect sales taxes in a simple way. The Court praised South Dakota’s provision of compliance software and simplified state rules.
Check out the full blog post here.