Want to read Slashdot from your mobile device? Point it at m.slashdot.org and keep reading!

 



Forgot your password?
typodupeerror
×
United States Businesses

Supreme Court Rules States Can Require Online Retailers To Collect Sales Tax (npr.org) 428

New submitter zippo01 shares a report: Online shopping will soon become more expensive after the U.S. Supreme court ruled Thursday that states can require internet retailers to collect sales taxes. The 5-4 decision broke with 50 years' worth of legal rulings that barred states from imposing sales taxes on most purchases their residents make from out-of-state retailers. The decision was a victory for South Dakota, which had asked the court to uphold its recently passed law imposing an internet sales tax. "Our state is losing millions for education, health care and infrastructure, and our citizens are harmed by an uneven playing field," said Marty Jackley, South Dakota's attorney general.
This discussion has been archived. No new comments can be posted.

Supreme Court Rules States Can Require Online Retailers To Collect Sales Tax

Comments Filter:
  • You'll, of course, make it illegal to use this money for anything else, right?

    • by jellomizer ( 103300 ) on Thursday June 21, 2018 @11:59AM (#56822812)

      In general I am OK with states charging sales tax for online purchases. As Sales Tax takes advantages of both Progressive and Regressive taxing. Being that the Rich will in general buy more so they will be funding more to the government, while taking the simplicity of a fixed rate tax.
      Online Purchases still need to be shipped to the sates, thus needing to use its infrastructure to deliver them. So all in all in this day in age Taxing internet purchases is perfectly reasonable.

      However the argument that the tax revenue is hurting any particular initiative is more to blame on bad leadership, or misaligned priorities. If the state wants more money to Education, then they would find a way to fund it better. Even if it means cutting money on services it deems as lower priority, and the leadership will need to take the responsibility of saying that that service doesn't deserve the money over Education. Also their are other taxing methods that can be applied to help better fund thing, all at their own tradeoffs as well.

      Sales tax on internet is an easy win with low political repercussion. Because the extra cost of sales tax, isn't going to hurt the economy. because if they want the product and it is prices closer to a local store. They may want to go to the store to buy it and get the convince of getting it now, and returning it the same day. If it is a hard to find item in the area, you can still get it online, just for 5-10% more.

      • by pr0fessor ( 1940368 ) on Thursday June 21, 2018 @12:19PM (#56822966)

        The only problem I see with the state taxing online purchases is that small online retailers will have extra overhead to meet tax requirements for all states.

        • by SlaveToTheGrind ( 546262 ) on Thursday June 21, 2018 @01:05PM (#56823348)

          The only problem I see with the state taxing online purchases is that small online retailers will have extra overhead to meet tax requirements for all states.

          The South Dakota statute in question only required collection/remittance of South Dakota sales tax if the online retailer had more than $100k in sales in South Dakota and/or more than 200 annual transactions in South Dakota. The Supreme Court specifically discussed those thresholds in its analysis, which will be a signal to other states that if they follow suit, they'll need to have some sort of reasonable minimum threshold as well. It would be hard for a truly small retailer to exceed that threshold in a single state in the first place, and then if they did it would only apply to transactions in that state.

          • The South Dakota statute in question only required collection/remittance of South Dakota sales tax if the online retailer had more than $100k in sales in South Dakota and/or more than 200 annual transactions in South Dakota.

            Which means that an online retailer will have to be able to prove he/she/it doesn't meet those minimums anytime the government of South Dakota requires them to. It'll be interesting to see the reaction the first time the State of South Dakota audits a resident of, say, Maine....

        • So long as the "patchwork problem" can be handled by standard, easy to use software, it should not add appreciably to even a small retailer's costs. Just don't make them handle any tax differential that affects an area smaller than one zipcode.

          • It's much worse than you think. Such software would have to keep up with every state, municipality, and local government in the US. You're going to have to know which items are taxed at what rate, and whether sales tax applies to certain types of items when combined, and what rate they're taxed at. I bet if somebody took any statistics on these, they'd probably find there are multiple sales tax code changes daily in all of the US.

            All of the major tax software companies are no doubt salivating over this. It

        • by hipp5 ( 1635263 )

          The only problem I see with the state taxing online purchases is that small online retailers will have extra overhead to meet tax requirements for all states.

          Seems like a pretty good business opportunity to sell an automated tax system to small online businesses.

      • The problem here is if you are a three employee retailer with a small online presence, states and counties and cities have their own taxes, and you have to determine the applicable rate for every combination. Also, what happens when you order from international shippers, who don't hold dollars or have accounts with the state?

        • That is an easy technology fix. Sorry. A simple table with Zipcode and Taxrate.
          You add the tax to your final total. Then pay the states the tax.

          • by Anonymous Coward on Thursday June 21, 2018 @12:32PM (#56823068)

            It's not nearly that simple.

            There is an area in Illinois (around Chicago + some) where a Snickers bar gets taxed less than a package of Starbust, because anything that contains flour does not qualify for the "candy" tax. There are strange laws on sales taxes in many municipalities all across the country. Don't think for a second that they don't expect those to all be followed to the letter.

            This ruling makes collecting sales taxes in America just as complicated as managing tariffs for international shipments. Hopefully minus most of the corruption.

          • Bzzzt.

            Zip code does not translate into tax rate.

            You need complete address information, there are websites that do it as a web service.

            But more realistically, 3 person company can safely ignore any other states tax authority. The worst that will happen is a harshly worded letter, which can be ignored. Just make sure it's incorporated, or owners are liable to get a surprise when on vacation.

            • But more realistically, 3 person company can safely ignore any other states tax authority. The worst that will happen is a harshly worded letter, which can be ignored. Just make sure it's incorporated, or owners are liable to get a surprise when on vacation.

              This is false. Do this at your own risk.

          • Comment removed based on user account deletion
          • Yeah! Super easy! Only 42,000 zip codes to keep track of! And setting an update schedule and mechanism and determining who is responsible for the update. And if you're relying on someone in each zipcode to make sure that their's is accurate, you'll need some method of authenticating people who can make that change. And then there's collecting address/payee info about where to send the tax for each one. And dispute resolution. And you'll probably need to keep track of what you sell as well, because some zip

            • by Dragonslicer ( 991472 ) on Thursday June 21, 2018 @01:00PM (#56823318)

              And that needs to be implemented correctly by every online business with a presence in the US.

              Not necessarily. I'm fine with a state being able to collect sales tax on online purchases, but it's the state's responsibility to provide a simple mechanism that the seller can use to determine what the sales tax should be. A different API for different states would explicitly be considered not simple. There would have to be something like a web service hosted by e.g. the FTC, where the seller just submits address and item name/description and gets back the tax rate. If the state can't provide the necessary information, then they'll have to simplify their tax code before they can collect sales tax from online purchases.

              • Man, I wish we had some mechanism for the states to work this out together instead of doing this way. Seems rather complicated, doesn't it?

            • by torkus ( 1133985 )

              42,000?

              Like, forty two THOUSAND? OMG. That would take a team of 5-10 people a few WEEKS to comb through and organize. Think of all the ledge paper and pencils that will go to waste. Especially when they need to update or change something! Horrific!

              Now fast forward 50 years to today when mapping apps can reliably tell you not only every street name in the country (and much of the world) but the speed limit on them as well.

              Or the parking rules in NYC which vary by the time, day and even portion of the bl

              • > considering states have direct financial motivation to have this data accurate and available, I don't expect it would be that difficult to implement, or use.

                How have you loves this long and never dealt with a government agency?

                In my experience, agency employees are wrong in what they think the law is, as often as not. For example in Texas the statute states very clearly "X service is not taxable", the taxing authority told me it was taxable. It took several hours to get one of their employees to simpl

          • by superdave80 ( 1226592 ) on Thursday June 21, 2018 @12:53PM (#56823250)
            You will also need a table that lists every item to determine if it is taxable or not. Every 'item' is not taxed the same in every state/county/city. This table is going to get really, really big...
            • by bigpat ( 158134 )

              You will also need a table that lists every item to determine if it is taxable or not. Every 'item' is not taxed the same in every state/county/city. This table is going to get really, really big...

              I hope states will take a hard look at their tax code and look to make them uniform with other states.

              • They won't make it uniform because each state uses taxes to try and implement it's agenda. For example, a state that wants to try and cut down on the consumption of sugar snacks and drinks for health reasons will heavily tax them. Another state that isn't interested in such a program will tax them at the standard rate. Some states may tax bottled water because it's a convenience item but other's won't because water is a necessity.

        • by suutar ( 1860506 )

          a three employee company is unlikely to be doing enough business to meet SD's thresholds, and since the SC talked about those thresholds it's not very likely for other states to impose a rule that doesn't have any thresholds.

          Also, it seems unlikely that a state law is going to worry overmuch about sub-state regional taxes; they just want the state-level cut.

      • Re: (Score:2, Informative)

        by plague911 ( 1292006 )

        Sales taxes distort markets, income taxes do not.

        For a 10% income tax If a product costs $9.50 to make and can be sold for $10.00 the transaction will occur a profit of $.50 will be generated which can then be taxes for $.05.

        For a 10% sales tax. If a product costs $9.50 to make and can be sold for $10.00, the tax will be $1.00 and revenue only $9.00. As such the transaction will not occur

        You ask. Cant we just lower the sales tax to %.5? Sure, however, given the large variety of margins generated in t

      • Throughout recent history (last 40 years) there have been a cavalcade of revenue for education initiatives in the US states which invariably end up with the new revenues being raised and then an equal or greater amount (to the new revenue) is subtly drained from the education budget to fund other political whims. The biggest offenders are the state controlled lottery proceeds that are always said to benefit education. Now comes another sales tax for education, which likely won't be what is advertised.

        I real

    • by msauve ( 701917 )
      "You'll, of course, make it illegal to use this money for anything else, right?"

      What difference would that make? It's a zero-sum game. They'd just reduce education expenditures from the general fund to offset.
      • "You'll, of course, make it illegal to use this money for anything else, right?"

        What difference would that make? It's a zero-sum game.

        Indeed. Money is fungible. Taxes targeted for specific spending priorities are just a way to dupe voters into accepting stupid taxes. Like lotteries targeted for education. So do states with lotteries spend more on education? Of course not.

    • Applying that logic, every dollar spent on police, fire departments, roadway construction, parks, sewage, water, etc, etc is lost money that could have gone towards education - think of the children!

  • by ScentCone ( 795499 ) on Thursday June 21, 2018 @11:48AM (#56822718)
    Also known as the Accounting Software Developers And Consultants Permanent Employment Act.
    • Dealing with US sales tax is a huge burden for online retailers. The same logic that's used to allow states to collect tax from online sales also applies to county and city sales taxes as well. Determining how much tax to apply to an item is actually a very huge task, especially for smaller merchants. Not only is figuring out the correct amount of tax to collect difficult, but keeping records of taxes collected and remitting them to the proper location would also prove to be a major issue.

      • by atrex ( 4811433 )
        Well, it's a burden on small businesses, but, it's also a business opportunity. It should be easy enough for some company to build a database of tax rates and keep it up to date, and then feed that into a web service or finance application that can provide applicable rates by address and manage the collection and payment of said taxes. The question is, how much are they going to charge other businesses to use their product?
  • If I call an out of state company and order something, no taxes. But if I do it via a web page, taxes? Seems fair...
    • What % on out of state purchases do you think involve ordering over the phone vs internet?

      The same issue exists for physically buying in a lower tax state then bringing it to another, in all such cases the buyer is supposed to report the sale and pay a use tax... which almost never happens.

      • by Kenja ( 541830 )
        After this? A lot potentially. All Amazon needs to do is put up a 800 number where you can call in to pay. Could be 100% automated.
        • by SirSlud ( 67381 )

          Companies circumventing the intent of this ruling would simply be painting a target on their backs for additional scrutiny and legislation. There are lots of legal loopholes you can drive trucks through, but you don't do it because it'd just result in those loopholes being closed.

        • Its certainly possible it could happen, but what incentive would Amazon actually have to do so? That would represent a cost to them for no gain, vs using their existing sales tax calculating and remittance systems.

          In the odd event phone and fax orders make a big comeback, I'm sure a state would seek to tax it like SD did here... and I'm sure SCOTUS would follow the precident they set here.

        • by Luckyo ( 1726890 )

          At which point, you get hit with additional damages for intent to circumvent the law.

  • States have no right to regulate interstate commerce. As much of a problem as sales tax is online, this isn't the way to solve it. We need a constitutional amendment to even give states these powers. I'm not saying we shouldn't do that either - just that we haven't.

    This is not something that the supreme court should even have the power to decide.

    • States have no right to regulate interstate commerce.

      True, but I lived in the US for a while in Michigan and they had a campaign to get people to declare out of state purchases on their tax form so the state could collect the tax and so I asked my American colleagues how this was legal. Apparently the dodge they used was that this technically was not a sales tax but a "use" tax i.e. you had to pay in order to "use" the product in Michigan and the tax was not technically on the purchase. Slimy, but probably legal unless you can afford a very expensive legal t

      • by DaHat ( 247651 ) on Thursday June 21, 2018 @12:14PM (#56822932)

        Use taxes are very common... though not often paid.

        Here in WA we have places that have a 10% sales tax rate, and it is not uncommon for people to take a drive down to Portland for some big purchases, were there is no sales tax.

        Hell, a neighbor of mine used to have their cars registered there to avoid WA taxes.

      • True, but I lived in the US for a while in Michigan and they had a campaign to get people to declare out of state purchases on their tax form so the state could collect the tax

        That is typical, most states have such a requirement, and few, if any, taxpayers comply - of course, some states like Delaware have no sales tax.

    • by Zero__Kelvin ( 151819 ) on Thursday June 21, 2018 @12:02PM (#56822832) Homepage
      The constitution doesn't grant states power, it *limits* federal power.
      • by msauve ( 701917 )
        The constitution doesn't limit federal power, it grants only specific powers to the feds. Of course, they ignore that (10th amendment) and do whatever they want.
        • "The constitution doesn't limit federal power, it grants only specific powers to the feds"

          By granting only specific powers to the Feds the Constitution is limiting their powers.

          • Doesn't make a whitelist the same as a blacklist. Government powers are whitelisted, but the commerce clause is too vague. Deal was broken by FDR.

          • by msauve ( 701917 )
            No. Just because Superman doesn't have Magneto's power to control magnetism, doesn't mean his powers are limited. A limitation is assertive - "you may not do this". The constitutional debates made that clear - one side arguing that the Bill of Rights was completely unnecessary, since the feds didn't have power to do any of the things which it specifically denied. The other side said, they'll take whatever power they can unless you say otherwise. And even though that's specifically spelled out in the 10th, t
      • And if a retailer isn't located in a state, they're not under that state's jurisdiction.

    • Though called a sales tax it's actually a Sales and Use tax and it applies to all purchases by state residents. It's not a regulation of interstate commerce, it's an application of existing law against state residents.

      • Sales taxes and use taxes are two sides of the same coin. Use taxes are not collected by the retailer, but sales taxes are. And in this case, South Dakota was suing Wayfair, not the consumers.

    • States have no right to regulate interstate commerce.

      That is NOT what the Commerce Cause [wikipedia.org] of the Constitution says. It says [The Congress shall have Power] To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. This wording does not prohibit States from having regulations regarding interstate commerce, it just means that Federal laws regarding commerce shall prevail in the event of a dispute. How this clause is to be interpreted has been the subject of debate since the founding of the republic but there is quit

      • This wording does not prohibit States from having regulations regarding interstate commerce

        While true on a technical level alone, does every state have to create a treaty with every other state in order to start expecting a tax? Otherwise, sellers in other states are outside of their jurisdiction (which this court refused to recognize in order to push an agenda). Are the states going to close their borders to open trade in response?

        • does every state have to create a treaty with every other state in order to start expecting a tax?

          If that's the case, we're probably going to have to send a representative from every state to meet together and work out the details. I wonder how that sort of system would work?

          • Well...they'd probably get together and write a Constitution....and then realize they got this whole thing backwards.

        • While true on a technical level alone, does every state have to create a treaty with every other state in order to start expecting a tax?

          Perhaps (yikes). That's why Congress might have to actually get off their ass and do something about the problem. I'm an accountant and this definitely has the potential to be a very expensive and complicated mess. There are ways to solve the problem but the best ones involve Congress not being a bunch of asshats only concerned with political infighting.

          Are the states going to close their borders to open trade in response?

          No they just have a lawsuit in federal court just like they do now. But this could really swamp the courts with needless litigation which is an obvious

      • So a sentence that specifically states that congress shall have the power to regulate commerce between the states... means that the states have the power to regulate commerce between the states?
    • States have no right to regulate interstate commerce. As much of a problem as sales tax is online, this isn't the way to solve it. We need a constitutional amendment to even give states these powers.

      You can argue that the Supreme Court doesn't have the authority to make this decision at this time, but Congress explicitly has the authority to regulate commerce among the states, such as by allowing collection of sales tax from online purchases. There's definitely no need for an amendment to the Constitution.

  • Strange SCOTUS Vote (Score:5, Interesting)

    by PopeRatzo ( 965947 ) on Thursday June 21, 2018 @11:51AM (#56822750) Journal

    The vote breakdown on this decision was really weird. Voting in favor of requiring online retailers to collect sales tax were Justices Kennedy, Alito, Thomas, Ginsburg and Gorsuch. Justices Breyer, Sotomayor and Kagan joined Chief Justice Roberts in the dissent.

    I wonder if Trump ever foresaw his boy Gorsuch and Ruth Bader Ginsburg joining on a 5-4 decision.

    • by Anonymous Coward on Thursday June 21, 2018 @11:59AM (#56822816)

      Trump foresaw another ketchup slathered Big Mac going down his gullet. That's the extent of his prognostication powers

    • by Anonymous Coward

      Wow, seeing Roberts and Ginsburg not voting with their cohorts implies that this was actually a real close ruling and not just some right/left bullshit.

  • Store fronts are closing but online sales are expanding.

    It HAD to happen sooner or later.

  • Remeber this (Score:5, Insightful)

    by whoever57 ( 658626 ) on Thursday June 21, 2018 @11:55AM (#56822776) Journal

    "The Internet's prevalence and power have changed the dynamics of the national economy," Justice Anthony Kennedy wrote for the majority.

    Remember this the next time Samuel Alito, Neil Gorsuch or Clarence Thomas talk about the following the original text of the constitution.

    • Or at least the commerce clause.

    • Re: (Score:3, Insightful)

      by Anonymous Coward

      Samuel Alito, Neil Gorsuch, and Clarence Thomas agreed with Justice Kennedy in this ruling.
      (Gorsuch and Thomas penned concurring opinions)

      It's not what you expect, is it?

      Chief Justice Roberts, along with Breyer, Sotomayor, and Kagan dissented from Kennedy's opinion.

    • Originalism (Score:5, Interesting)

      by sjbe ( 173966 ) on Thursday June 21, 2018 @12:19PM (#56822964)

      Remember this the next time Samuel Alito, Neil Gorsuch or Clarence Thomas talk about the following the original text of the constitution.

      Heh... Yes this is a solid example of why originalists [wikipedia.org] are so full of shit. It's almost always an excuse to justify some sort of behavior that is abhorrent under current social norms or to try stem the tide of political change that some people (usually conservatives) disapprove of. Originalists tend to ignore this principle when it is convenient for them but shout loudly about it when it helps whatever cause they are pushing at the time.

      In this case internet commerce has changed the game dramatically and the laws were written in an earlier era with different circumstances. I haven't looked closely enough at this case to decide whether I agree with the decision but it seems clear enough that the old understanding regarding sales tax collection between states no longer makes much sense in the internet era. Change has to happen one way or another so such a decision isn't surprising even if it ultimately turns out to be a poor one. Maybe this will force Congress to actually address the elephant in the room and establish a new framework for States to collect sales tax that makes sense. (Dare to dream...)

      • by MobyDisk ( 75490 )

        Did the internet change things, or the telephone? I also haven't read the text, but I never understood why internet orders are any different from telephone catalog orders.

    • The constitution is silent on inter-state sales taxes. This requires a LEGISLATIVE fix to spare people with NO VOTE on how an out of state government forces them to conduct business from taxation without representation in all of those other states and taxing jurisdictions.
    • Why, exactly?

      Here's the thing: while it is entirely true that technological and sociological advances will change many of the dynamics of the country, that doesn't mean we should suddenly interpret laws differently. Rather, it means we should adjust the laws.
  • I'm thinking the solution is to dust of the U.S. Robotics 56K Fax modem and on-line retailers can accept fax orders.
    • I'm thinking the solution is to dust of the U.S. Robotics 56K Fax modem and on-line retailers can accept fax orders.

      Gee, I was thinking of AI text to speech robots that make non-taxed out of state phone call catalog orders out of Internet REST POSTs.

      And AI robots that do speech to text to receive those calls.

      With a Blockchain stuffed in there somewhere, of course.

    • I'm thinking the solution is to dust of the U.S. Robotics 56K Fax modem and on-line retailers can accept fax orders.

      This opinion has nothing to do with how the orders are submitted. All it did was do away with the prior requirement that a business had to have a brick-and-mortar presence in a state to be required to collect/remit sales taxes for transactions in that state. Mail order retailers fell under the same exclusion for a long time before Internet retailers hit the mainstream.

  • by alvinrod ( 889928 ) on Thursday June 21, 2018 @11:57AM (#56822798)
    You mean to tell me that the residents of South Dakota didn't self-report and pay the state use tax as they are obligated to do? [sd.gov]

    All this is doing is placing the burden of collecting those taxes on out of state taxes on the merchant instead of on the South Dakota residents as previously. This isn't imposing any new taxes on residents, merely making it impossible for them to avoid paying those taxes. If you already lived in a state where the retailer (Amazon) was incorporated or had a business presence, you were already paying sales tax and nothing will change for you.

    This probably isn't too much of a burden as long as its limited to a single value for each state. If county or city level taxes start getting involved or any kind of fuckery involving different tax rates for different categories of products, then this is going to become an absolute nightmare for online retailers.
  • Just wondering how this is enforceable. What mechanism under civil law would allow the state of South Dakota to bring an enforcement action against a resident of, say, Pennsylvania? Please forgive if this is obvious, IANAL.
  • Not so fast (Score:5, Insightful)

    by mysidia ( 191772 ) on Thursday June 21, 2018 @12:45PM (#56823170)

    They have not ruled that states can require online retailers to collect sales tax in general. They have overturned the argument that there is no nexus because of No Physical Presence, and Nexus can be established in other ways for large National retailers such as Quill or Amazon, for example. The court ruled there --- This quantity of business could not have occurred unless the seller availed itself of the substantial privilege of carrying on business in South Dakota.
    And respondents are large, national companies that undoubtedly maintain an extensive virtual presence. Thus, the substantial nexus requirement of Complete Auto is satisfied in this case

     

    The question remains whether some other principle in
    the Court’s Commerce Clause doctrine might invalidate
    the Act. Because the Quill physical presence rule was an
    obvious barrier to the Act’s validity, these issues have not
    yet been litigated or briefed, and so the Court need not
    resolve them here. That said, South Dakota’s tax system
    includes several features that appear designed to prevent
    discrimination against or undue burdens upon interstate
    commerce. First, the Act applies a safe harbor to those
    who transact only limited business in South Dakota.

  • will be companies moving to states with little or no sales tax.

    Anyone looking for a new idea to make money should start working on sales tax software for small businesses.

  • by magzteel ( 5013587 ) on Thursday June 21, 2018 @01:03PM (#56823338)

    They have been collecting sales taxes in every state for over a year.
    http://money.cnn.com/2017/03/2... [cnn.com]

    Amazon already offers sales tax calculation services to marketplace sellers
    https://sellercentral.amazon.c... [amazon.com]

    Bet they offer it to external ones too soon

  • by kenh ( 9056 ) on Thursday June 21, 2018 @01:13PM (#56823432) Homepage Journal

    When politicians designate new tax revenues as going towards some worthy cause (lottery profits for education, for example), rather than increasing the money spent on education, the lottery money instead offsets other tax revenues, freeing them up to be spent on politicians pet projects.

    If the lottery generates $20M for education, the net result is that $20M in lottery money takes the place of $20M that used to come from property taxes.

    Politicians expect you to think that the new revenue is in addition to what was already being spent, but it isn't.

"In my opinion, Richard Stallman wouldn't recognise terrorism if it came up and bit him on his Internet." -- Ross M. Greenberg

Working...