Published: Fri, June 22, 2018
Tech | By Amelia Peters

Supreme Court ruling could have huge impact on Texas economy

Supreme Court ruling could have huge impact on Texas economy

States such as South Dakota, which have no income tax and rely heavily on sales taxes, stand to gain the most from the new ruling, according to a Barclays research note.

The matter reached the Supreme Court after South Dakota in 2016 passed a law requiring out-of-state sellers to collect and remit sales taxes, provided the total sales exceeded $100,000 or at least 200 transactions.

South Dakota was looking to repeal a 1992 decision which ruled that companies were only required to collect sales tax in states where they had a physical brick-and-mortar location.

The decision, in which South Dakota prevailed over the online furniture retailer Wayfair, immediately sent ripples through the internet shopping industry sending shares tumbling in Amazon, eBay, Etsy and others. They say they already pay other taxes, but they do not mind this decision today at all.

Justice Anthony Kennedy wrote that the rule "each year. becomes further removed from economic reality and results in significant revenue losses to the states".

As an example, lawyers for the online retailers told the high court that in IL, a Snickers bar costs more in taxes than a Twix bar, since food items containing flour are not treated as candy for tax purposes.

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The ruling overturned a 1992 Supreme Court precedent and potentially paves the way for consumers to pay more for their online purchases. "These issues are not before the Court in the instant case; but their potential to arise in some later case can not justify retaining this artificial, anachronistic rule that deprives States of vast revenues from major businesses". Amazon.com, with its network of warehouses, also collects sales tax in every state that charges it, though third-party sellers who use the site don't have to.

President Trump called the decision a "big victory for fairness" in a tweet posted Thursday afternoon. Expected to generate more than $24 billion for the state government in the current fiscal year, the sales tax is the single largest source of funding for the state.

If a business had a physical address in a state, it's required to charge sales tax for all orders in that state. "This is a big win for local brick-and-mortar retailers, who will now get a chance to compete on a level playing field with out-of-state internet companies that have maintained an unfair edge by not collecting sales taxes". "A lot of the companies that haven't been paying sales tax are going to have to start paying". The firm already collects sales tax on the goods it sells directly, but it does not always do so for products sold by independent merchants using its platform. He also had supported Nebraska joining with 33 other states and the District of Columbia previous year in supporting South Dakota's case before the high court.

"For the business community, it now means that they may have 50 different sales tax regimens to deal with as they sell to people in the 50 states", Geehern said.

The case is South Dakota v. Wayfair, 17-494.

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