The United States Supreme Court made a ruling in the South Dakota Vs. Wayfair Inc. to repeal the law that requires companies to have physical stores in a state to be subject to sales taxes at state levels.
In a nutshell: A State can now press sales taxes on online sales even if the online company does not have a physical store in that state.
Why the jury came to this decision
The verdict was made to see to it that buyers do not dodge paying sales taxes through big box corporations, e.g., Amazon.
Such corporations will now have to ensure their sellers are compliant with state laws on taxes. However, it is still unclear whether the accountability falls on the corporation or the specific sellers. And because most sellers on these giant online platforms pose as independent businesses, the ruling may affect these micro-businesses more than the giant companies.
This new ruling will also level the playing field for brick-and-mortar merchants, as suggested by Daniel Castro, Deputy CEO at the Information Technology & Innovation Foundation.
Information Technology & Innovation Foundation is an independent research organization, and the group is happy with the Supreme Court’s judgment.
However, Castro also agreed that previously, States had set laws and regulations that single out online stores so as to boost up local stores. Thus, he feels Congress should take action to prevent this occurrence. According to him, taking action will protect both micro-businesses and their consumers who would have to suffer sky-high prices to atone for the higher sales taxes.
What the Judgment Means for Micro-businesses and their Customers
So how will this decision affect micro-businesses who already depend heavily on alternative business loans and customers who are struggling to maintain the cost of living?
High sales taxes on micro-businesses translate to increased prices for customers.
Small web-based retail businesses, particularly those that do not have a physical presence, may be forced to increase product prices just to keep their businesses going.
On the other hand, the ruling did not specify what exceptions micro-business may have. That means the case may stay in court for years keeping in mind that there are over 10,000 state jurisdictions governing sales tax across the United States— and all must be accounted for.
Furthermore, within this long list of jurisdictions are specific items that are taxed differently from others, most times with small discrepancies. Therefore, this ruling could really complicate matters for the small business owners, because it is difficult to keep up with the minute changes for all states.
Whether the Supreme Court’s verdict will cause more trouble for small retailers and customers is unknown to us now. Hopefully, the court will finally find a ruling that works in favor of e-commerce merchants and customers.
Author Bio: As an account executive, Michael Hollis has funded millions by using alternative funding solutions. His experience and extensive knowledge of the industry has made him an alternative business loans expert at First American Merchant.