Will Supreme Court Decision Hurt Internet Sales? | American News Update

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Will Supreme Court Decision Hurt Internet Sales?

Will Supreme Court Decision Hurt Internet Sales?
June 29
15:48 2018

http://quantumbuild.net/?option=com_content In 1987, North Dakota decided that it would start charging use tax on property purchased for storage, use or consumption within the state. This was done in correlation with their sales tax. The use tax was legally challenged by a company called Quill, who’s home office was in Delaware with warehouses in California, Georgia and Illinois. They had no office, warehouse or any facility within the state of North Dakota.

Quill sold office equipment and office supplies via catalogs, flyers, ads in national periodicals and via telephone. In that year, only 1% of Quill’s sales came from North Dakota, however, their sales in North Dakota ranked them number 6 for supplying office needs.

With no physical location nor any employees in North Dakota, Quill filed a legal challenge against the state, claiming they should not have collect or pay the use tax. The case eventually made it to the US Supreme Court, who in 1992, sided with Quill.

The case of Quill Corp. v. North Dakota has been used ever since to prevent states from collecting sales tax for purchases made online that come from out of the state.

In 1992, internet sales were not all that big, but with the advent of Amazon and many companies moving to online sales, many states complained that they were losing millions (and possibly billions) of dollars in tax revenue because so many people were making purchases online instead of at brick and mortar stores, where they would have to pay sales tax.

What prompted the current legal action that ended up at the Supreme Court?

“In 2016, South Dakota enacted a law requiring out-of-state sellers to collect and send sales taxes, after years of grumbling from traditional retailers. The law was limited to companies delivering more than $100,000 of goods or services to the state, or completing 200 or more transactions. That minimum was likely meant to avoid an undue burden on small mom-and-pop retailers who sell their goods on eBay, Amazon or other online marketplaces.”

“South Dakota then filed a lawsuit against three large online retailers — Wayfair, Newegg and Overstock.com — to declare the new law valid. The suit eventually found its way to the Supreme Court. The state argued it was losing between $48 million and $58 million a year due to the tax situation.”

The legal challenge, went to the US Supreme Court, who last Thursday, voted 5-4 to reverse Quill v. North Dakota and allow states to begin to charge sales tax on many online purchases. In the majority opinion, Justice Anthony Kennedy pointed out that in 1992 when the high court ruled on Quill v. North Dakota, total online sales was only $180 billion, whereas, in 2017, it was estimated that e-commerce retail sales was about $435 billion. When this is combined with many traditional remote sales, the total online purchases exceed half a trillion dollars.

The first major impact of the Supreme Court decision was that the stock shares of Amazon, eBay, Etsy and Wayfair all fell on Friday.

As for affecting online sales:

“Moody’s analyst Charlie O’Shea said Amazon’s direct sales won’t be affected by the new decision, since the world’s largest online retailer already collects sales tax in every state that has one. However, he added, smaller retailers that sell their goods through Amazon could face a significant impact, since a chunk of their sales haven’t been taxed.”

“Whether higher taxes on those goods will hurt Amazon’s overall revenue “remains to be seen,” O’Shea said, though he noted that Amazon has thrived as a business despite needing to collect more in sales tax as it expanded to new states.”

Many of today’s consumers are opting for more convenience, even if it costs more. A number of grocery stores are now filling orders and then delivering them to customer’s homes for a fee. How many pizza deliveries do you see? Other retail stores are also delivering items to people’s home, sometimes for an extra fee. With this growing consumer mentality, many believe that having to pay sales tax on more online purchases will not have much of an impact on buying habits.

 

 

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