The landscape of online shopping changed with last week’s Supreme Court 5-4 decision in the South Dakota v. Wayfair case. The Court’s decision is that states can now require online retailers beyond their borders to collect sales-tax revenue from consumers.
While most news reports covering the decision refer to “internet sales” subject to states sales-tax, two important points are overlooked.
The first is that all remote (interstate) sales are subject to the decision, not just internet sales. For example, sales across state lines could be taxed whether originating from an internet transaction or initiated in any other form whatsoever and however communicated.
The second is that the Court’s opinion assumes that the consumer’s (buyer’s) residence dictates the point of collection.
The Court’s assumption as to point of collection means that a seller must find a way to deal with thousands of state and local sales-taxes instead of calculating a sale as if made in the seller’s state and local residence.
Therefore, unless Congress acts, numerous sales-taxes will become targets of state legislatures, not just internet sales. More importantly, sales-taxes can be applied to anything of any kind or character, hypothetically including accounting and/or legal advice, stocks and bonds, commodities like natural gas and products moved through pipelines—an endless list.
Many states have taxes on their books already that were struck down as violating interstate commerce. The Court places those laws back on the table.
In ICTA’s opinion, Congress must do something it seldom does. It must take a lead to avoid unforeseen consequences. Federal legislation is needed to “build a fence” around appropriate state laws affecting interstate commerce. We will be working toward that end.
ICTA will have much more detail and analysis at the World’s Fair of Money.
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