Published: Fri, June 29, 2018
Industry | By Dora Warner

Online Sales Tax Ruling Could Boost Kentucky Revenue

Online Sales Tax Ruling Could Boost Kentucky Revenue

In March, Outdoor Industry Association (OIA) joined several other trade associations in submitting an amicus brief to the U.S. Supreme Court in support of South Dakota's effort to collect sales tax on these remote sales.

He said this ruling from the Supreme Court should not affect their customers much, if any.

He wrote that "each year, the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the states".

The U.S. decision comes after continued battles between bricks and mortar retailers and online retail giants, which have turned the consumer retail market upside down in recent years.

The burdens imposed on online commerce by the court's decision will fall particularly hard on smaller internet retailers that rely on online sales to stay open. MA has been attempting to jury-rig laws enabling it to collect from on-line retailers, and indeed Amazon has been remitting MA sales taxes thanks to a deal crafted during the Patrick administration. By leaving this up to Congress and the states and failing to address the possible retroactive collection of sales taxes, the Court has set up a potential tax nightmare for small businesses that could force some out of business.

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Second, the Court's decision now compels one party (the seller) to enforce a law the state claims another party (the buyer) is violating.

"The whole point of this whole exercise from states and localities is to get more tax money in their coffers so that's going to come out of consumers' pocket books", Melugin said.

Sellers that use eBay and Etsy, which provide platforms for smaller sellers, also haven't been collecting sales tax nationwide.

"The South Dakota model is a safe bet for states, so it's reasonable for them to start there" said Max Behlke, who directs budget and tax issues at the National Conference of State Legislatures.

Grover Norquist, president of the anti-tax group Americans for Tax Reform, said in a statement, "Today the Supreme Court said yes - you can be taxed by politicians you do not elect and who act knowing you are powerless to object".

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The South Dakota law challenged in the case provided that a business having $100,000 in annual gross sales in South Dakota, or conducting 200 business transactions in South Dakota, needed to collect South Dakota's sales tax on those sales or transactions.

McCarty said the ruling could mean Springfield will get an estimated $300,000 from the state, which hands out state sales taxes to municipalities on a per capita basis.

Quincy Mayor Kyle Moore said the sales tax ruling is a step in the right direction. Under the Quill principles, a state could generally not require a seller to collect and remit sales tax for sales made to people in the state unless the seller had some kind of physical presence in the state (employees, offices, inventory, property, etc.). Kennedy also pointed out to the existence of SAS and tools that "may make it easier for small businesses to cope" with the new compliance.

Chief Justice John Roberts and three of his colleagues would have kept the court's previous decisions in place. Special interest politics is behind the Supreme Court's decision.

The Trump administration backed South Dakota in the case, urging that Quill be overturned or at least limited to catalog sales. Justice Anthony Kennedy defended the state's measures as preventing "discrimination against or undue burdens upon interstate commerce".

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The Court held that a physical presence was no longer necessary to satisfy the substantial nexus requirement, casting its prior holding in Quill as "flawed on its own terms" and the physical presence rule as "artificial in its entirety".

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