Supreme Court ruling may boost Virginia tax income by $300M

Angelica Greene
June 24, 2018

And for the state of Georgia and local governments, a U.S. Supreme Court ruling Thursday means hundreds of millions of dollars in extra revenue pouring in annually.

The Supreme Court decision ruled local governments can now decide if an online retailer that sells goods into the state, that don't have a physical presence, would have to register as a dealer and collect taxes.

"This is an issue for the Legislature, and legislation would have to be passed to authorize the state to enforce the collection of out-of-state sales taxes". Out-of-state sellers that meet minimum standards can be required to charge, collect and remit sales tax.

Previous Supreme Court decisions prevented states from collecting sales tax from out-of-state retailers with no physical presence in the state because the court concluded that would be an unfair burden on interstate commerce.

The General Accountability Office estimates that states could have taken in $13.4 billion more in revenues a year ago with an online sales tax. In today's context, he said, the physical presence rule is "an extraordinary imposition by the judiciary on the states' authority to collect taxes and perform critical public functions". "But that tax shelter isn't going to last much longer".

Lauren Boggs Meslar has been selling patterned paper straws, hemp gift cords and other lifestyle goods on Etsy since 2012, relying on sales from the Etsy shop and her own e-commerce website to "help pay the bills" for her family. Lawmakers in the state, which has no income tax, passed a law created to directly challenge the Supreme Court's 1992 decision.

But using the compliance services won't be without complications, says Jamie Yesnowitz, an accountant specializing in state and local taxes with the firm Grant Thornton. In dissent, Chief Justice John Roberts said Congress should be making this decision, not the courts.

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"It's not as easy as pushing a button", because businesses will need to make decisions about where they're going to collect tax, Yesnowitz says.

Blair says the Senate Finance Committee has been watching and studying the online tax issue for over a decade.

The law specifically protects small businesses from collecting sales taxes if they have less than $100,000 in sales as well as fewer than 200 transactions in the state. Some states have exemptions for collecting sales tax. "It automatically made the playing field unlevel for those entities that are here in the state doing business and participating in our community".

A case study Vince Kadlubek was originally happy enough when he heard of the Supreme Court ruling. North Dakota, deciding that companies should charge sales tax even in states where they have no physical location.

Starting next year shoppers will have to pay sales tax for all online purchases. "I don't have to drive", said Thornsberry.

Those earlier decisions, one half a century ago, the other a quarter-century ago, date back to a time when mail-order sales were relatively small and online sales were all but nonexistent. "And it's about time".

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