February 23, 2019

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Supreme Court Widens Reach of Sales Taxes in E-Commerce

Supreme Court Widens Reach of Sales Taxes in E-Commerce
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“Today, the U.S. Supreme Court has reshaped 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 E. Johnson III, a member of Overstock.com’s board.

Overstock said the decision would have little impact on its business but argued that with more than 12,000 different state and local taxing districts, the ruling would present a “compliance challenge” for internet start-ups. Chief Justice Roberts made a similar argument in his dissent.

Many experts, however, played down that problem. When the Supreme Court decided the Quill case in 1992, complying with various state and local tax laws would have been a major hurdle for small businesses. But today, many companies offer software that helps small businesses navigate local laws.

“The digital and internet revolution contributed to the problem, but those same factors contributed to the solution, which is easy-to-use tax-automation software,” said Daniel Hemel, a University of Chicago law professor.

Wayfair, in a statement, said it already collected sales tax on approximately 80 percent of its orders in the United States. “As a result, we do not expect today’s decision to have any noticeable impact on our business,” the company said.

The impact on Amazon could be even smaller: As of last year, the company collected sales tax in the 45 states that have one.

But about half of Amazon’s total online sales come from independent merchants who simply post their inventory on the online store. In most states, those merchants are responsible for calculating and paying the various state taxes if they are owed. In the past year, Washington State and Pennsylvania have enacted laws requiring internet retailers to collect taxes on third-party sales. More states are expected to follow suit.

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