Online Sales Tax Ruling Could Boost Kentucky Revenue

Gladys Abbott
June 24, 2018

The court ruled that states can now require online retailers to collect sales tax from their customers. This reverses the Court's 1992 decision that state's could only collect sales tax from online retailers with a physical presence in that state, such as a warehouse or office building.

The Supreme Court ruled Thursday in South Dakota's favor after the state sued several online retailers in 2016 based on a separate law seeking to get them to collect the tax. Instead, consumers themselves were expected to voluntarily submit the required taxes-and many did not.

Nebraska tried to pass a bill this past spring to collect these taxes, but it failed.

A "quarter century of experience has convinced me" the Supreme Court's earlier decision was no longer justified, he wrote, adding that it was "never too late" to arrive at a better position. "Any adjustment to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress", Roberts wrote. We applaud state legislators who took the initiative in the 2017 Indiana General Assembly to prepare for this hoped-for decision.

National Retail Federation CEO Matt Shay on the impact of the Supreme Court ruling that states can charge sales tax for online purchases. "This decision finally levels that playing field, and I think that's all any business wants".

The high court decided that states have the right to mandate sales charges from retailers whether or not they have a physical location within the state.

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The new rules could make it harder for small online retailers to remain independent, since many lack the infrastructure to handle a complex array of taxes applied in over 9,000 jurisdictions, Bloomberg notes. The decision could result in billions of dollars in extra tax revenues at the state and local level.

It remains to be seen if online shoppers will abandon their virtual carts because of a sales tax. If you like to sell stuff on the auction website, you should be exempt from this unless you're making six figures from sales.

Governor Pete Ricketts reacted to the ruling. For decades, these sales tax laws were only applicable on purchases that were made from retailers who had a physical presence within that state.

By one government estimate, states can stand to reap between $8 billion and $13 billion in new revenue. "That legislation, which the Indiana Chamber strongly supported, has our state perfectly poised to fully implement an online sales tax law and trigger the tax collection".

The Minnesota Revenue Department said its staff is "analyzing the court's decision" and will provide guidance to retailers within 30 days.

Although consumers have in theory always been liable for paying sales tax to their state and municipality for online orders, the reality is very different.

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