Does the NEW Supreme Court “State Tax” Ruling Affect Micro Online Businesses?
On Thursday, June 21, 2018, The Supreme Court passed a new bill, 5 to 4 vote, affecting small online businesses. It will require them to collect state taxes for all states collecting sales tax. In the past, small online businesses only had to collect and pay state taxes to their state of domicile, (residence) if they had a physical brick-and-mortar presence.
It should take some time for this law to be formulated into state law, and enforceable over time. Hopefully at least several months. Many big box companies with an online presence like Wal-mart, Best Buys, etc., along with online markets like eBay, Etsy, may be adversely affected by this ruling. And how will this affect sellers in China, Japan, Taiwan, Korea, and other foreign countries be affecte3d by this ruling on eBay, Etsy, and so forth? If they are unaffected by this ruling, then imagine how they will have a huge advantage over American companies selling on these online platforms.
It appears that there may be some exceptions for micro online businesses. South Dakota is actively pursuing the benefits of this new law but may exempt small companies from collecting and paying these taxes that make less than 200 sales (per year) to their citizens or sell less than $100,000 per year. But how is this fair? I believe the dollar amount should be the ONLY exempt.
Why? If a micro online retailer sells a digital $10 downloadable ebook, that means he can only make a total of $2,000 in sales. Another high ticket retailer, selling a $20,000 product online, can sell a total of $4,000,000 before being required to collect any taxes in that state. This makes no sense and in inequitable. But on the other side of the coin, most micro businesses won’t likely make 200 sales in any state. If this law was made nationally, a small business could make 10,000 sales a year, collecting and paying no state taxes IF they kept their sales under 200 in a given state.
Remember, this is only conjectured at this time, we make for hypothetically explaining the effects this new law may have on your new or existing business. One other consideration is what states, if any, will make their “NEW” tax law retroactive, requiring small businesses to pay BACK TAXES they didn’t collect, but the states felt they should have. Don’t panic yet. Just keep your eyes open to what “MAY” become local law in some or all states in America. This situation is currently a mess at best, but you need to keep abreast of how this may affect your business.
Micro businesses will now need to closely monitor this new “Law” made by the Supreme Court (Shouldn’t it have been made by Congress)? Check back with our BLOG frequently, since the Stanford Trade Center (STC) will carefully monitor this new ruling and keep you informed of any new developments.