Score one for the brick-and-mortar stores: Your internet shopping bill is about to go up.
The Supreme Court ruled this week to allow sales taxes on items purchased over the internet regardless of the seller or buyer’s home state. The landmark decision is almost certain to cause consumers to have to pay more to shop online.
The 5-4 decision by the nation’s highest court is the culmination of South Dakota v. Wayfair, a case in which the state government, tired of not being able to collect sale taxes for online businesses, filed suit against a handful of e-commerce retailers, including Wayfair, Overstock.com and Newegg.
How the online sales tax will affect consumers
The lack of a sales tax has always been an huge benefit of shopping online. Experts have said that e-commerce sites have enjoyed a price differential of as much as 11% over physical-presence stores, according to Forbes. That gap figures to shrink considerably.
The ruling overturns a 1992 decision that sided with internet companies. When expressing the court’s opinion, Justice Anthony Kennedy acknowledged that the beginning of the tech boom was another time. “The Internet’s prevalence and power have changed the dynamics of the national economy,” he wrote.
As an example, the court cited that a quarter-century ago, mail-order sales were at $180 billion in the United States. In 2017, e-commerce retail sales hit $453.5 billion. Indeed, Amazon.com set sales records for Black Friday through Cyber Monday — and they weren’t the only ones.
Advocates of in-store sales applauded Thursday’s ruling. National Retail Federation President and CEO Matthew Shay in a statement that the decision represented a “fair and level playing field” for brick-and-mortar stores. “Retailers have been waiting for this day for more than two decades,” he said.
So how will the new ruling play out for the everyday consumer? Here’s what we know:
Here are 3 things to know about online sale taxes
- South Dakota only: In the particular case of South Dakota, tax collection only applies to e-commerce sites who take in more than $100,000 in sales or 200 transactions from the state annually. So no one really knows how this high court’s ruling will exactly be administered by other states.
- Online sales taxes are already a thing: At least 31 states already charge online sales taxes on items consumers buy via computer.
- What about Amazon?: Amazon already collects sales taxes, where applicable, so that leaves third-party vendors and smaller online firms to figure things out. With all orders, you can find an “Estimated Tax” displayed at checkout on Amazon.com. On its website, the company also says “The tax rate applied to your order will be the combined state and local rates of the address where your order is delivered to or fulfilled from.”
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