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State Sales Tax: Is Shopping Online About to Get More Expensive?

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state sales tax online shopping - credit card near a laptop

Have you heard the news?

Shopping online might get a little more expensive. 😬 On June 21st, the U.S. Supreme court ruled that states can now require internet retailers to collect sales tax — even if they don’t have a physical presence in that state. This ruling overturns a Quill Corp. vs. North Dakota, 1992 decision from the Court that allowed states to levy taxes only on businesses with a brick-and-mortar location within the state.


state sales tax online shopping - amazon.com boxes stacked on a front porch

So what does this actually mean for businesses and consumers?

Well, there’s a bit of both good and bad.


The Good

state sales tax online shopping - open sign

This ruling could be beneficial to smaller brick-and-mortar businesses. Mom-and-pop shops along with independent artisans with a physical presence have been required to charge state sales tax creating a disadvantage against large-scale online retailers who did not. This ruling levels the playing field by setting a unanimous standard between virtual and physical sales.

Marty Jackley, South Dakota’s attorney general, called the ruling “a big win for Main Streets across America,” because the decision could be particularly significant for rural areas where local businesses have been hit hard by competition from online retailers. So really, it’s a big win for the little guys! 🎉

Local governments may also benefit from this decision, as the government estimates that between $9 billion and $13 billion in potential tax revenue is left on the table from previous rulings. This means there’s potential for billions of dollars to fund education, healthcare, and infrastructure from the new tax revenue that’s generated!


The Bad

state sales tax online shopping - laptop and crafting supplies

For most large online retailers (including Amazon — the country’s largest), the decision will have little impact, since they’ve been voluntarily paying state sales taxes for years. However, small-scale and earlier-stage companies without the same major online presence and administrative departments may end up facing more operational costs as a result.

It’s still unknown how this will affect individual sellers on sites such as Etsy and eBay. 😕 The threshold for imposing the state sales tax ruling in South Dakota is a minimum of $100,000 in sales, so it’s very likely these types of sellers won’t be affected. That said, states do have the ability to adjust their qualifying sales threshold to a lower limit if they wish. Joseph Bishop-Henchman, executive VP at Tax Foundation, told CNNMoney that if states have a much lower sales threshold or no threshold at all, “this ruling would not directly apply. It’d be a new case.”

This ruling will also hit home for consumers, too, as paying sales tax means paying more for products bought online.


So why now?

The original case dates back to 1992, when less than 2% of Americans had access to the internet. It’s funny to think about since you’re currently reading about this from your computer or smartphone.

It will be interesting to see how this affects consumer’s online shopping habits since recent surveys have reported that 36% of consumers say they would shop online less frequently if all retailers were charging a sales tax for an online purchase.


Will this new legislation affect your online shopping habits?

Join The Discussion

Comments 23

  1. 727sweettt@gmail.com

    We don’t have sales tax in Oregon. This would definitely change the way we shop.

    • emily

      if you live in a state with no sales tax, i don’t think it will impact you at all. it doesn’t sound like all states must start imposing sales tax for online purchases. it seems like it would apply to those states that do have sales tax.

    • Seriously?

      If your state has no sales tax then there’s no state sales tax to charge you. So this will not affect you. In the states that DO have sales tax, whatever their tax rate is (5%, 7%, etc) is what people who live in that state will be charged for their online purchases.

    • AZ

      except that it wouldn’t…

  2. lindak

    Yes, I would probably buy more locally if the store is in a convenient location.

  3. Jackie

    This won’t change the way I shop. We live nearly an hour from shopping (and that’s in the next state). If there’s a good deal, it’s much more beneficial for me to shop online when possible. It’s been nice not paying sales tax while it lasted!

  4. ToriSC

    The ruling specified $100,000 in sales OR 200 transactions so it could affect smaller businesses easier than you think. It also includes ALL sales – not just internet and not just taxable items – as meeting the threshold for filing.

    • Colleen

      I just came here to say this. It’s the “or 200 transactions” part that may affect the Etsy and/or eBay sellers the most.

    • Lori Hermann

      I’m a smaller eBay seller (comparatively) although produce significant income to my family and it is a potential nightmare for me because we (small sellers) will have to know all the tax laws which will be different for every state. Collecting and filing sales tax for 45 states that charge it will be no small job and will potentially just put me out of business. And the cost of an accountant to handle it wouldn’t be worth it. Sad to say…

  5. rpearson

    It’s not going to affect my shopping decisions. I live in a small town and the nearest mall is an hour away. I buy online frequently bc there just aren’t any options in my town. Walmart is pretty much my only choice in town and it’s very lacking.

  6. Jo

    As the owner/designer of a handmade business, the thought of reporting quarterly sales and use taxes for each state makes my head spin. This is a concern for all other owners I have talked to.

    • Deb

      I agree if the states are not careful in their limits the small business is going to hurt. The costs of time and money to collect and report sales taxes especially to different states is going to run some out of business.

    • NV

      This, IMO, is where the problems really begin. I live in MA so we have sales tax and I pay sales tax (6.25%) on most everything I buy online anyway. I could jump up to NH (not too far) and buy “big ticket” items if I really wanted to avoid sales tax (I don’t typically do this). But the amount of front end work that this will create for small businesses like Jo mentioned above could become daunting and possibly even prohibitive if these small online sellers/retailers have to start navigating this (and esp if they have to use an accountant to assist). It’s really quite small business “unfriendly,” IMO. That’s the big problem as far as I am concerned.

  7. 50ShadesofLipstick

    I live in a small city w/o any decent malls for a good 30-35 min, but this still doesn’t make a big difference to me as a consumer. If something is on sale and I’m not paying shipping, then I’ll always prefer to buy it online than to spend my time and gas $ driving somewhere to do my shopping w/ 2 little ones in tow. You just have to do what works for you- sometimes that means paying a little bit more for convenience or putting some time in to save $.

  8. Charlin Cho

    My budget won’t change regardless on the tax. I would just spend less overall.

  9. Lauren

    Like some of the other posters, I rely heavily on online shopping because of where I live. So this change really isn’t going to affect my personal shopping habits at all. Plus, this takes the burden off of consumers to self-report these purchases on their income taxes at the end of the year. The past couple states I’ve lived in have had a line on their income tax return forms for you to report all the purchases you didn’t pay sales tax on, calculate the tax due, and add it to what you owe. Most people never did this and that’s why we’re seeing this change. However, I do agree this will be very difficult for small businesses to manage. I hope they make reasonable minimum thresholds so that it doesn’t kill off a bunch of ebay and etsy sellers.

  10. tracey

    Check out your eBay accounts…mine had a message in it to sign a survey for ebay: Now is the time for Congress to act on legislation that protects small businesses.

    And we need your help.

    Please consider signing our petition to show our country’s political leaders that these new Internet tax burdens could permanently damage U.S. small businesses. The petition takes less than a minute to complete. We will soon deliver this petition to President Trump, key members of Congress, and select state governors, so we need you to participate now.

    eBay has always supported tax policy that is fair to entrepreneurs, artisans, and small businesses. Rest assured that eBay will continue to fight this battle on behalf of all of our valued customers.

    Sincerely,

    eBay

  11. Live Free

    No taxation without representation. Just the government grabbing more money from it’s citizens that the government doesn’t need. They need to learn how to spend the money they have and quit putting this country into debt. If they can’t do it, they need to get out. We the people are their boss. They work for us. The people need to see what is truly going on and hold the government accountable. We the people!

    • Sara

      They work for their donors, not for the people that voted for them.

    • Lisa

      It is only fair that people buying online pay their fare share of the sales tax. Not fair to put all the burden on the people who can not by online. Have to pay for the police, fire, and roads somehow. Everybody should pay their fair share.

  12. Meredith

    I’m a third party Amazon seller, and Amazon requires you collect sales tax where you have nexus. I sold a little in Q4, and then got scared to sell more because I needed to set up sales tax for multiple states. It stressed me out just thinking about it. Taxjar will do this all for you and even file, but for a price. I think $20/month/state, which I can’t afford when I had nexus in over 10 states. So yes, going to be A LOT of work to set this all up, but I’ve read people have done it on their own, just takes a lot of work…

  13. lovespring

    I probably wont change my online shopping. Its to convenient.

  14. Cassandane

    This is going to be a potential nightmare for my parent’s small business, which has both a physical and online presence. They will likely now need a sales tax ID for every state, and will be super cumbersome (ie more time, higher costs and likely a specific employee to just handle sales tax.😐). Such a PIA.

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