The cost of doing business online is about to increase.
Overturning a 1992 ruling from Quill v. North Dakota, the Supreme court recently ruled that states can start charging sales tax on internet purchases even when a retailer has no physical presence in that state.
How Will the Ruling Affect Small Businesses?
The 1992 ruling originally addressed mail-order businesses only. It allowed businesses without a brick-and-mortar building to flourish after the dotcom crash by taking away sales tax on purchases. This is no longer the case.
Major e-commerce businesses don’t yet know exactly how this will affect them, but Amazon Marketplace, Etsy, eBay and other online platforms for many businesses are sure to be affected greatly.
Josh Silverman, Etsy CEO, said, “While today’s decision is not the one for which we advocated, the Supreme Court did acknowledge the important difference between big internet retailers and the creative entrepreneurs on our platform.”
How Will Congress Level the Playing Field?
Some businesses are calling for congressional action, and small businesses have a lot of questions and would like Congress to bring more clarity to tax rules. They’d also like to see a ruling to create a more level playing field for small businesses.
eBay put out the following statement:
“As expressed in both the Supreme Court’s decision and throughout oral arguments, the operations of small businesses are different than large retailers, and state tax actions targeting them raise additional legal questions that are not addressed by this decision. Now is the time for Congress to step in and provide clear tax rules, with a strong small business exemption, to help small businesses take advantage of the Internet to grow and create local jobs.”
So the question remains how exactly this ruling will affect small businesses operating on the internet. As time goes on, more will be revealed regarding changes online businesses will need to make in order to stay compliant and how the likely impending increase in prices will affect consumer spending.
This year has brought several changes to tax law. To stay informed on how the changes affect your business, start with our helpful tax blog posts.