Published: Fri, June 22, 2018
Business | By Tara Barton

Commerce Stocks Smacked By Supreme Court Ruling On State Taxes


I'm just happy that our state tax authority now loosely resembles the world that we actually live in.

"[.We] are prepared to comply with any outcome, and the decision will have no appreciable impact on our business [.] Today the U.S. Supreme Court has re-shaped the interstate commerce landscape in a move that could impact small business innovation on the internet, which has been a driving force behind our nation's economy for the last 15 years".

The Supreme Court ruled 5-4 in favor of South Dakota. Dissenting in relevant part, Justice White argued that "there is no relationship between the physical-presence/nexus rule the Court retains and Commerce Clause considerations that allegedly justify it". But times have changed, the majority decided. Most brick-and-mortar retailers are familiar with "customers" who come in with their smartphones to look at goods they have no intention of buying from the local business.

"Quill creates rather than resolves market distortions", the ruling says.

The court's nine justices split five to four in overturning a prior Supreme Court decision that had held that a state can only tax sales by businesses that are physically present in that state. That has created a patchwork of laws. Amazon generally doesn't collect taxes on behalf of third-party sellers that sell goods on Amazon, but it does collect taxes on third-party sales in Pennsylvania and Washington because of new laws in those states.

This overturned two Supreme Court rulings: 1967's National Bellas Hess, Inc. v. Department of Revenue of IL and 1991's Quill Corporation v.

Today's ruling upheld a statute from South Dakota, which requires any company with more than $100,000 in annual sales to collect sales tax on sales made to customers in the state. "New Hampshire small businesses do not have the time or resources to become tax collectors for other states".

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"This historic decision from the Court in support of sales tax fairness is a major victory for the jewelry industry, providing a clear path to level the playing field between traditional and online retailers", said president and CEO David Bonaparte in a statement. This was due to 50 years' worth of legal rulings which prevented states from charging sales tax on purchases made from out-of-state retailers.

South Dakota had challenged the physical-presence rule, saying it was losing roughly $48 to $58 million in revenue each year.

"Any adjustment to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress", Roberts wrote. North Dakota, that dealt with out-of-state taxes collected on catalog purchases, and the 1967 case, National Bellas Hess Inc. v. Department of Revenue of IL.

The Trump administration had urged the justices to side with South Dakota.

The decision, which overturns an earlier Supreme Court precedent, will boost state revenues at the expense of consumers and sellers who have avoided sales taxes in the past. In other words, many states are poised to adopt legislation that will allow them to tax online purchases.

In fact, 52 percent of the state's general-fund revenue - which pays for schools, prisons and social services, among other programs - comes from retail sales and use taxes, according to a 2016 report.

Chris Geehern, a spokesman for Associated Industries of MA, a business trade group, said the court ruling has the potential to "introduce a high degree of complexity for companies that do sell things over the web". Legislators in their 2017-19 state operating budget raised an estimated $432 million through a partial expansion of online sale taxes.

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