New Supreme Court Ruling Impacts Online Retailers

pablo238In a decades-long debate, the Supreme Court ruled on June 21st in favor of South Dakota in that small catalog and web retailers will have to comply with the conflicting tax rules of more than 12,000 local tax jurisdictions across 46 states. This is a big win for states and brick-and-mortar retailers, but not everyone will feel this way. “Small web businesses will be hardest hit,” said Chris Cox, NetChoice outside counsel in a press release, “particularly those with only a single location, because they can’t afford the overhead to comply with thousands of different tax rules across the country. Consumers will quickly feel the negative effects as those businesses dry up or are forced into the arms of Internet giants.”

Larger e-commerce companies like Wayfair, Newegg, and Overstock, all involved in the case of South Dakota v. Wayfair, said they won’t see any noticeable impact on their businesses but that it still very much poses a threat to smaller online retailers. In a press release, Wayfair stated they already collect and remit sales tax on approximately 80% of their orders in the United States, and they believe the Court was not the ideal venue for creating this level playing field.

The 5-4 ruling altered the 26-year Quill Corp. v. North Dakota, a law that previously only mandated that companies with a physical presence in a state must collect and remit sales tax. Given by Justice Anthony Kennedy, the Court stated that the old rules were “unsound and incorrect.” The case still needs to be sent back to South Dakota for a final decision, which will ultimately implement an economic standard to collect sales tax only if an online seller does more than $100,000 in business or processes more than 200 transactions, in the state.pablo239

“Today the U.S. Supreme Court has re-shaped the interstate commerce landscape in a move that could impact small business innovation on the internet, which has been a driving force behind our nation’s economy for the last 15 years,” said Jonathan Johnson, Overstock.com executive and board member in a press release. “To lessen the potential impact of today’s ruling on Internet innovation, Congress can, and should, pass sound legislation allowing states to accomplish their aims while still permitting small Internet business to thrive.” 

Small businesses have a bigger impact on the economy than most people think, and it is clear from these online giants that things will quickly go south if Congress decides to go along with this online sales tax. Not much more information is being given out at the moment, besides press releases from the issue and unless Congress responds, the Court’s ruling may remove key entrepreneurial opportunities before they even get out of the heads of the investors, according to the Overstock.com release. 

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