AuctionBytes Blog
Covering auctions, collectibles and marketplace selling.

AuctionBytes Blog The AuctionBytes Blog has been giving a voice to online merchants since its launch in 2005. Named one of the world's top 30 blogs in 2008 by "Blogging Heroes." Weigh in with your thoughts on the joys and pitfalls of selling online.
Thu June 21 2018 10:39:48

Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

By: Ina Steiner

Sponsored Link

Online sellers may have to change their practices around collecting online sales tax after the Supreme Court ruled in a key online sales tax case. Unless Congress acts, that is - lawmakers have avoided enacting legislation to address the issue until this point.

The High Court ruled this morning: "Because the physical presence rule of Quill is unsound and incorrect, Quill Corp. v. North Dakota, 504 U. S. 298, and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753, are overruled."

Supreme Court Justice Kennedy delivered the opinion of the Court, in which Thomas, Ginsburg, Alito, and Gorsuch joined. Justices Thomas and Gorsuch filed concurring opinions. 

Justice Roberts filed a dissenting opinion in which Breyer, Sotomayor, and Kagan joined.

You can see the filings on the Supreme Court website.

The Supreme Court heard South Dakota v. Wayfair on April 17, and right out of the gate, the crux of the argument became apparent. Should states expect retailers with no presence to collect a tax that residents of those states are obligated to pay? As we wrote in April in reporting the arguments made before the Court: 

"When South Dakota Attorney General Marty J. Jackley said the state's small businesses on Main Street are being harmed because of the unlevel playing field created by Quill, where out-of-state remote sellers are given a price advantage, Justice Sotomayor challenged that premise.

""Isn't the problem not Quill but the fact that you don't have a mechanism to collect from consumers," she asked. "It's not the merchants who are playing - paying the sales tax; it's the consumer. They're collecting it for you. So find a way to collect from them.""

Other Justices were not as outspoken, and some indicated it was a matter for Congress, not the High Court.

In 1992, the High Court weighed in in a case called Quill vs. North Dakota, ruling that state tax agencies could not force merchants with no physical presence in their states to calculate, collect, and remit sales tax on transactions made to their residents.

In South Dakota v. Wayfair, the question the High Court considered was this: "Should this Court abrogate Quill's sales-tax-only, physical-presence requirement?"

One argument used by those in favor of overturning Quill is that the retail world is very different today from 1992 and that it's an antiquated ruling - some Justices bought that argument

States have become emboldened to defy Quill or devise other ways to try and get the use tax owned to them by their residents for their online purchases from out-of-state retailers.

For example: the "Marketplace Facilitators" laws that require marketplaces like Amazon and Etsy to collect and remit sales tax on third-party transactions. Many small sellers favor this approach since it takes them out of the equation, leaving the administrative tasks to the marketplaces on which they sell. However, for sellers who also sell on their own websites, it's not clear all ecommerce-hosting companies would help them fulfill their possible obligations.

Some proponents of overturning Quill include major retail trade organizations such as the National Retail Federation and Retail Industry Leaders Association. Some opponents of overturning Quill include the National Auctioneers Association and NetChoice, a trade organization backed by online retailers and marketplaces.

Even some of those in favor of overturning Quill seek Congressional action. In January, the National Retail Federation had said it welcomed the Supreme Court's decision to hear the South Dakota case "but also urged Congress to address the issue through federal legislation."

Watch for lots of news and analysis about today's decision, which may have major implications for online sellers - particularly smaller sellers.

Update 6/21/18: The Supreme Court referred to "substantial nexus" rather than Quill's "physical nexus"; eBay takes this to mean small sellers are protected. In a blog post, it urged Congress to act to add a small-business exemption, as we report in this article.

Update 6/23/18: See "Supreme Court Throws Out Longstanding Sales Tax Rule-Book" (link to article)




Comments (87) | Permalink

Readers Comments

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: futervest This user has validated their user name.

Thu Jun 21 11:00:53 2018

Another shinning example of MONEY talks.  This tax is sponsored and pushed by stores like Walmart  because the small seller is taking a bite out of the big box retailers.  That do have to pay tax.  But Unfortunately only the buyers will get hurt by this. they are the ones that have to pay the tax. The sellers wont take it out of there pocket.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: dander This user has validated their user name.

Thu Jun 21 11:16:34 2018

lets see if congress acts. I do see a case where states figure out it takes more money to collect tax than the actual tax start to hit sellers with fees to sell in their states. Strange days ahead

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

This user has validated their user name. by: toolguy

Thu Jun 21 11:17:13 2018

I will NOT collect taxes for another state!

If the selling platform I sell on wants to collect and remit the taxes so be it but I'm not going to do the extra work for nothing.

It's NOT going to happen and no one on Earth can make me do it. . .

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: ebayout This user has validated their user name.

Thu Jun 21 11:20:22 2018

As I understand, the seller of record will be responsible for collection/payment of state taxes.
With the advent of Adyen, ebay will be the seller of record.
a-a-a-u-u-u--g-g-g-h-h-h-h-h-h

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

This user has validated their user name. by: Rexford

Thu Jun 21 11:33:41 2018

With the eBay's constant and never ending nonsense, and now this, it may be about time for me to examine whether or not I even want to continue selling online.  It has become a major headache, and this only adds to it.

Based on SCOTUS' last few rulings, I think SCOTUS have become what I always dreaded that they would become.  "Supreme" my eye!

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: mcposty This user has validated their user name.

Thu Jun 21 11:40:09 2018

Should just have states colle taxes for those in their states. The issue was if someone in ohio sold something to someone in texas they wouldn't charge taxes which is wrong.

They fixed it the usual idiotic way.

Now next time i go to another state ill demand they pay taxes to MY state not theirs because im from that state and ill show my id.

Also..what if i colle t taxes for my state and soneone in ohio buys from me? Im no longer able to give my state that revenue?

This is all backwards snd we need yo boycott it NOW im serious this id redicuous that a state is able to colle t tax from another state

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: 1st Armored Div. 1971-1973 This user has validated their user name.

Thu Jun 21 11:40:53 2018

North Dakota requirements to pay sales tax does not apply to me. If a state comes along and says I have to pay on every dollar or sets the threshold very low I probably will shut down my ebay store. I just cannot meet the administrative headache.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: mcposty This user has validated their user name.

Thu Jun 21 11:45:51 2018

South dakota should demand taxes from their local in state bisinesses even if someone in another state buys from that business..thats the thing to fix.

Its dumb to siddenly go after thst other business on another state because someone in your state bought something.

Ill just block sales from any state who enacts to collect taxes from me...as i ONLY collect taxes for MY state

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: buffalochick This user has validated their user name.

Thu Jun 21 12:12:13 2018

And then there is China.  We will get shafted by them again, because you just KNOW that they will NEVER send taxes to our government.  Just one more way we will bear their expenses and prop them up so they can stab us in the heart. (or wallet so it seems...)

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: sasikat9 This user has validated their user name.

Thu Jun 21 12:25:05 2018

Well if most states follow South Dakota's law of 200 transactions or 100,000 in sales they won't have to worry about it as most of the sellers on Ebay if you believe them don't have 100,000 in sales much less in one state. The 200 sales is also subjective as the way Ebay hides items one is lucky to have 200 sales a year.

As for us an our stores its going to be business as usual. This is to far down the road as we are getting ready to give Ebay the middle finger and call it a career.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: comments This user has validated their user name.

Thu Jun 21 12:40:47 2018

I really don't understand the argument. Force all citizens to fund governments in places they have never been so they can preserve the profits of Walmart? How does this help small businesses? The state attorney for SD is "protecting" small businesses? You can't spin that.....

This takes away the competitive advantage from the small business to compete. It only harms large business that have a presence in every state and are required to collect tax. No "small business" is in all 50 states.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: Flying Childers This user has validated their user name.

Thu Jun 21 12:44:56 2018

Just another example of Big Government having their way with the little guys.  The bas***s are just not happy unless they get their piece of every single transaction that occurs in the USA.  It is sickening.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: mcposty This user has validated their user name.

Thu Jun 21 12:57:42 2018

China is not impacted at all. No state can try to get taxes from them. Another advantage for china. People will simply order direct from china and never pay any tax.

If states do not want to be hypicrites theyd make vonsumers pay taxes gor buying globally.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: pace306 This user has validated their user name.

Thu Jun 21 13:24:43 2018

The issue is the mechanism to collect taxes.

The fights outcome was easily forseen.

States were loosing money (sales tax) because people were buying goods online with no tax, instead of supporting local businesses.

Those businesses then closed, with the states loosing jobs, taxes and more.

There will be a threshold (#1) that alot of people wont make so their situation(s) will be the same as now

Congress in some fashion will make rules and states will comply and set up rules. This SHOULD mean that ebay/amazon/etsy will have to put the tax mechanism into their system and the buyer will have to remit it.

YES there may be reporting requirements for sellers - but %99 chance that it wont be as onerous as everyone thinks.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: pace306 This user has validated their user name.

Thu Jun 21 13:31:33 2018

"Just another example of Big Government having their way with the little guys"

Its your STATE government - NOT "Trump".

If your state has BIG unpaid bills (ala PA,NJ, CA) OR you have large social outlays - then they will want their piece of the pie to help offset those costs.

If you dont like "it" then vote out the people in charge or change what your state does.

Im in NJ - one of the looser states - with BIG deficits and large social outlays. Our new governor even wants to let criminals out of jail EARLY, and the tax payers should foot the bill .... so yeh - Jersey is on the hunt for all eBay and Amazon sellers who dont pay sales tax for buyers from NJ.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

This user has validated their user name. by: toolguy

Thu Jun 21 13:42:05 2018

When the USA goes to digital cash NO ONE will be able to escape taxes. . .

Every single transaction will be taxed & recorded.

They'll know about everything you bought and where you bought it.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: mcposty This user has validated their user name.

Thu Jun 21 14:22:50 2018

Its not other state business responsibility to charge tax for other states only their own..so nj should not be chasing anyo e down except online businesses in their own state.

How is nj going to feel when i buy something from nj online and california cones after that nj seller? Nj loses thst revenue.

These states should implement rules that nj businesses charge tax to others no matter where the buyer is from..just like brick and mortsr stores do.

The problem has always been businesses who are in nj dont charge tax if the buyer is out of state..that is a lot easier to fix than going after every state because they will find it not so easy to shake down nom residents.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

This user has validated their user name. by: Shane

Thu Jun 21 14:42:42 2018

There needs to be a uniform sales tax and snall business exemption. If not, I don't know how a small online retailer can survive.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: Carol Is Here This user has validated their user name.

Thu Jun 21 15:09:44 2018

The Wall Street model shifted from private business to businesses making money the easy way by dipping their fingers in the taxpayer purse.

The states and Federal government model is to collect as many taxes as possible not for "aid" or to help the little guy, but to reward large wealthy corporations, global corps, and wealthy people.

They fool the public with stories of social aid and "helping the poor' but it is the wealthy who make money off tax collection. The bureaucrats want people to think their tax dollars are going to good, so people don't fight back and will willingly give up more and more of their income to the middlemen legislators who reward their rich masters.

SCOTUS represents that bureaucracy, all of them. You can't differentiate.

They were supposed to address unfairness, but what court these days does anything but reward the rich? People would be shocked by what goes on in courts and the preferential treatment for corporations and Wall Street interests, if they found about  it.

But when those interests own a lot of the media who should be exposing it, there's no chance.

Perminate Link for Small Sellers Hit Hard by Supreme Court Sales Tax Ruling   Small Sellers Hit Hard by Supreme Court Sales Tax Ruling

by: leathermermaid8 This user has validated their user name.

Thu Jun 21 15:26:05 2018

We live in NJ and Amazon has a huge fulfillment center in here and they charge NJ sales tax on all applicable items.  Note that some items are not taxable here, like most items of clothing and dairy products but I can't speak to other states.    Paper sewing patterns and the notions are taxed but not fabrics to make them with.

Not sure about ''used'' items.  Somehow I thought used goods were exempted too but now I'm not so sure.

And unfortunately, no matter how many tax dollars it collects, NJ will never, ever be able to stay within a budget.  This will be hard to comply with as a small business, it sounds like the stuff of nightmares.  

Click to view more comments
1 2 3 4 5  [Next Page]


Login is required to post comments.
To sign in to leave a comment using your AB Verify User Name, fill in the form below. If you have not yet signed up for AB Verify, or if you'd like more information, go to the Registration Page
.

Login for AB Verify
Be sure and use your email address and password to log in.

 
Email:
Password:
 
 Forgot Your Password?
 Even though you are signed in with the AuctionBytes Blog, you will have to sign in to the EcommerceBytes blog. But you can sign in with your existing AB Verify info.