Paul L. Caron

Thursday, January 30, 2020

WSJ: Supreme Court's Wayfair Ruling Strains Small Online Sellers

Wall Street Journal, Sales-Tax Ruling Strains Small Online Sellers:

WayfairEighteen months after the Supreme Court gave states the green light to tax online transactions, small companies that sell things as diverse as recycled yarn and gold bullion are struggling to adjust. ...

In its June 2018 ruling, the Supreme Court held that states had the authority to make online retailers collect sales taxes even if they didn’t maintain a store, warehouse or other physical presence. Before the decision, consumers were supposed to pay what is known as use tax on out-of-state purchases, but most didn’t. The decision came in a lawsuit filed by South Dakota against home-furnishings retailer Wayfair and other online sellers.

What is taxed and how often those taxes are paid varies from state to state. Some states, such as Colorado, allow localities to administer their own taxes. Some states share definitions and procedures to make it easier for companies to comply, but some of the biggest jurisdictions have their own rules. ...

Most states have tried to limit the impact on the smallest companies, with many following the lead of South Dakota, which exempted out-of-state sellers with $100,000 or less in sales or fewer than 200 transactions in the state a year. But limits vary, with a threshold of $500,000 in California and none in Kansas.

In another step to make it easier for smaller sellers, 38 states and the District of Columbia have enacted laws requiring marketplaces such as Amazon, Etsy and eBay to collect and remit sales tax for third-party sellers, according to the National Conference of State Legislatures.

Still, business owners have struggled to determine whether they exceed the state cutoffs and how to comply.

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