Though online shopping has been a convenient solution for many busy Americans, people aren’t only buying products online for convenience’s sake — it may also have something to do with the fact that many of those online purchases are tax-free.
On June 21 however, the U.S. Supreme Court ruled that companies selling products on the internet can be required by the state they are selling in to collect sales tax. It no longer matters whether that company has a physical presence in that state, as it was originally declared in the 1992 case Quill Corporation v. North Dakota.
The circumstances that the original decision was made in were quite different from current conditions. In 1992, it was more difficult to purchase products from out of state retailers. It happened so rarely that it didn’t matter as much to state governments and local businesses. But now that online shopping is so accessible to Americans and the online marketplace is so vast, online retailers not getting taxed for the sales they make has become a nuisance to many.
That’s why the South Dakota v. Wayfair decision is a victory for both state and local governments, and local business. State governments can now effectively enforce sales tax laws, while local businesses are now on more of an equal footing with their online competition, as many have been able to avoid paying sales taxes until now.
It’s important to note, however, that the decision made in South Dakota v. Wayfair was in response to a South Dakota law, which means that the impact of this decision on other states is still somewhat unclear. Currently, there are 31 states that have laws that tax online sales, but if those laws are more restrictive than South Dakota’s, they may not hold up in court. That’s why states will likely be spending some time revising their laws to model new bills after South Dakota’s, so they can begin collecting sales tax on online purchases as well.
Learn more about how this ruling will effect Maryland businesses on our July 12 Facebook Live. We will be joined by James Dawson of Miles & Stockbridge who will discuss the effects of the ruling on Maryland businesses.
Don’t forget to watch our Facebook Live from this week over on our YouTube channel. Be sure to like the video and subscribe while you’re there!