Supreme Court Ruling Opens Door to Online Sales Tax

But plenty of smaller players, such as home furnishings websites and Wayfair, don't have widespread enough operations to be subject to state taxing authority, giving them a substantial price advantage over traditional brick and mortar businesses.

IN has made agreements with more than 200 online sellers to collect sales taxes on some items. That made online shopping less expensive when the industry was first starting out.

The Supreme Court's 5-4 decision overruled a 1992 ruling that found the Constitution didn't allow states to require businesses to collect sales taxes unless they have a substantial connection to the state.

Nebraska Retail Federation President Jim Otto applauded the ruling as a move that levels the playing field between brick-and-mortar stores, which collect sales taxes, and online retailers, which often don't.

When will I start to see changes?

South Dakota's suit stemmed from a law requiring sales taxes for any out-of-state seller that delivers more than $100,000 worth of goods.

"For years, this situation has resulted in substantial loss of revenue to states, thus increasing the tax burden on those who do pay the taxes they owe", Walz explained.

David Campbell, CEO of TaxCloud, one of the companies that manufactures tax compliance software, also noted that how long it may take for states to weigh in isn't known, since some have part-time legislatures. "I think it's overall a positive". North Dakota focused on catalog and mail-order purchases and required that businesses must have a physical presence within a state for the state to collect income taxes.

Some companies like online retail giant Amazon already pay those taxes to the state, but many others do not, said State Rep. Terry England, R-Auburn. That may change as state laws are modified.

Will people be turned off online shopping by a sales tax? Some shoppers may not notice, or care, analysts say. States and municipalities stand to gain billions of dollars in annual revenue.

Otto said that Congress or state legislatures now need to set the threshold at which online retailers must collect taxes.

"E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule", he wrote.

  • Eleanor Harrison