Should local businesses be 'fearful' after a U.S. Supreme Court ruling?

Should local businesses be 'fearful' after a U.S. Supreme Court ruling?

The US Supreme Court says states can force online shoppers to pay sales tax.

Large retailers including Apple, Macy's, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from their customers who buy online.

Soon after the South Dakota law passed, South Dakota took it to court with retailers Newegg, Wayfair and Overstock, alleging that the companies failed to comply with their state sales tax laws. Here in IN, former Gov. Mitch Daniels' administration agreed not to seek the sales taxes in exchange for Amazon locating several warehouses in the state. If the sales tax is now being collected, it will be important for states either to drop the use tax or to make sure that there is no double taxation in some other way.

The 1992 decision eventually gave a huge boost to out-of-state online retailers in that they received a consistent state tax subsidy with every sale that their in-state and local competitors - brick-and-mortar and online alike - did not receive.

The order from the Supreme Court strikes down previous rules that said states could not collect sales tax from a business if that business did not have a physical presence in the state.

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"Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the States", he wrote in an opinion joined by Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch. The decision could allow more states to impose sales taxes on companies that operate entirely online.

"Rejecting the physical presence rule is necessary to ensure that artificial competitive advantages are not created by this court's precedents", Kennedy said.

Governor Steve Bullock also expressed disappointment in the ruling, saying it will undoubtedly impact small businesses in Montana, although the extent of that impact unclear. Third-party vendors on Amazon often don't collect the tax. North Dakota, which declared that the Constitution prohibited states from requiring businesses collect sales taxes unless they have a substantial connection to the state they operate in.

The majority of USA states collect some sales tax on retail purchases, typically charging customers between 4% and 8% for each transaction. The law applies to out-of-state retailers if they have more than $100,000 in sales or complete more than 200 transactions per year within South Dakota.

Internet companies opposed to the South Dakota law appealed.

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