For some, online shopping was a way to buy things without needing to drive to a brick and mortar store to make the purchase. For others, it also included the added bonus of not having to pay sales tax from select merchants. 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. However, in a landmark decision today, with a ruling of 5-4, the Supreme Court says states can now collect sales tax from online retailers.
Sales tax is pretty interesting in the United States as it’s done on a state-by-state basis. Some states have a base sales tax set at 2.9% while others have set theirs as high as 7.25% and even 10.5%. Then we have a handful of states who don’t even charge sales tax at all. For decades, these sales tax laws were only applicable on purchases that were made from retailers who had a physical presence within that state. When it comes to online shopping, this resulted in the states missing out on a lot of tax when something was purchased from an out-of-state company.
This is big news for many of us as we can typically save a lot of money in sales tax from buying smartphones from companies who don’t have a physical presence in the state we live in. This may not be the case much longer with the new ruling from the United States Supreme Court, though. While it doesn’t mean that every state will begin collecting sales tax in this way, it does allow for each state to come together and decide if they want to or not. Many of these states look at this as lost revenue and will likely pass laws so they can start collecting sales tax on these purchases.
South Dakota was the first state to pass a law requiring online retailers to collect sales taxes. The Supreme Court upheld their law and now other states will be able to do the same. The decision does not require all internet retailers to collect sales taxes. Large companies like Amazon are obligated, but small retailers on eBay would not be required.
Source: NBC News
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