Supreme Court Rules on Online Sales Tax Changes

Supreme Court Rules on Online Sales Tax Changes

On June 21, 2018, the U.S. Supreme Court ruled that state and local governments can impose a sales tax on out-of-state online sales. This decision overturns a precedent from 1992 that barred states from collecting sales tax on sellers unless they had a physical presence in the state. The rule is thought to have a positive impact on brick-and-mortar and local stores, but could also potentially cause damage to smaller online retailers.

According to Clarence Kehoe, Leader of Anchin’s Tax Department and Sharon Ackerman, Tax Director in Anchin’s Tax Controversy Services Group, “It’s been estimated that states lose $8 billion to $33 billion in annual sales tax revenues because of the physical presence rule.”

Some states could be hit harder than others, putting local brick-and-mortar stores at a competitive disadvantage. This is one of the reasons for passing the rule in the majority opinion.

What does this mean for local brick-and-mortar stores?

You should expect business as usual. There are no changes to the taxes of stores that have a physical presence.

What does this mean for online retailers?

Online retailers, or retailers with no physical presence, will have to adjust to be compliant. This could harm small businesses that sell products online and ship to customers in multiple states.

Many large businesses, such as Amazon already collect sales tax for online sales. .

What’s next?

States may need to revise or enact legislation to meet new requirements.

If you have questions in light of the recent U.S. Supreme Court Ruling, or need assistance in making your business compliant, give us a call at (859) 331-1717.