Internet Sales Tax Laws

The Supreme Court’s Online Sales Tax Ruling Is Already a Huge Headache for Small Businesses

An overlooked ruling could force small businesses to pay sales tax in dozens, even hundreds, of jurisdictions where they have no representation.

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When he started selling race car equipment 40 years ago, Chris Heitman never imagined that he'd have to learn which states charge sales tax for fireproof underwear.

"Is it clothing? Is it specialized equipment? That's the question," he says. And since the answer isn't always clear, he errs on the side of charging the tax—better to overcharge a customer than to face the wrath of the taxman, after all.

Image courtesy Chris and Clara Heitman

Heitman and his wife, Carla, have been running Pegasus Auto Racing Supplies since they founded the company back in 1980, out of a two-story building in New Berlin, Wisconsin. Until last year, that meant Heitman was responsible for collecting and paying sales taxes to exactly one place: the Wisconsin Department of Revenue. But thanks to an under-the-radar ruling from the U.S. Supreme Court in June, he's now receiving letters, phone calls, and emails from revenue officials across the country, each wanting a piece of his business.

The source of Heitman's frustrations is Wayfair v. South Dakota, which allowed states to collect sales taxes from online businesses located beyond their borders. Many states view the Wayfair ruling as a potential tax revenue windfall in which the taxes are paid by non-residents who can't vote against them. That's why businesses like Heitman's are now facing the chilling prospect of owing taxes in dozens, and possibly hundreds, of different jurisdictions—while being hounded by out-of-state tax collectors.

Since the Supreme Court issued its ruling in June, Heitman has been scrambling to become compliant with tax commissions and revenue departments from coast to coast. He's spent thousands of dollars on new software to help navigate the complexities of state sales tax law, but that's only been so much help. "It almost seems like I have another full time job dumped on me with this sales tax thing," he says. "It's burning me out."

As the 2019 tax season begins, states are ramping up efforts to squeeze extra revenue out of remote retailers like Heitman, putting an expensive new burden on businesses that have found broad customer bases online. The burden is particularly large in the five U.S. states that charge no sales tax, where entrepreneurs could now be charged with paying a tax they have never had to pay before, to a government over which they have no voice. And while Congress could clean up the Supreme Court's mess, it's far from certain that it will.

The Supreme Court Overturns a Sales Tax Precedent

The question of whether states can charge taxes on out-of-state goods predates the U.S. Constitution. In fact, it's one of the primary reasons it came into being in 1787.

The Articles of Confederation allowed each state to set its own rules for cross-border trade, creating barriers to interstate commerce. The Constitution thus gave the federal government explicit control over interstate commerce. In Federalist 42, James Madison said this was necessary, because otherwise states "would nourish unceasing animosities, and not improbably terminate in serious interruptions of the public tranquility."

JIM YOUNG/REUTERS/Newscom

In the decades that followed, various Supreme Court rulings developed into a legal doctrine known as the "dormant Commerce Clause." This assumes the Constitution forbids state-level policies that limit the free flow of commerce. That rationale was the basis of Quill Corp v. North Dakota, a 1992 Supreme Court ruling blocking North Dakota from collecting sales tax from a catalog-based office retailer that sold goods to other businesses in the state, but that did not have a physical location in North Dakota.

Last year, South Dakota succeeded where North Dakota had failed. At the root of the Wayfair case was a South Dakota law claiming that the state had the authority to collect sales tax from any business that made at least 200 transactions or $100,000 in sales into South Dakota in a single year. The Supreme Court upheld that law, and ruled that the 1992 North Dakota ruling was "unsound and incorrect," as Justice Anthony Kennedy put it in the majority opinion—the last that he would author before retiring in July.

The earlier Quill ruling, he wrote, had become "a judicially created tax shelter for businesses that decide to limit their physical presence and still sell their goods and services to a state's consumers—something that has become easier and more prevalent as technology has advanced." The 5-4 majority cut across the Supreme Court's usual ideological lines, with Ruth Bader Ginsburg joining conservative justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and the moderate Kennedy in support of South Dakota's law.

The court's liberal wing, minus Ginsburg, joined Chief Justice John Roberts' dissenting opinion, which largely agreed with Kennedy that Quill was decided incorrectly, but insisted it was Congress' duty to fix that problem.

"By suddenly changing the ground rules, the Court may have waylaid Congress' consideration of the issue," Roberts wrote. States had been petitioning Congress for years to change the rules for interstate sales taxes, but Roberts worried that an abrupt change of direction ordered by the courts would steer state efforts towards "securing new tax revenue from remote sellers."

A Ruling Both "Sweeping and Vague"

In the months since the Wayfair ruling, Roberts' concerns have been vindicated. The ruling was both "sweeping and vague," says Andrew Moylan, vice president of the National Taxpayers Union Foundation, a nonprofit that advocates for lowering taxes. "The result is that there's an enormous amount of gray area that states, businesses, and policy experts are trying to define in the face of very thin guidance from the Court."

The most important of those gray areas is the question of when a business is considered to have done enough business in a certain state to owe sales tax there. The South Dakota law that was the basis of the Wayfair case specifies a threshold of 200 transactions or $100,000 worth of sales. That's a high enough threshold to exempt most small businesses and online sellers from owing sales taxes to South Dakota. But using the same standards in a state with a lot more potential buyers—California, for example, whose economy is more than 50 times larger than South Dakota's—has the potential to ensnare many more businesses.

With no clear instruction from the federal government, states have quickly stepped up to fill in their own. Days after the ruling, lawmakers in New Jersey introduced a bill to hit out-of-state retailers with a 6.625 percent tax on sales into the state—and state lawmakers touted the potential for it to generate more than $300 million in annual revenue.

In many cases, new legislation wasn't even required. In January, the New York Department of Taxation and Finance reinterpreted existing sales tax rules to cover any business that does more than $300,000 of gross sales in the state or made 100 transactions with New York customers. The California Department of Tax and Fee Administrators announced in December that remote sellers will owe taxes if they do more than $100,000 in California sales or have 200 transactions. The state expects to generate $500 million from those new collections. Most other states have made similar changes to their laws or tax codes, or are now considering such changes.

It's not just states. In many places, counties and cities have their own sales taxes applied on top of the state rate. In the 45 states with sales taxes, there are more than 12,000 tax jurisdictions, says Moylan. Although it is unlikely that a small business would do enough sales in that many locations to hit the sales tax threshold, it's not impossible. Heitman does enough sales in California that he worries he could be on the hook for taxes in some of those local jurisdiction too—although he's not entirely sure.

"It almost seems like I have another full time job dumped on me with this sales tax thing. It's burning me out."

Determining where and what a business owes is its own burden, and the largest costs are born by medium-sized businesses like Heitmans. Bigger businesses are better able to handle the increased compliance costs created by Wayfair, and truly small businesses are unlikely to surpass the various sales thresholds to trigger tax collections—but for those in the middle, the sudden shift in the playing field is "hair-raising," says David Mittelstadt, a tax attorney from Chattanooga, Tennessee, and chairman of the Tennessee Bar Association's tax section.

The transaction limits are what will capture many of them, he predicts. "Because, you know, 200 sales when you're selling industrial turbines is one thing," says Mittelstadt. "If you're selling t-shirts, you could hit those thresholds at a very low volume of sales."

That's exactly what's facing Kenny Ballard, CEO of The Mountain, a New Hampshire-based company that sells T-shirts online—including the internet-famous shirt featuring three wolves howling at the Moon. At approximately $25 per shirt, 200 sales into a certain state is a mere $5,000 in revenue for Ballard's company but would be enough to trigger tax obligations, cutting into profits and requiring new expenditures on reporting and compliance.

For business owners, the challenge isn't just determining if they owe, it's determining what. State sales tax codes are notoriously complex, and no two are exactly alike. In Pennsylvania, for example, most clothing is exempt from the state's 6 percent sales tax—unless it is considered formalwear or recreational equipment. In practice, that means a pair of gloves would not be taxed, except if it's considered skiing equipment, in which case the exact same pair of gloves would be taxed. New York taxes Yoo-hoo, a milky, chocolatey drink—but not chocolate milk. Coffee is not subject to sales tax in Colorado, but you will be charged tax if you get a to-go cup with a lid, which is considered "nonessential packaging" under state law.

That's why Heitman spends a lot of time thinking about the tax status of fireproof underwear, but he's hardly alone. Micro-retailers operating through marketplace sites like Etsy, for example, sell all variety of handmade items—from homemade moccasins to unicorn fluff. Adding to the confusion, transactions of non-taxable goods in some states still count towards the overall transaction threshold that determines whether a seller has to pay taxes. Since the Wayfair ruling, Etsy has updated its seller handbook to keep users aware of the shifting playing fields, and the platform is now collecting and paying sales taxes on behalf of users in states where the laws have changed.

For small businesses operating outside of an online marketplace, software can help navigate the complexity of suddenly having to understand thousands of different tax codes. But it's only so useful, and it can be expensive. Heitman says he paid $6,000 for a program that calculates taxes owed based on buyers' ZIP codes, but it's also brought him additional frustration. "Some of the addresses cannot be validated," he says, recalling an order that was shipped to a building at Newark Airport. The address was rejected because it was not in the U.S. Postal Service database. "Apparently the Postal Service doesn't deliver there—but this was a large package shipped by UPS."

"It's just ridiculously time-consuming every month," he says.

A Problem Fixed by Software—or Congress?

In writing the majority opinion in Wayfair, Justice Kennedy waved away some of Roberts' worries about how the court's abrupt overturning of the decades-old precedent would create chaos by pointing to the fact that computers could solve the mess—or that they would, maybe.

"Eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems," he wrote. And if that doesn't fix it, he added with one of the all-time great hand-waves in Supreme Court history: "In all events, Congress may legislate to address these problems if it deems it necessary and fit to do so."

So, will it?

Even before Wayfair, there were good reasons for congressional action on an issue that fits very squarely within the enumerated power of the federal government to regulate interstate commerce. In the wake of last year's Supreme Court ruling, congressional involvement now seems both more urgently needed and less likely to happen.

Bill Clark/CQ Roll Call/Newscom

One potential vehicle for resolving problems created by Wayfair is a bill sponsored by Rep. Jim Sensenbrenner (R-Wisc.), first introduced in October and likely to be re-introduced to the new session of Congress within the coming weeks. His bill, the Online Sales Simplicity and Small Business Relief Act, would add important specifics like prohibiting states from collecting out-of-state sales taxes on transactions that occurred before January 1, 2019, essentially giving businesses much-needed time to get up to speed on the new requirements without suddenly being hit with tax bills they weren't expecting.

Most important of all, the bill would create a $10 million sales tax exemption for all small businesses that do not have a physical presence in a given state. That means upping the $100,000 threshold in the South Dakota law that triggered the Wayfair case to a level far in excess of what a small business would have in sales—effectively removing the ability of states to target all but the largest of remote sellers.

"Small business owners, in particular, have shared fears that they will be unable to bear the new compliance burdens and may have to shutter their businesses," Sensenbrenner says. "I've heard from online sellers in Wisconsin and across the country who are concerned with the complexity of the post-Wayfair tax regime."

The bill is likely to have bipartisan support in the House this year, with Reps. Anna Eshoo (D-Calif.) and Zoe Lofgren (D-Calif.) lined up as co-sponsors, along with Rep. Jeff Duncan (R-S.C.).

But cities and states eyeing a windfall in new tax revenue are likely to organize against congressional action. Late last year, a coalition of groups including the Council of State Governments, National Association of Counties, and the United States Conference of Mayors sent a letter to Congress decrying efforts to "undermine" the Wayfair ruling.

States With No Sales Tax Fight Back

While many states likely will work to keep the Wayfair ruling, a smaller group are already organizing to fight its effects. No state is likely to fight harder than New Hampshire, which has a long track record of defending its residents from out-of-state tax collection.

In December 1976, the New Hampshire State Police literally arrested two agents from the Massachusetts Tax Commission. The agents had been staking out a parking lot in the small town of Hinsdale, barely five miles north of the Massachusetts border, looking for Massachusetts license plates as part of an effort by other New England states to crack down on tax-free cross-border holiday shopping. Unhappy with other states targeting shoppers and businesses in New Hampshire, Gov. Meldrim Thomson told the state police to keep an eye out for revenue agents—and to charge them with loitering if they were caught.

The two officers were released without charges, but the incident prompted the president of the Massachusetts State Senate to threaten—only probably in jest—to declare war on New Hampshire. The arrests were part of a long-simmering conflict between New Hampshire and its neighboring states over sales tax collection. Following Wayfair, New Hampshire has been moving to fortify itself once again.

"Our retailers don't have the infrastructure set up to collect sales taxes," says Nancy C. Kyle, president of the New Hampshire Retailers Association. "New Hampshire has chosen to balance its budget without the use of sales taxes, so making our businesses collect sales taxes for other states, that's just ludicrous."

So while other states hurried to legalize out-of-state tax collections in the wake of the Wayfair ruling last year, New Hampshire's lawmakers were rushing to the barricades. Gov. Chris Sununu called the state legislature into a special session to create a legislative task force to address the Wayfair ruling and issued an executive order telling the Department of Justice to monitor for tax collection activities by other states against New Hampshire businesses. "Our goal is basically to create every possible barrier that you can imagine, so that even if we are forced to do it, it would be really hard for any jurisdiction to try to do it," Sununu, a Republican, told the Conway Daily Sun at the time.

The state also set up a website inviting businesses to report collection efforts—although the website is clear that the state will not represent New Hampshire-based businesses if they are targeted by out-of-state revenue hounds.

"You can't let one state impose its law on another state. That's my real concern," says state Rep. Betty Gay (R–Rockingham). She's sponsoring a bill this year declaring the right of New Hampshire businesses to refuse to collect and remit sales tax to other states on the grounds that such a requirement would violate the state and federal constitution. Other bills would require out-of-state taxing authorities to comply with all New Hampshire revenue laws before being able to collect from in-state businesses, as well as force other states to reimburse New Hampshire businesses for any costs incurred.

It might not require the physical arrest of revenue offices, but New Hampshire public officials are doing everything short of standing at the border and daring other states to try it.

"It's part of our identity, and it's part of how we survive as a state," says Gay. Forcing New Hampshire businesses to collect sales taxes for other states would be "more than an inconvenience or an expense," she says. "It would be cutting us off at the knees."

Alex Edelman/CNP/AdMedia/SIPA/Newscom

They might get some help from Congress too. Last month, Sens. Jeanne Shaheen (D-N.H.), Maggie Hassan (D-N.H.), and Jon Tester (D-Mont.) teamed up to introduce a bill fully overturning the Wayfair ruling. Montana is another of the five states with no sales taxes (Alaska, Delaware, and Oregon are the other three).

"States like New Hampshire have a competitive advantage because of our lack of a sales or income tax," Hassan told Reason. "I'm deeply concerned that the backward Supreme Court ruling would threaten that advantage or inhibit economic growth by requiring small businesses to collect internet sales tax for other states." It's familiar territory for Hassan. In 2009, as a member of the state House, she sponsored a bill to make it illegal for New Hampshire to share tax information with other states.

"There's something psychological about not having to pay a sales tax that people really enjoy. You have an 8 percent sale—no one is going to go to that. But to avoid paying the 8 percent sales tax, they'll drive up here to New Hampshire," says Kyle. "They feel like they are sticking it to the government."

"It's Going to Be Just Horrendously Expensive"

The days of paying no sales tax online in states like New Hampshire may feel good, but they are probably coming to an end. Even critics of the Wayfair ruling don't deny that the Quill decision—decided two years before Amazon.com existed, when mail order catalogs were the cutting edge of retail—was an anachronism. With e-commerce accounting for more than $500 billion in sales during 2018, and certain to keep growing, it was really only a matter of time before states convinced Congress or the courts to let them have a larger slice of that pie.

It's up to Congress, then, to restrict overly aggressive state revenue departments, limit the confusion facing e-retailers of all sizes, and help small businesses that cannot afford the burden of dealing with hundreds of different taxing jurisdictions at once.

"It costs a lot just to have our accounting firm do our sales tax returns just for our home state of Wisconsin," says Heitman. "If I start having them do all these individual tax returns for all these states it's going to be just horrendously expensive."

State lawmakers and tax officials don't have much of an incentive to follow in New Hampshire's footsteps. In fact, the opposite is true. But even in the absence of federal legislation, state policymakers should be careful not to break the Golden Rule. "Do unto residents of other states as you would have those states do to your residents," says Bartlett Cleland, a vice president of the American Legislative Exchange Council. In the rush to squeeze cash from other states, lawmakers might end up encouraging more aggressive raiding of their own businesses, he warns.

That sounds a lot like what was happening during the Articles of Confederation. "I think a lot of this is a failure to appreciate history," says Cleland. "I don't think anybody is thinking about the very logical conclusions to these things."

If states wrote simple, flat tax requirement for out-of-state retailers, Heitman says that would help. Illinois, for example, has a flat rate of 6 percent for online sales taxes, which at least does away with confusion over what items are subject to tax. Better, he says, would be a federal law that exempts the first $500,000 of sales into any state. That's the sales threshold that Texas set on January 1 when it announced it would start collecting taxes from remote sellers.

Until that happens, Heitman will have to keep trying to figure out whether Connecticut taxes fireproof underwear. "My wife, she can see that it's stressing me out. What do you do? Do you keep fighting it or just give up? I hate talking that way, but it's just frustrating."

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80 responses to “The Supreme Court’s Online Sales Tax Ruling Is Already a Huge Headache for Small Businesses

  1. I’ve definitely noticed the sales taxes starting this year; not in all cases but in a lot of out of State online purchases.

    State governments definitely won themselves a windfall with this ruling.

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  2. Lol at blaming scotus. This is a congressional issue.

    The flat tax idea is a good one, but it cuts out the cities.

    Perhaps the best solution is for the taxes to be payable based on the location of the business. Someone who drives across the city line to buy gas isn’t going to remit taxes back home.

    1. “Someone who drives across the city line to buy gas isn’t going to remit taxes back home.”

      But they might owe them anyway, by law. It was the failure to get individuals who owed additional use taxes on out-of-state purchases that led states to try to force out-of-state vendors to be their proxy tax collectors.

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    2. YESSS!!! The easiest simplest solution is to treat all sales as if they were at that location.

      When you buy in person at a brick-and-mortar store, they don’t give a shit where you are from — you pay the sales tax due at that physical location. It ought to be exactly the same for mail orders, phone orders, internet orders, all orders.

      The reason it won’t happen is Amazon and other huge online retailers. They don’t want to have to add an across-the-board sales tax and raise their prices; furthermore, warehouse states would claim that Amazon owes taxes based on the warehouse location.

      The states sure don’t want it, because big retailers would be pushing for lower sales tax. Governments have competition, especially from other governments. They’d scream “race to the bottom” and have conniption fits.

      1. A straight federal flat tax on all online sales to American customers to be distributed in apportionment to the population to the states would be the most forward way to handle this.

        1. Federal already has enough taxes don’t they? You want them to have more pimping power (Centralized) to bribe the States into their ideology than they already do?? No, No; I don’t think so.

        2. I like the idea, but make the sales tax go to fund social security instead.

    3. Nope. Its definitely the Court’s fault. They should have ruled that sales taxes on out of state purchases was a violation of the Constitution. But it failed its job.

  3. It’s taxation without representation.
    Didn’t we have some kind of revolution about that once?

    1. Aren’t taxes effectively paid by the consumer? This is what people arguing against corporate sales tax increases usually say. It would be simpler to just have the sales tax paid based on the location of the buyer at the time of the sale. For online purchases, this would be the mailing address.

      1. ^RIGHT – State Citizens have full representation on their Sales Tax. It really doesn’t matter WHERE the item was made (be it China for that matter) – State Sales Tax is EXACTLY that (STATE IMPLEMENTED AND EXECUTED!).

      2. “Aren’t taxes effectively paid by the consumer? ”

        That rhetoric is only used when it makes the oligarchs money.

        Globalist Profits Uber Alles!

  4. If my state can force a retailer in another state to become a proxy tax collector, face audit liabilities, and comply with my state’s sales tax laws, what other laws can my state force retailers in other states to comply with? Can my state force retailers to comply with my state’s gun laws? Can my state force a retailer in another state to comply with my state’s age-of-consent laws for abortificants?

    And if they can force retailers to comply, why not individuals or other state governments? What limits do states have to force entities that are not present, that are subject to other state’s laws, to comply with the laws of the former? What if they conflict with the laws of the latter?

    This was a bad decision all around.

    1. It was yet another “what is the practical outcome” decision.

      Any time the court asks “what is the political outcome” of a decision, look out.

      In this case, they had previously protected interstate commerce from local tax collectors because mail order wasn’t a huge deal.

      But this is the age of Amazon. Huge chunks of retail are moving online. And that is costing the government too much of the pie. So a different outcome is needed. Therefore, the courts back in to the desired solution instead of protecting federal jurisdiction over interstate commerce.

      1. Agree, it was politically expedient, but altogether wrong-headed.

        Amazon now has physical presence in most states, and so falls under Quill.

        Also, this was always promoted as “evening the playing field”, but instead actually imposes requirements on online vendors that are not faced by brick-and-mortar vendors.

        When a customer walks into a physical store and makes a purchase, they are charged the local sales tax. Period.

        Imagine if a brick-and-mortar retailer was being forced to ask every customer for their mailing address and whether they were taking the goods home with them so that they could collect the sales tax owed to the customer’s home state?

        Like the stores mentioned in the article in NH that are being beset upon my MD revenuers? Indeed, can MD now force the stores in NH to check ID and collect and remit MD sales tax for the over-the-border shoppers? Why not?

        1. Why not?

          Because we say so.

          At least that seems to be the court’s reasoning. Sure, they dress it up rhetorically a bit more than that, but that’s what really seems to be happening most of the time.

        2. Not always. In WA the auto sales tax rate a single rate regardless what the muni sales tax rate is.

        3. It’s a matter of how you look at an online sale. Is the vendor going to the buyer or is the buyer going to the vendor? The buyer initiate contact by navigating to the vendor’s web site, but if we use the location of the vendor’s web site, every vendor would just set up a web site in a state that has no sales tax, which would be an unfair advantage over brick-and-mortar stores. On the other hand, if we use each buyer’s location, vendors choose to sell to multiple states, so I don’t see why they can’t also be expected to handle sales taxes for those states. They are not required to sell to buyers in other states.

      2. How is it costing governments a dime?
        What does South Dakota do with tax dollars that benefits a retailer in Florida?
        Are they contributing to fire protection?
        Do they assist in maintaining roads?
        How many South Dakota policemen investigate crimes in Texas?
        Does South Dakota keep California residents from touching guns in SD?
        Is California allowed to prevent the purchase of a firearm in Florida?
        Madness.
        There was a revolution ever taxes without representation. Time for another?
        Call your congresscritters and demand a bill to prohibit state taxes of any kind on persons in a different state. Now political jurisdiction should have control over residents of a different jurisdiction.

        1. Very honestly, the best, most workable, and simplest system I’ve ever seen and worked with is in Canada. There is ONE national sales tax rate (GST/HST) that is handled 100% by the federal government. It doesn’t matter if you walk into a store, order over the phone, buy from a mail order catalogue, of fill out a form over the Internet; if money changes hands, you pay sales tax — no exceptions, everything is taxable. Send it to the CRA (Canadian IRS) and they distribute it to the provinces and territories by population. Any calculated excess collected is REFUNDED to the taxpayers. My Canadian wife gets a check every quarter for around $80. Even Amazon collects HST here.

          Americans, Congress and the states are too busy fighting and arguing with each other (and taking kickbacks) to come up with a logical idea like that.

          1. There is ONE national sales tax rate (GST/HST) that is handled 100% by the federal government.

            Not anymore: HST (Harmonized Sales Tax) got whacked in various provinces (in BC for sure); in those provinces PST (Provincial Sales Tax) is in effect *in addition to GST). Which can be different for different goods.

            Here is a sales tax calculator for Canada:

            http://www.calculconversion.co…..t-gst.html

          2. Very honestly, the best, most workable, and simplest system I’ve ever seen . . .
            Is no taxation without representation.

  5. Taxes are just the price we pay to do business in states other than that from which the tax originates.

  6. Just wait until he has to pay the states for Foreign qualification to do business and other licensing fees. Then he’ll choke on the CPA bill for filing in each state, and crappy business property tax filing laws that chew up your cash.

    Pretty soon he will only do business in specific states that buy enough product to offset the fees. When government smells revenue opportunities, they tend to milk it for every fee they can get.

    1. Not just milking, but slicing up the golden goose.

  7. One often overlooked problem here is that not only do you have to collect, but you have to remit the taxes collected, as well as file a tax return.

    I used to work for a company that handled this process for a lot of telcos.

    Some of our customers (MVNOs for example) would have hundreds of monthly tax returns with very low tax liability because their customers could live basically anywhere. Spend $5 to remit $5 in tax on $40 in revenue.

    I’m not even going into the challenge of figuring out if a customer is in the boundaries of special tax districts (CO and TX were notorious for having boundaries that intersected cities), or rules on what is and is not taxable and at what rates.

    1. “but you have to remit the taxes collected, as well as file a tax return.”

      And face audits for each and every one of those returns.

      1. Well, the supremes did not say how revenue agents from South Dakota are going to enter a business in Alabama to conduct an audit, did they?
        Is a search warrant from a different state valid? Does an SD judge have authority in MS?

        1. Search warrants may not be, but that’s not what they do. They file tax liens, and then it’s up to the person or business the lien is filed against to do all the contesting. Tax liens are always considered valid across state lines: you are literally guilty until proven innocent.

    2. I can completely back this up.

      In most cases you have to file a return every month, even if you didn’t do any business that month. So if you are in hundreds of tax authorities’ jurisdictions…. every month!

      In Georgia they had a unified return for all districts. So I could file it all on the same form. But I had the “multiple intersecting jurisdictions” problem in spades. School districts, public transit districts, cities, counties… what a mess. You have to figure all of that out for every transaction. Then you have to account for it all on your returns every month.

      Just doing one city (the Atlanta area) had me working for a couple of days a month, just preparing the return. A return filled with $0.00 line items and $0.38 line items. Things that literally cost more to write down that it is worth.

  8. good to be in Texas if we’re going to play “let the states push each other around”

  9. “overlooked”???? Watcha talkin bout Willis?

    I can’t imagine that there were that many mail order companies who weren’t painfully aware of the pain Wayfair was going to impose.

  10. Of course, his solution to this problem is going to be to use a vendor that takes care of this for him – taking a slice of his profit with them.

    Eventually the inefficiencies will get wrung out of the system and a few major providers like quicken will own the field, producing products that ad a minimal amount of cost to doing business.

    But in the mean time, it sucks to be a business owner figuring it out. And this sort of thing definitely will create barriers for small startup businesses.

    I used to own a business that had to collect sales tax in multiple jurisdictions. It sucked out loud, and I only had about 8 different jurisdictions to deal with. It was probably about 1/3 of my effort, with another 1/3 going to bookkeeping with regards to business taxes. Only 1/3 of my time went into actually doing the work that made money.

    And of that… well, I operated in a competitive arena, so I operated on about 8% profit… about the same cut that the government took in sales tax. For doing nothing. Nice.

    And then the feds and state come along and take a third of my 8%.

    And then I have to pay taxes on anything I buy with what is left of my share……

    So in the end the government was taking home about twice what I did for my efforts.

    So yeah,…. I am a libertarian.

    1. Of course, his solution to this problem is going to be to use a vendor that takes care of this for him – taking a slice of his profit with them.

      Eventually the inefficiencies will get wrung out of the system and a few major providers like quicken will own the field, producing products that ad a minimal amount of cost to doing business.

      Free enterprise at work.

    2. Are you me? The struggle is real.

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  12. The first part of the article makes it seem as if this is a new tax that businesses are required to pay from their own profits. It is not. The ruling requires businesses to collect sales tax from the in state purchaser, and remit the sales tax to the state where the purchaser resides. It is worth noting that many states already required resident purchasers who bought goods from an out of state seller to remit a use tax to the state. Obviously, purchasers were not in the habit of writing a separate check to the state for the couple of bucks use tax on their Etsy purchase. Still, the ruling imposes, in many cases, the burden of collection on the seller, whereas before it was on the buyer. I don’t disagree that the new obligation to collect and remit the tax is not a significant administrative, ie time and money, burden on the businesses, but it may be hard to argue that businesses are being taxed in states where they have no vote when there is no tax actually imposed on the business. Let’s hope congress acts to fix this mess.

    1. Evidently this dipshit doesn’t know much about small business.

  13. I am still in a state of disbelief that Thomas, and Gorsuch concurred with this judgement. And that Kagan and Sotomayor dissented. And ROBERTS (he of the penaltax) wrote the dissent.

    I first read the opinion before knowing how wrote, concurred or dissented. I was floored when I saw how the court was divided.

    1. Agreed. I would have expected exactly the opposite, except for the clown Kennedy, of course.

  14. And the basic thing about it, is that it is a “Sales Tax”. Not a “Purchase Tax”. So when an online retailer has some physical presence in one state, they would have to pay sales tax in that state. And the theory being that the sales tax is to support the infrastructure that the retailer uses to sell and distribute their goods.

    Oh, and Kennedy wrote the opinion, so don’t bother wasting your time reading it. It is a meandering piece of gobbledygook (as usual). How can the so-called “constructionists” go along with this nonsense, when Congress SPECIFICALLY is granted the power to regulate interstate commerce. THIS IS INTERSTATE COMMERCE!! SCOTUS says a growing a plant in a state to be only consumed in that state is interstate commerce, so Congress can regulate it. But then here turns around and says the States can fuck over companies in other states.

  15. It would be much better for all concerned if all of these petite bourgeois enterprises go the way of the dodo.
    Small businesses make up the majority of the nefarious capitalist enterprises in this country, inflicting their cancer of financial independence, business acumen, and their vulgar entrepreneurial spirit that plagues us all.
    It would be much better if the unenlightened masses obtain such luxuries as food, clothing, medicine, etc. from a ration store like they have in the successful and enviable socialist paradises like Cuba and North Korea.
    This way, our ruling elitist turds can disseminate, at their leisure, what the people need.
    Control will finally return to bring a just and fair society that is needed here in America as our beloved betters can make a fortune ripping off all us little people while simultaneously grow fat, rich and more oppressive at our expense.
    Plus, the ruling elites will finally be able to cull the herd from annoying doubters and capitalist counter-revolutionaries that continue to plague us with their nay-saying beliefs and attitudes.
    Only when we allow and welcome our ruling elites to destroy this hideous monster called small business can we all finally enjoy all the perks and pleasures of a socialist slave state.

  16. It’s up to Congress, then, to restrict overly aggressive state revenue departments, limit the confusion facing e-retailers of all sizes, and help small businesses that cannot afford the burden of dealing with hundreds of different taxing jurisdictions at once.

    Golly. So it looks like we’re gonna move to a VAT tax instead. Except without any ACTUAL behind-the-scenes cooperation between these taxing jurisdictions (like eg Switzerland) to keep the paperwork/filing burden down. Worst of all possible worlds – as usual.

  17. I actually shut down and cashed out of my online retail business because of this ruling. It was hard enough figuring out what my home state required. Filing the state monthly tax returns was enough. There aren’t enough hours in the day to do 50 tax returns a month.

  18. How about if Florida started demanding that residents of other states who visit on vacation have to file income taxes in Florida for the time spent there…if you’re on paid vacation, you earned income while you were in Florida, after all. Kind of like the “jock taxes”.

    Or California starts demanding that all other states must follow California emissions standards, since their residents might at some point drive their cars into California?

  19. It’s not a bug in the system, it’s an intended feature.

    1. My sentiments exactly, pandora’s box.

  20. Best solution is to stop taxing…

  21. The ongoing problems are caused by Congress’ failure to push the Commerce Department to write detailed regulations. Until such time as this happens, sellers are going to have to restrict customers with clear statements such as “Sales are Retail Only – No Tax Exempt Sales Permitted” and “No Shipments into California, Texas, New York and , . . . ”

    Thirteen states have gone to uniform sales tax rules which needs to extend to all states and the Tax Exempt States present a monstrous problem if any are protected from taxation by their Constitutions.

    Another approach would be for sellers to change to marketing through the likes of EBAY or Amazon Marketplace where collecting tax from customers and remitting the tax to the states would be a function of the marketer which is the new law. Service costs will rise from Amazon, for example, but that can be passed on to the buyer.

  22. Wayfair was just wrongly decided. For his last opinion, Kennedy really screwed it up.

  23. I live in a high-sales-tax area.

    Can I just set up a po box in Alaska or Delaware that just automatically forwards everything to my home address? That would be ideal.

    1. If I remember correctly from when I lived in NY over 45 years ago, here’s how sales tax worked at a brick-and-mortar: If you lived & bought in NY & had it shipped to a family member’s NJ address (e.g. clothing; no sales tax on it in NJ), you still had to pay NY tax because that’s where your residential address was. They asked for address proof (yours) when you asked the merchant to ship rather than take the package with you. Or if you were from just anywhere & bought anything, they’d charge NYS (+NYC, if purchasing there) sales tax. There WAS a time when shipping to that NJ address avoided the sales tax altogether, but that changed somewhere along the way & I’m only guessing it was somewhere in the 20-years-ago range.

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  25. Sales Tax is a STATE issue (period – no debate). The only *mistake* is making retailers collect buyers sales tax. The buyer is still the one paying the sales tax. If States don’t like their citizens skipping out on sales tax they should address that within their STATE instead of trying to supersede other states into doing their tax collection for them.

    If they cannot figure it out effectively perhaps it time to find a different taxing mechanism than “sales tax”.

  26. Don’t give them any ideas.

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  28. Of course this is hurting small business, that was the point of it. Big business like Amazon backed it, knowing small business would not have the money or manpower to support collecting taxes from all 50 states.

  29. Bought my last fire suit from Pegasus. Pre-legislation apparently, no sales tax.

  30. ‘ “By suddenly changing the ground rules, the Court may have waylaid Congress’ consideration of the issue,” Roberts wrote. ‘

    Per usual, Roberts doesn’t care about the law, and considers himself a supra constitutional Top Man charged with acting to get the “right” result”

  31. ” Unhappy with other states targeting shoppers and businesses in New Hampshire, Gov. Meldrim Thomson told the state police to keep an eye out for revenue agents?and to charge them with loitering if they were caught.”

    I love Mel Thomson!

  32. The internet sales tax moratorium was a huge giveaway to the centralized internet companies at the expense of corps with a brick and mortar presence.

    That builtin sales edge probably drove the internet economy and pumped money into the huge internet sellers, and thereby into internet ad sales (Google), and all the online data collection (Twitter, Facebook).

    Sell the internet.
    Buy Walmart.

    1. Actually it was an extension of the already existing exemption for “mail order” (and telephone order) sales. The sales tax exemption for companies without a physical presence in the state existed decades before there was an internet.

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  34. As someone who lives in a rural non-incorporated area, distant businesses which collect sales taxes on my purchases on-line will likely apply the tax rate of the town where my mailing address originates. If I buy an item from the country store down the road, I’m liable for state and county tax, but not the “city” tax of the mail address city. Texas has a maximum limit on sales tax which was last increased to accommodate the Dallas Area Rapid Transit project. Of course pretty much every smaller city and town (obviously all without a massive transit system) increased the local sales tax to reach the state maximum. Any tax software out of state vendors will purchase will not include any adjustment for all the rural areas of the US which are not subject to local sales taxes. Needless to say I have no vote in the town which collects local sales taxes from my purchases.

    Just another unintended consequence of the SCOTUS decision. Not that I would expect Congress to do anything different wrt rural areas, but Congress had avoided the demands of states to address the issue for years and might still have failed to act, leaving things as they were.

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  36. What passes for judicial ” thinking” in this case amazed me at the time, and amazes me still. What do you think ones chances of obtaining an English Language explanation, as opposed to “lawyers talk” of the “thinking” behind this most unfortunate ruling. I suspect that there are 4 chances of obtaining same. Fat Slim, Little and No, though I could certainly be wrong. Think I might be?

  37. All material life originates from industry, guaranteeing industrial communication, and is the origin of all matter.

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