Tomorrow the Supreme Court starts looking at South Dakota v. Wayfair, a critical case for online businesses (not to mention their shoppers). If you’re a small ecommerce merchant, be well advised that if this court case goes the wrong way, you would be required to collect sales taxes for all 50 states on all your sales, depending on the address where they’re shipping to. Currently you do that (or should be doing it) for your home state, but never had to bother with the other 49. Well, South Dakota is arguing that you should start bothering, even though you have no physical presence or connection with them.
Who will be hurt by this asinine argument if it passes? Make no mistake about it – it’s small businesses. Larger businesses have ample resources to manage the administrative nightmare this would present and would even welcome the barrier to entry this new compliance requirement represents. Indeed, Amazon already collects sales taxes in all 50 states and would be completely unaffected, since it already operates physical facilities everywhere. Small ecommerce store owners, on the other hand, would be forced to spend 95% of the rest of their working lives sorting out how much tax to pay to whom, and filing 50 sales tax forms quarterly or monthly. Forget about growing your business… you could get in serious trouble if you miss that $25.38 in sales taxes for March that you forgot to pay California.
(Consumers would be hurt too, since they’d now have to start paying sales taxes on all their purchases online. In theory they should already be doing so though, without waiting for the merchant to act as tax collector. You’re supposed to keep track of all your online purchases and pay sales taxes on them yourself, to make up for the fact that you probably weren’t charged at the time of purchase. In practice, we’re not sure this has ever happened…)
Read more by Googling “South Dakota v. Wayfair” and switching to the News tab…