"...South Dakota, whose law requires retailers with more than $100,000 in sales or 200 transactions annually in the state to pay a 4.5 percent tax on purchases"
"..Kennedy’s majority opinion strongly suggested the measure was constitutional, in part because it has the $100,000 threshold and doesn’t try to impose retroactive taxation."
A clear bar is set for what is covered here and what is a burden.
1) Assume that they will hit one of those limits and collect tax from the start. Once they've told the customer that they've been charged tax, they will have to file anyway. I don't see anything that says the first $100k/200 transactions are exempt from the requirement. And if you hit the limits this year, you'll have to collect taxes no matter what from my reading of the bill.
2) Keep track of how much has been sold to South Dakota residents and stop selling if they hit the limits.
3) Give up and tell South Dakota residents that they're out of luck and that a state with less than 900k residents isn't worth putting up with the filing hassles.
If I'm not sure if my business will take off, I'm probably not interesting in paying taxjar or someone else $5000/year just in their filing fees (to make sure I'm covered), so I'm most likely to go with option 3 and start by limiting sales to my home state, those with no sales tax, and those that aren't going to try and make me collect the sales tax for them.
But regardless, that kind of number is a full time job. If you're selling over the internet and making a full time job out of it, you can handle computing sales tax for SD residents. Yes, it's burdensome. Yes, it would be good to have a simpler federal framework for this. No, it's not the end of the world.
"No tax on the internet" sort of made sense in 1997 when it was a new and exciting market and we wanted to see what would happen. Now, it's just a giant subsidy for Amazon. We can put that money to better uses.
Amazon voluntarily started collecting taxes nationwide without a blip to its bottom line.
The new law will in fact put Amazon's first-party goods in parity with 3rd party sales. Third party sellers could often undercut Amazon's own pricing due to the disparity.
This tax change is a huge win for Amazon on many fronts. Any protests they make to the contrary are strategic, imo.
This makes it tougher for these small businesses to compete and since Amazon takes 15% of those sales AND makes money off them for fulfillment services.
I personally worked on this sort of problem for a large company; most of the work is in figuring out what the business logic ought to be; turning it into code is (largely) trivial.
Figuring out the logic only needs to be done once, and the payments provider is the natural place for it to live.
Note, though, that for South Dakota it is $100k in annual revenue or 200 transactions per year.
Consider a company selling a subscription product/service for $5/month.
If they had a mere 17 customers in South Dakota, their South Dakota annual revenue would be a mere $1020, but they would have 204 transactions per year.
This assumes each re-billing on a subscription counts separately. If it could be counted as a single $60 sales that is merely being billed in 12 equal parts, then they would only have 17 South Dakota transactions.
In practice though, indie retailers will use reseller services that collect & remit the taxes on their behalf, in return for a ~10% cut. I use FastSpring for my shopping cart, others use Paddle or Gumroad. The EU has had similar tax laws on internet sales since the mid 2000s, and Australia will enforce their own 10% internet tax on non-Australian internet businesses from July 1st.
I wonder if Adobe publishes how many noneducational Photoshop licenses South Dakotans buys a year. As I highly doubt you're in any danger of needing to pay SD tax.
But it's not. This line is reasoning is very outdated.
They have built a massive network of warehouses all over the country, and that's the physical presence that a state sales tax collection clause needs to come into effect.
Amazon has been charging people sales tax in many states for a few years now. (I wish I had a number of states, but top jazzy to look it up.)
But it isn't just SD, it's hundreds, if not thousands of jurisdictions. One person doesn't have that kind of time.
It was always just a giant subsidy for Amazon.
It's an interesting precedent.
> Think you got a great deal not paying sales tax on your online purchases last year? In most states, there’s a pesky tax called “use tax” that you are supposed to pay in lieu of sales tax if you buy stuff out of state or online--and bring it in state. Theoretically, you’re supposed to root through all your receipts and credit card statements, calculate what you owe and report it on your state income tax return.
> Use tax is a tax imposed on the use of taxable items and services in a state when the sales tax has not been paid. For example, use tax would be due if taxable property is purchased from a seller located outside of New York, the property is used in New York, and sales tax was not paid on the purchase. With online platforms and sales being increasingly popular currently, this concept is significant. Remote retailers that make sales into a state but do not have any presence there (i.e. an office, store, storage, employees) may not be registered to collect sales tax in that state because of the lack of presence there. However, the use tax reporting requirement that has been recently implemented by a number of states requires remote retailers to notify their customers that they may owe use tax on their purchases.
- mapping an address to one or more jurisdictions
- digital deliveries might not have a shipping address
- tax rates often depend on the type of product
- product types have different definitions in different jurisdictions
- some taxes are time dependent (back to school tax holidays)
- some buyers are exempt in some jurisdictions for some products
I think its more tenable for governments to provide an optional sales tax as a service and remit the money to the states. One singular report to file one party to pay.
While the average EU interchange fee for taking credit cards is cheaper than in the US, it’s not “less than a penny”
The time to lower interchange fees was before reward programs became standard, interest is where card issuers make their money.
This situation is called an oligopoly. I don't think it has something to do with government sanctioned rent seeking.
At one small company I worked for, we paid SAAS companies for:
- expense reporting and reimbursement (Concur)
- managing payroll
- Managing retirement benefits
- source control hosting (Github)
- Infrastructure (Microsoft Azure)
- Salesforce (I don’t know what they do)
- Training and Compliance
- Chat (Slack)
- Email, Office software (Microsoft Office 365)
- vending services
How are these companies any different than the company that helps businesses manage tax collection? They all saw a business opportunity and my company was glad to pay them so it could focus on its niche.
The Commerce Clause gives Congress the power: "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." This has been widely construed as meaning that states cannot make taxes that affect other states' citizens unless they are doing business in that state.
The Supreme Court has just ruled that their earlier ruling (that Store A had to have some physical presence in State S in order for S to require A to charge sales tax) is wrong, and no such physical presence is required.
Did you pay income tax in the state, which will be what supports the university? Congrats, you get in-state tuition.
>>Drive a car into my state? You have to pay a roads tax.
Two points: 1) you are using the roads in the state, why can't you fund them?
2) that tax already exists, you pay it when you buy gas.
We might actually see some movement in this direction now.
Most things are pretty similar state-by-state, but it can be really nice being able to pick your laws if you have to. Maybe you love weed and you want to pick a state with legal weed. Or maybe you like drones and want to pick a state with fewer drone laws. So many things differ state-to-state, from REAL ID to trans rights to surveillance to taxes to guns to driving age to social aid to public transit. Gay marriage, slavery, and interracial marriage were all issues of the past but they were very important in their day too.
I do think it's an important part of what makes America America, and being able to "pick your laws" is an amazing freedom that most people don't have.
Now, the actual ability to move wherever you want can sometimes be limited. If you're in Vermont and you want New Hampshire laws, well, that's easy. (Differences: weed, guns, advertising, taxes, many more.) But if you're in Maine and you want Hawaii laws, a move like that probably isn't doable. Still, I think it's a valuable freedom.
I think it's good to start harmonizing the sales taxes, but such a fee (if I understand you correctly) should be removed...
TaxJar will register for you in the States that you need for ~$100 per state, plus their fees (https://www.taxjar.com/state-registrations/) -- I'm sure Avalara does something similar but that's ~$5000 that a small business probably won't have.
It's a system designed ages ago, not only pre-internet, but even pre-car.
For internet businesses it's really unworkable to require they submit anything other than state sales tax but even that is onerous due to registration fees and old and nonstandardized submission systems.
As far as I know, Stripe doesn't do this, they only provide integrations for services that will calculate your tax obligations. (My guess is governments will eventually force Stripe to pay the taxes themselves directly.) Here's Stripe's page with tax calculation integration options:
Note that the disaster area that is US regulatory overlap means passing a law like this is probably impossible without constitutional amendment.
Right now in the US it's often difficult, and sometimes impossible, to know how much you'll actually be paying in any transaction. It's ridiculous, and from a pure Econ 101 perspective it's a first order problem in the market.
But we can't make the switch unilaterally because if we're the only ones doing it, then we look more expensive than everyone else and lose sales. Even if the final price is the same, consumers tend to just look at the up-front cost when making buying decisions. So we'd need everyone in our market to switch, or nobody can. So basically it would need to be mandated by the government.
bread and cold cuts
20 oz soda
12 pack soda
donuts from the bakery
DO you know which of those items are going to be taxed and at which rate? Me neither!
>Note that the disaster area that is US regulatory overlap means passing a law like this is probably impossible without constitutional amendment.
I actually don't think so. The FTC covers truth-in-advertising laws.
It's probably less of a problem for someone starting from zero, but I'd imagine there's a type of vendor that's a huge nightmare. The firm that basically said "we can sell anything we can get from our vendor", and stocked their cart with thousands of SKUs, many of which exist only as lines in CSV files so they may not even know what they are offhand. The cart was probably built in the Eisenhower administration so good luck extending it.
It would be interesting to see some states offer a "trade convenience for savings" model-- rather than try to navigate a maze of regional rates and product categories to decide if a widget is taxed at 8.2% or 8.3, just file a one-page form and charge everyone 8.5% on everything. Saying "pay us $50 per year more in taxes, rather than spend $50k and ongoing service subscriptions to optimize the rates down to the penny" is a pretty compelling argument.
2) Zip codes have zero to do with taxing jurisdictions; zip codes merely tell you where the closest post office is.
I would love someone to at least make the case -- it seems like a non-partisan thing, surely the free market types should be in favor of price transparency, while liberals should be against misleading consumers.
In this case the "hidden cost" would be clearly printed on the receipt.
A rhetorical question, since obviously because it serves the agenda of the merchants, who want to set up a "let's you and him fight" situation between consumers and government.
If we really start peeling the onion, we can talk about the merchants' profit margins, and then also externalized costs in the form of stuff like pollution and bankruptcies (and the tax money spent to clean those up.)
I recall going to a cafe in India, looking at the menu price, handing over cash then being asked for more. It would be impossible for me to account for which taxes would be applied at what rate to work out the end price before paying.
I also think it sets it up so that sales taxes are actually paid by the intended target - they buyer. When Ireland changed its VAT rate from 21% to 23%, I suspect very few coffee shops changed the price of their latte from €3.00 to €3.06. So it feels like the tax increase can end up being paid by the seller, not the buyer.
Since VAT is a tax that is paid by the customer but usually remitted to the tax authority by the merchant, it has to be shown on the receipt.
Why does it matter who of buyer or retailer covers the few pennies, or if retailer makes a small price change to stick at a .99 or .00 price point? Retailers have done this forever in both directions.
Why would a law like that contradict with the constitution?
As an example; the sales tax rate in my region is 7%, but cigarettes are then flat taxed $1.36 a pack so roughly 20% tax at the state level, plus often times there is an added "local option tax" which adds on top of this.
(1) very large organizations with retail over a wide area as a core business focus would handle relations with taxing jurisdictions directly as a central function.
(2) medium scale organizations would outsource tax compliance to specialized vendors that would handle it.
(3) very small organizations would either do the same as medium orgs (assuming vendors handle them) or just not sell into many jurisdictions.
Truth be told most here are just mad that their online sales tax loophole is getting closed.
You are also now open to tax audits from all other states, since you may need to prove you are below any exemption limit.
It's a bad deal for small business no matter how you slice it. I think that if your revenue is below ~$100m annually, the future is beginning to look bleak. Very helpful to the big players like Amazon in killing off small competition.
Why wants to win by being the asshole who did it for $500 instead of say a percentage of revenue?
Basic economic principles. You compete by lowering your price. So more competing providers would make it highly likely that price moves closer to cost, because there is a higher chance that one will defect from the current price structure.
To put it plainly. You run a gas station but the guy across the street gets all the customers. You both charge $3 but your cost is only $2. What do you do to get more customers? Lower the price.
I wish I shared that faith in market forces. What seems more likely to the cynic in me is that a big player like PayPal will incorporate it into their merchant services, obtain some overly broad patents on the process, use those to stifle competition, and make the service a nominally cheap add-on (but only for their own customers).
It's a business opportunity now, but as with many government laws, in the future businesses end up depending on government forcing their markets existence. So then they lobby for the government to keep the system, even if it's out dated or badly thought out. We can't stream line anything, because entrenched businesses don't want anything to change.
It makes me sad the world is this way.
but a petition is always an option?
I think eBay and Etsy side hustle sellers especially should be worried. This helps large internet retailers like Amazon. They have the systems in place to charge and remit sales tax for 3rd party merchants, they've just been waiting until this ruling happened.
Strange huh? Seems like the little guy is being attacked by the elites in every manner possible. Whether it is small online sellers, small time youtubers, independent freelance journalists, small time artists, writers, etc, seems like the rules are being changed to favor corporations and the heavy hitters. Heck, even search and social media results/algorithms are changing to cater to corporations.
Odd that this story hasn't gotten that much traction anywhere either. You'd think something this important would be all over hacker news and social media. I remember Bezos used to be very vocal whenever internet tax issues came up. He's been awfully quiet. Oh that's right, amzn is no longer a small time book and music seller.
It's the top story on... Hacker News.
In 10 minutes I was able to file and pay all the sales taxes to several state, dozens of California counties and a handful of cities that charge additional taxes on top.
Usually, small shops can ignore stuff like this until they get a bill from an authority, or get big enough for it to matter. As long as they save money for estimated tax liability (approximately equal to their local tax rate), they are fine.
I get that being subject to regulation or taxation is more burdensome than not being subject to it, of course that's the case. But it does not follow that requiring sellers to pay sales tax is unduly burdensome.
If the underlying complication of tax is the problem, fix that.
They would only have to pay sales tax in one tax jurisdiction, the one in which they are physically based and in which they can vote to change those taxes.
> But it does not follow that requiring sellers to pay sales tax is unduly burdensome.
What follows is requiring sellers to track and remit sales tax in some 10,000 jurisdictions is burdensome.
There is zero economic gain from more complex tax rules. Further, the software does not absolve you of liability. At best they may agree to cover it, but that's unlikely and they can also go broke if they get it wrong.
There is already a precedent with DMV data sharing agreements, and some states will collect sales taxes for others as well.
I'm having a hard time coming up with an example where this makes any sense. Can you elaborate?
It’s a big deal for cars — without this people in NYC metro would have a hard time otherwise.
Actually, the federal government should oblige each member state to provide the algorithm, and sign it cryptographically and have it expire every X fixed time interval, and have signed algorithms for the current and next time interval, so that software can automatically fetch and stay up to date.
Then the "business opportunity" of navigating FUD evaporates. Currently any such enterprise charging for such a service can spend a fraction of their budget lobbying against harmonization...
Since it would be an obligation of the states to the federal government, these algorithms (provided by each member state) should be hosted on a fixed federal government site.
Time to start a petition?
What is the most convenient format for this layered geographic data? Are the tax district boundary polygons already otherwise available as open data?
What do localities call these? Sales tax tables, sales tax database, machine-readable flat files in an open format with a common schema?
How much tax revenue should it cost to provide such a service on a national level?
States, Counties, Cities, 'Tax Zones'(?) could be required to host tax.state.us.gov or similar with something like Project Open Data JSONLD /data.json that could be aggregated and shared by a server with a URL registry, a task queue service, and a CDN service.
While the Bitcoin tax payments bill passed the Senate and House in Arizona, it was vetoed in May 2018. Seminole County in Florida now allows tax payment with crytocurrencies such as Bitcoin:
> According to a press release, the county will begin accepting Bitcoin (BTC) and Bitcoin Cash (BCH) to pay for services, including property taxes, driver license and ID card fees, as well as tags and titles. The Seminole County Tax Collector will reportedly employ blockchain payments company BitPay, which will allow the county to receive settlement the next business day directly to its bank account in US dollars.
This could also help reduce the costs of tax collection and possibly increase the likelihood of compliance with the forthcoming tax bills!
Yes there is. States compete with each other and this prevents any one of them from having laws that are much crappier and more oppressive than average because when that happens businesses and people leave.
Not as unusual as you would think, given that it is a basic principle of both the EU (despite what Eurosceptics would have you think) and the US.
There’s a case to be made for variation, but that ain’t it.
Its not surprising that one US right wing think tank thought the UK with its "socialist" NHS and higher income tax was a freer place to business.
If: i)your accountant messes up due to negligence or worse, ii) you get audited, and iii) it turns out you owe far more than you thought, then you are liable to the Govt for the extra amount owed. The accountant may be liable to you for professional negligence, damages etc. Your damages against the accountant are not the extra amount owed (because it is what you should have paid in the first place), but losses caused by the mistake. In the above scenario, the Gov't may assess a "penalty" and/or "fee" for late payment of taxes, but those fees are usually waived and/or extremely nominal. In the above-scenario, criminal liability simply does not happen. The above is not legal advice.
There are companies that already sell massive lookup tables or API access to calculate a lot of this stuff. I think for most retailers, this won't be that big a change.
Most mom-and-pop online stores have disappeared too. Gone are the days when you went to Pricewatch.com and Pricescan.com. Now all the individual shops just create a store on Newegg, Amazon and eBay. I'm pretty sure the big players will start offering up tools to do these calculations for them as well.
UPDATE: Out of curiosity I looked it up. And it looks like sales tax holidays depend as usual on the state. The MO back to school one is optional if less than 2% of merchandise is affected. But the TN one doesn't look optional.
Collection of taxes is done to enforce law, unless the state is compelling people with something else?
To _comply with_ law.
More than that. Sales tax in California can change arbitrarily, not just by county. E.g. different cities in the same county can have different sales tax. To further complicate things, shipping address may have a city on it but they might not actually "live" in that city.
E.g. in SoCal there is a city of "Westlake Village", which spans the Ventura-LA county border, which technically is a city in LA County, but technically is just a neighborhood within the city of Thousand Oaks in Ventura County.
When I last looked at this a few years ago for a project, for certain problem addresses, no one got them right. Not Macy's, not Amazon, etc.
The only real way to properly calculate sales tax is to geolocate their location.
It doesn't matter what Westlake Village wants to charge in sales tax to Amazon. In order for the sales tax to survive South Dakota v. Wayfair, it must be minimally restrictive on an out-of-state vendor. This means that it can't include local sales taxes, because an out-of-state vendor can't be expected to know about such taxes unless they do sufficient business with that locality. Note that both of the current federal sales tax laws before Congress also disallow local sales taxes in favor of state-level sales taxes.
Long story short: there will be up to 50 sales taxes that online stores must deal with.
While the outcome you describe might be a good one, I think you are greatly overstating when you read into this decision a new standard of "minimally restrictive". Major vendors already charge local sales taxes to the best of their abilities, and almost certainly will continue to do so.
This decision merely says that there is nothing inherently unconstitutional about a particular South Dakota law requiring a retailer without a physical presence to collect sales tax on behalf of the state. This does mean that a law in another state with similarly restricted characteristics is likely to survive review as well. But it doesn't (yet) create any line that says all of same characteristics must be met.
If New York City were to attempt to enforce the same law, it might find enforcement difficult, but it likely would not have constitutional impediments. If another state were to choose some wider scope, it too might well be judged constitutional. At the least, we wouldn't know until more cases have been decided: it's not yet clear how much 'stare decisis' has been thrown out here.
Instead, this case sets a standard for what is clearly constitutionally allowed, saying that there no longer a requirement of physical presence, but doesn't say much about what else would be required. It gives Congress an opening to pass a clearer national law about what the standards need to be, but doesn't create such a standard itself.
EDIT: While it is true that the dissenting opinions wanted Congress to solve this problem for them, the physical nexus rule was (and generally always has been) a construct of the Courts, and should have been struck down by the courts. Having a legislative counterpart is no excuse for letting bad decisions live.
EDIT2: Also, SCOTUS did not strike down the nexus requirement, only the specific physical nexus requirement of Quill. The dicta quoted below strongly suggests that complex sales tax system would require stronger nexus than the South Dakota regime.
"Complex state tax systems could have the effect of
discriminating against interstate commerce."
"That said, South Dakota’s tax system includes several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce. First, the Act applies a safe harbor to those who transact only limited business in South Dakota. Second, the Act ensures that no obligation to remit the sales tax may be applied retroactively. S. B. 106, §5. Third, South Dakota is one of more than 20 States that have adopted the Streamlined Sales and Use Tax Agreement. This system standardizes taxes to reduce administrative and compliance costs: It requires a single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules."
Yes, this is important to note. Still, much of logic involved in the decision makes it sound like in the future nexus may be defined quite loosely, based largely on the states' desire to collect the tax and the practical difficulties involved, rather than just being a redefinition of "substantial nexus". Consider this part:
Under this Court’s decisions in Bellas Hess and Quill, South Dakota may not require a business to collect its sales tax if the business lacks a physical presence in the State. Without that physical presence, South Dakota instead must rely on its residents to pay the use tax owed on their purchases from out-of-state sellers. "[T]he impracticability of [this] collection from the multitude of individual purchasers is obvious." [[cite]] And consumer compliance rates are notoriously low.
This might be good change socially, but it feels more like the court is pushing a policy change rather than offering a reinterpretation of the constitutional requirements. In this part of the logic, there's no change of the interpretation of nexus (since it's based on only the customer's failure to obey other existing laws), and yet it's used as justification for why the state has a right to demand action from an otherwise out-of-jurisidiction company. Same nexus (or lack thereof), but different constitutionality.
While one would hope for a balance between burden and benefit, I think it points to a much more inclusive concept of nexus. In the absence of a clear national law, until there is a case showing the limits in the other direction, I'd guess that states will pass more and more inclusive laws on who is required to collect on their behalf. We'll likely end up in a situation where a multitude of state laws technically require most retailers to collect, but selective enforcement means that only the large (or unpopular) players are pursued. I didn't like this previous approach of on-the-books but unenforced use taxes, but I'm uneasy about this outcome too.
I would hope Stripe or people using online services like Shopify will quickly add support for everyone. But the state by state, county by county, grocery vs non grocery stuff sounds like a goddamn nightmare.
EDIT: You won't be able to just be some just launch it break stuff and fix later SASS. You will have to keep track of all this shit and send out 50 different cheques, or track when your company has reached the minimum to have to pay sales tax back.
The people who define the taxation are payed by taxes, so why not require the deliverable to include a cryptographically signed algorithm? Then all the shops can have free peace of mind:
As part of the agreement those entities without a physical presence in the state pay only a single state agency all sales tax and not have to pay tax to individual localities within the state. For each state the type of products subject to tax and the rates of tax on them are uniform across the state.
The states are also required to make available free of charge databases with boundaries and the tax rate on goods within each boundary. States must not hold any businesses liable for the under or over collection of taxes based upon any errors in their database. In addition the Streamlined Sales Tax Board of Governors certifies service providers. If a busines uses a certified service provider they are not liable for under or over collection of taxes based upon an error by the service provider. There are currently 7 certified providers. The certified service providers provide data regarding what taxes need to be collected on a transaction, will collect the tax on behalf of the business and submit it to the state on behalf of the business. Many e-commerce platforms already integrate with one or more CSPs. I imagine those that don't today will quickly do so or if large enough become a CSP themselves.
When I launch a single small web app, I have to worry about everything single tax jurisdiction in the country.
I'm super not opposed to taxes, but I do think this is an area that the federal government should step in. If only to provide a standardized system for different jurisdictions to report their sales tax laws.
It seems like a very very clear use of the commerce clause and regulation of interstate commerce.
But I fully agree with you regarding the need for the federal government standardizing.
See my comment at https://news.ycombinator.com/item?id=17367669
As long as the two are conflated nothing will change. Irrespective of political/personal/ideological position on nr.2) I think most of us can agree on nr.1)... (except for the bigger chains, and the FUD navigation services.
However, this is a HUGE change. Instead of registering for a sales tax permit and remitting tax for one state, smaller merchants will have to do this in many states if they meet a certain threshold. They will likely have to use sales tax compliance software to aggregate all of their transaction data across multiple platforms (Amazon, eBay, Walmart, etc) and their shopping cart, then report / remit accordingly.
That's not even the half of it. Grocery vs. non-grocery changes the rate. Some services that are tax exempt in other states are not in Tennessee.
And in Tennessee, you have the state level of 7%, and the ability for it to rise up to 9.75% based on a whole lot of inter-dependent local tax overlays.
The 2.75% difference comes from county, state, school district, transportation district, and "special purpose district" levies. All of which are optional to levy and voted on at the local level, and which may or may not overlap with each other to "stack" up to that cap at 9.75%.
Avalara, which is the de-facto owner of the sales tax calculation software space, has a good write up.
Ok great so you know the tax to collect. How do you remit to a vast amount of jurisdictions? You think that's trivial? It's not.
And the reality is that small businesses will mostly just fly under the radar if they want to even if some states don't have a floor for the sales that trigger taxes.
Respondents argue that “the physical presence rule has permitted start-ups and small businesses to use the Internet as a means to grow their companies and access a national market, without exposing them to the daunting complexity and business-development obstacles of nationwide sales tax collection.” These burdens may pose legitimate concerns in some instances, particularly for small businesses that make a small volume of sales to customers in many States. State taxes differ, not only in the rate imposed but also in the categories of goods that are taxed and, sometimes, the relevant date of purchase. Eventually, software that is available at a reasonable cost may make it easier for small businesses to cope with these problems. Indeed, as the physical presence rule no longer controls, those systems may well become available in a short period of time, either from private providers or from state taxing agencies themselves. And in all events, Congress may legislate to address these problems if it deems it necessary and fit to do so.
In this case, however, South Dakota affords small merchants a reasonable degree of protection. The law at issue requires a merchant to collect the tax only if it does a considerable amount of business in the State; the law is not retroactive; and South Dakota is a party to the Streamlined Sales and Use Tax Agreement, see infra at 23.
If you're making $100k to each 50 states, then you've got $50 Million in Revenue and can afford to do it.
If you've sold 10 t-shirts at $20 a piece, then your total sales of $200 isn't worth bothering with.
If we want there to be problems we can certainly create them, but doesn't seem all that complicated if we want it to work.
Enough to live comfortably on, but not exactly a big money. Further, the ruling applies to all taxes and has no cutoff under 100k/year required.
Isn't it $100k or 200 transactions?
200 transactions is just 17 customers with a year of monthly subscription payments.
The end result is smaller busineeses get stomped. Only solution i see is to streamline it with software. Software is getting easier to use so hopefully it becomes less burdensome.
Multiply by 50 states, and it's up to 25 hours a month of work.
For those of you who have never done this, sales taxes are a lot more complicated than they seem. In the three states where I've had retail businesses, different types of products have different sales taxes and each has to be reported individually.
It gets exponentially more complicated if your state also has use, consumption, or other retail taxes; and if it requires you to report purchases your company made out of state.
If I had a popular company, even with small sales, I could easily see this becoming a week-long headache I offload onto my accountant, who will then charge me extra.
So not only do I have to raise prices to include the sales tax for various states, I have to factor in the extra accounting expense.
I've worked with a lot of small businesses so I don't mean to disparage things but this seems like a really obvious law that should be enforced.
That's a pretty big if. The $200k cutoff from the article is South Dakota. I've never had a business in a state that had any cutoff at all. Only sell $1 this quarter? Pay the tax.
Please be more specific.
Also, remember that every single one of those bucks will be passed on to the customer in higher prices.
Considering you are already required to do it for where you are located it's just a little more work to automate it for all locations.
Also, I wouldn't generally classify it as "a little more work", since in many cases the old system could be hard-coded and the new system requires reworking the checkout flow to capture the full mailing address and pass it through an external API before calculating the transaction total.
Consider selling 100x$1000 computers at $50 profit per each, vs 1000x$100 jewelry at $50 profit per each.
From they very start of Quill they said: "we ruled that a "seller whose only connection ... is by common carrier ... lacked the requisite minimum contacts with the State." So the issue was: how substantial does the seller's contact have to be?
The court ends this decision by saying "the first prong ... asks whether the tax applies to an activity with a substantial nexus with the taxing State... sellers who engage in a significant quantity ... are large, national companies ... undoubtedly maintain an extensive virtual presence." So the issue remains: how substantial does the seller's contact have to be?
The underlying logic of the law hasn't changed, they just fixed some imprudently broad language referring to a physical presence.
So I doubt the SCOTUS abandoned one bright-line rule for being flawed in favor of another bright-line rule that equally fails to address the underlying issue of substantiality (e.g. imposing a "single-sale" rule).
Small businesses will just ignore this because there will be no enforcement unless you are operating at a scale large enough (millions in taxes) to justify enforcement.
My only question is then whether individual municipalities in states that allow them to have their own sales tax will also now be able to force compliance. If that's the case, what a nightmare for online retailers.
We even had areas where we could not find the correct tax because the government in charge refused to tell us
Or the 100s of thousands of literal exceptions such as "windows 98 physically shipped to a customer once in California on CD so you need to calculate the tax on it as a physical good forever, even when it's sold and received over the internet"
That's why companies like TaxJar and Avalara are focused on sales tax -- to integrate with every shopping cart, payment processor, marketplace, accounting, order management / ERP platform out there to combine all of your transaction data and determine how much sales tax you need to remit in every state.
Cheaper to just hire avalara to do it for you.
These days, the structural advantages larger businesses have are huge. Many of them are on feedback loops.
There're reasons we will soon see several companies pass the $1trn mark, reasons that aren't economies of scale.
Those same services can also automate your tax filings with each state. It's not free, though.
I suppose we should continue that state of affairs, because heaven forbid we hurt the mom-and-pop online stores... Which make up a tiny fraction of overall commerce, compared to physical mom-and-pop stores.
My thoughts were that if you bought something from a store it would be x% more expensive with sales tax than purchasing off of amazon and having it delivered without needing to pay sales tax.
This way both have to charge the same sales tax and the difference in price will simply be down to the costs relating to owning a store.