How Supreme Court tax ruling could affect states, small businesses - and you

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The case originated from a lawsuit that the state of South Dakota had filed against four online retailers, including the online furniture retailer Wayfair. "The Internet's prevalence and power have changed the dynamics of the national economy", he wrote.

Many e-commerce giants like Amazon and Walmart already collect sales tax because they're so big they have a large enough presence throughout various states to collect sales tax.

Thursday's decision came after South Dakota passed a law in 2016 compelling remote retailers to collect sales taxes and then sued several merchants to pay up.

While the ruling opens the door for states to collect taxes from online businesses, there're some significant outstanding questions now that the court has made its decision.

Stocks of online retailers were down significantly immediately following the ruling.

Brick-and-mortar retailers are also celebrating the news. It's rarely enforced on individual purchases, however, according to Grant Thornton sales tax expert and University of Minnesota adjunct professor Dale Busacker. "We have long fought the battle to defend Main Street businesses and now with today's ruling, all businesses will compete on a level playing field", South Dakota Republican Governor Dennis Daugaard said. "CCIA has serious concerns about the future implications for e-commerce if governments are empowered to tax those who reside beyond their borders".

It's the smaller businesses - some of which are third-party sellers on eBay and Amazon - that could see a greater impact.

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CNET reports that this overturns a standing 1992 decision that prevented states from collecting sales tax from online retailers that had no physical presence in their state.

Buyers have to pay sales tax if they are shopping from a big box store online because many have stores in every state.

The online stores have contended that charging sales tax would be "burdensome" for small- to mid-sized shops. Prior to the ruling, sellers were responsible for collecting sales taxes if they had a presence in the state. Forty-five of the 50 states have sales taxes.

Justice Anthony Kennedy wrote the majority opinion, supported by most of the Court's conservatives and, somewhat surprisingly, Ruth Bader Ginsburg.

Last November, the federal Government Accountability Office estimated that states could have collected between $8.5 billion and $13.4 billion in sales taxes in 2017 if they had expanded taxing authority. Chief Justice John Roberts dissented along with Stephen Breyer, Sonia Sotomayor, and Elena Kagan.

In the new case, South Dakota v. Wayfair, South Dakota had attempted to overturn that precedent, arguing that Quill was decided before the existence of internet commerce. First, the Act applies a safe harbor to those who transact only limited business in South Dakota.

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