A new analysis of the Supreme Court ruling in South Dakota vs Wayfair offers a ray of hope for small online sellers who are worried about the burden of collecting and remitting sales tax across the United States. But it also highlights the uncertainty left in its wake.
Tax attorneys with Jones Walker examined what the end of Quill‘s standard of physical nexus would mean for a single state – Louisiana – and what it described as it that state’s 63 autonomous parish taxing jurisdictions that levy, administer and collect local sales and use tax on behalf of numerous cities, towns, districts and other local jurisdictions(!).
While the “physical presence” rule is gone, the “substantial nexus” test remains – as we had pointed out, the Supreme Court didn’t define it, but provided some hints and guidelines. In addition, there are three other factors besides the substantial nexus rule, which we described in this article.
In their post on the Jones Walker tax-blog “Cooking with Salt,” the attorneys pointed to the third factor in that four-prong test that now applies to remote sellers: that a state “does not discriminate against interstate commerce.”
They wrote, “The Supreme Court’s decision, however, similarly leaves no doubt that Louisiana’s complex state and local sales tax systems are presently lacking those features that would prevent undue burdens upon, or discrimination against, interstate commerce.”
But the attorneys also said the Supreme Court ruling “has undoubtedly provided various states with an additional opportunity to require remote sellers to collect and remit sales tax.”
The Cooking with Salt blog post about Louisiana serves to highlight the extreme burdens some states and locales place on in-state and out-of-state sellers. The authors, like everyone else, will be monitoring developments as things shake out after the Supreme Court overruled its 1992 Quill ruling.
I would think that if you currently don’t have 200000 in sales, much less to the same state, what is there to worry about. This sales tax thing is meant for the big dealers ie walmart, wayfair etc. Most of the people don’t have 200000 in sales total for the year. Thats if you believe all the crying about no sales. In fact 200000 in sales for each state makes it 10 million dollars and that would make one a diamond dealer. If you make that much and aren’t then why are you on fleecebay.
Here is the kicker: If eBay is considered to be the the seller when they start taking the payments then they will be the ones responsible for paying the tax. It will have to be levied on all sales to say South Dakota because they will be making more then 200K in sales a year. If they want to be the seller and not just “a venue” that is their responsibility and theirs alone. That will be the downside for eBay trying to force their way into everybody’s business. I am sure that is why they did not want the sales tax thing upheld in SCOTUS.
eBay = Dead Man Walking
@ Bill
I really feel for Ebay BUT no matter how hard I reach I can get to them.
The way to do this to be ‘fair’ to online AND brick/mortar (b/m) stores is for online retailers to collect sales tax on ALL sales (local and out of state) and submit them ONLY to their LOCAL city/state. That is what b/m stores do. THAT would level the playing field.
B/m stores do not check customers’ IDs and pay sales tax to the state where the customer lives. Regardless of whether that customer crossed a state line to visit that store and take their purchases to their home state.
When people shop online, they ‘visit’ the store in whatever state it is, the store does not visit them, same as b/m stores.
States like South Dakota can collect sales taxes from their own local businesses and not MOOCH off other states. If they don’t like it, they can make their state more attractive to businesses and create incentives for companies to sell there. Each state should benefit from their own economy they built themselves, not some other state’s.
For companies who sell from multiple states such as Amazon, they can pay taxes to each state based on where the items ship from, the warehouse address for each item, which is usually a few states.
Problem solved. No nightmare for us small online businesses. No ridiculous tax burden of 12,000 whatever tax zones. ‘Level playing field’
New Hampshire would be satisfied as well.
I agree that sales taxes need to be collected and I would gladly pay sales taxes to my city/state on all sales, in or out, of state. States should not be allowed to mooch off other states.