Etsy sellers confront unknowns after Supreme Court ruling

Etsy sellers confront unknowns after Supreme Court ruling

That earlier ruling placed the responsibility of paying the online sales tax on customers who generally did not realize they owed it.

The cases the court overturned said that if a business was shipping a customer's purchase to a state where the business didn't have a physical presence such as a warehouse or office, the business didn't have to collect sales tax for the state. The estimates of the amount of sales tax lost to sellers outside of a jurisdiction is from $8 billion to $33 a year according to the Supreme Court decision.

The Supreme Court decision "will certainly change how states look at these laws but we may see states trying to see if their versions could survive even if they are less simplified and direct than South Dakota's law", Joseph Bishop-Henchman, an executive vice president at the Tax Foundation, said in a blog post. The court noted that the law had three features created to prevent discrimination against or undue burdens upon interstate commerce: it had a safe harbor for those transacting limited business in the state; it was not retroactive; and the state was a member of the Streamlined Sales and Use Tax Agreement, which has been adopted by more than 20 states to standardize taxes to reduce administrative and compliance costs.

Still, the group says federal legislation is necessary to spell out details on how sales tax collection will take place, rather than leaving it to each of the states to interpret the court's decision. Reaction to the ruling is mixed Companies with a physical retail presence in states have cheered the decision since before they were at a competitive disadvantage with online sellers.

While some online sellers recently have started collecting sales taxes, others, like L.L. Bean, do not.

"The amount of the impact of this Court decision is hard to estimate, but we would expect that over time, the impact would be very similar to Amazon.com", he said.

But using the compliance services won't be without complications, says Jamie Yesnowitz, an accountant specializing in state and local taxes with the firm Grant Thornton.

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Chief Justice John Roberts wrote in dissent that the sales tax issue should have been left to Congress to decide. "We want to make sure when we do levy taxes that they're levied in a fair and equitable manner", Blair said.

"The Court should not act on this important question of current economic policy, exclusively to expiate a mistake it made over 50 years ago", he said. But it's also "much bigger than that", Jackley said. "Now our members are going to be able to figure out how to construct their businesses without worrying about whether putting a distribution center on this side of a state line or that side of the state line will result in a different tax implication".

Another question for states to consider will be whether to push to collect tax on previous transactions. Amazon.com and Overstock.com are among the companies that say they support a nationwide law that would relieve retailers from dealing with a patchwork of state tax laws.

"With today's ruling, all businesses will compete on a level playing field", said South Dakota Gov. Dennis Daugaard (R), whose state brought the challenge to the Supreme Court.

The case is South Dakota v. Wayfair, 17-494. North Dakota, deciding that companies should charge sales tax even in states where they have no physical location.

"It is going to squash the entrepreneurship, I just can not stress that enough", Christy Keyon, who owns Bird and Bean Coffee House and Naomi and Olive Gift shop said.

"The world has changed", she said with a smile.

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