News & Events

States Can Now Require Internet Retailers to Collect Sales Taxes

Ruling by the Supreme Court now allows states to collect sales tax from internet retailers regardless of their physical presence in that state.

On-line Sales Tax

If you are an on-line seller, this is a ruling that will affect your business. There has been much anticipation to learn the final decision from the Supreme Court.  Today’s 5-4 vote sides with states and traditional retailers, which overturned a 1992 ruling that had guarded retailers from tax-collection duties if they didn’t have a physical presence in a state.

Thursday’s ruling suggests that some very small retailers (i.e. individuals who sell on eBay or Etsy), may not face the requirement, while larger companies are now obligated to withhold sales taxes.  However, at this point, future clarification will be needed to define any exemptions from this requirement.

It has been estimated that broader taxing power will let state and local governments collect at least an additional $10 billion a year in sales taxes. Many  believe this ruling will create a more fair and level playing field for retailers whether they sell merchandise online, in-store or both. They can now compete under the same sales tax rules.

Presently, about 16 states already have laws that will let them require tax collection by internet retailers in the coming months, Rhode Island being one of them. All but five states impose sales taxes. The ruling is expected to put new pressure on those companies and other internet retailers and marketplaces that don’t always collect taxes.

For more information about how this ruling may affect your business, please contact a Sansiveri tax professional at 401-331-0500.