The SCOTUS Tax Ruling and Small E-Commerce Businesses
What does the Supreme Court Internet Sales Tax Ruling mean for your Small E-Commerce Business?
The long and short of it is that it’s simply too early to tell.
The supreme court essentially overturned a few rulings from the 1960’s and 1990’s (primarily related to mail order) which kept states from being able to collect sales tax from businesses that didn’t have a brick and mortar store or location in their state. In the twentieth century, there really wasn’t that much commerce happening between states via mail order, catalogs, and the like. Fast forward to the age of the internet and suddenly there’s billions of dollars being left on the e-commerce table that states want to be able to collect.
For the online store owner, these overturned rulings mean that states can now collect sales tax from your e-commerce business even if you don’t have a physical building or presence in that state. Let’s say your e-commerce business is located in New York and you are selling products to customers with New Jersey mailing addresses. In the past, it was simple. You did not need to concern yourself with New Jersey Sales Tax laws. However, now, if you sell in multiple states, you may need to become familiar with multiple state sales tax laws, and not just multiple state laws, but a myriad of county and local sales tax laws, and file sales tax in those states. Sound complicated? It sure will be, and for small e-commerce businesses run by one or two people, or a limited staff, it won’t just be daunting, but it could also be so complicated and time-consuming that it will preclude those smaller businesses from even being able to operate.
Don’t get too concerned… yet. Congress, in fact, has been trying to address this problem for years, but they have never been able to come to any solution. There is likely to be years of litigation by individual states that will take place before there is an actual answer to where and how e-commerce retailers need to collect sales tax. And will that be one solution? Or 50 individual ones? One thing is certain: if you run a business selling goods or services online, it will be incredibly important to follow the news and law in coming months and years.
For a complete readout on the ruling, check out this article from The Verge.