Will eCommerce Growth Stall If Consumers Must Pay State Tax?

by Tim Sloane 0

By refusing to hear a recent case, the Supreme Court has opened the door to state laws that will require residents report how much they spent on eCommerce:

“Buying things online could get pricier after the U.S. Supreme Court rejected a case Monday that could ultimately lead to states collecting billions of dollars in sales taxes lost to increasingly popular internet retailers.

The court would not hear a challenge to a Colorado law requiring online sellers such as Amazon.com to notify customers and the state how much they owe in taxes. State officials have estimated that Colorado alone has been missing out on as much as $172.7 million a year.

At least three other states — Louisiana, Oklahoma and Vermont — have passed similar laws that could take effect given the resolution of the Colorado case.

Though the court didn’t endorse Colorado’s law and could even weigh in against it if given a different case, other states are likely to see Monday’s move as a green light to step up collection efforts. That comes despite a 1992 Supreme Court decision saying retailers must have a physical presence in a state before officials can make them collect sales tax.”

Merchants want online retailers to be taxed to level the playing field and states have been trying to determine methods by which they can collect sales tax to recover lost income. If Colorado has found a mechanism for collecting sales tax that works, then at least part of the playing field may very well be leveled.

Overview by Tim Sloane, VP, Payments Innovation Advisory Service at Mercator Advisory Group

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