8 ms·

Did Supreme Court Potentially Bankrupt Tens of Thousands of Online Businesses?

16 points by pedro84 8y ago

nasalgoat 8y ago
I thought this only applied to businesses with over $100K in sales?
- intopieces 8y ago
  Or 200 orders.
- ghaff 8y ago
  That is specific to the South Dakota law that the Supreme Court made its decision on. That said, the Supreme Court also had language suggesting that one reason it decided in favor of South Dakota was that its requirements weren't onerous. This might suggest, for example, that states should have some minimum threshold but the decision didn't supply one or state so explicitly. IANAL but, if I head to guess, this isn't going t be an apocalypse but there are going to be some uncertain times, some state will probably push the boundaries, compliance costs will rise, many small businesses won't comply and try to fly under the radar especially given it's not clear what teeth a state has against out-of-state retailers with no physical presence, etc.
  - LyndsySimon 8y ago
    I suspect it’ll mean a move from independent web shops to “marketplace platforms” which will handle the tax implications. Bonanza.com probably stands to gain the most from this. Shopify and similar products will likely adapt to gain as well. WooCommerce and other “self-hosted” shops might actually end up dying from it.
- mreome 8y ago
  From The Article: "Yes, South Dakota, which prevailed in this decision, is currently exempting, from sales taxation, small businesses with $100,000 or less in state sales or fewer than 200 individual transactions." Unless I'm miss-understating, this ruling makes every company that sells online subject to the local tax law in every state they make a sale in (for even small companies this can easily be most of the 48 continental US states). The concern is that every state will have different rules for exemptions and filling requirements, so even knowing if you are exempt and/or need to file is going to be a significant cost for a small businesses just to be sure they are in compliance... even if they owe no actual sales tax.
maxxxxx 8y ago
It may also have saved tens of thousands of brick and mortar stores. I often buy expensive items from B&H in New York instead of a local seller who has to add 9% CA sales tax.
- mreome 8y ago
  Except this isn't going to hurt the big online retailers undercutting local brick-and-mortar stores. Companies like Amazon have whole divisions that deal with sales tax (in the US and globally). They won't be happy about this ruling, but they won't have real problems being complaint. This hurts small online niche and specialty businesses with very thin profit margins, the mom-and-pop online shops and one-man-startups.
  - ghaff 8y ago
    Except a lot of local sellers lost the fight to the big chains and then the big online retailers a long time ago. There's maybe one local photo place in the Boston area who could compete with B&H and they're inconvenient enough I haven't been there in years. B&H probably will be hurt by this a bit. Compliance probably won't be a big deal and they beat out Amazon for a lot of specialty equipment. But they also sell a lot of DSLRs and the like too. They just basically lost their price advantage of Amazon for many items. (And, for those of us with Amazon credit cards, Amazon will mostly be cheaper once these rules go in place.)
    - mreome 8y ago
      I agree that battle has largely already been lost, I was just making the point that this ruling isn't going to significantly help brick-and-mortar retailers as they are in competition with large online retailers who are already undercutting the local B&M shops by far more then the sales tax rates and won't have issues staying in compliance with lots of complex laws. I only see this negatively effecting small online business, the niche stories, single-person operations, etc. I'm not familiar with B&H specifically, so I couldn't comment on them specifically.
thrill 8y ago
If anyone has caused undue pressure on businesses - and hence customers - it's Congress. The Supreme Court interprets when Congress is unclear. Congress has incentive to always be unclear - it gives them wiggle room to negotiate for your vote.
dbjacobs 8y ago
The good news, is that so far most states seem to be modeling their legislation after South Dakotas so hopefully there won't be a ton of rule variation. The filing requirement is the real kicker. Until small business software like Quickbooks and Turbotax for business makes it trivial to file in every state. The compliance cost will be VERY high. In Hawaii for example, you have to file and pay your excise tax return every month. Multiple that by every state and you have a lot of work. I suspect those companies that sell inexpensive items will probably restrict the number of states they sell to until the software support is there.
- mreome 8y ago
  Further tightening the near-monopoly those companies have over the processing of legally required tax filings. They're the only real winners here. If is not possible for a small business owner or individual to realistically handle their own tax filings, the onus is on the government to address the complexity of their tax laws and regulations.
  - bryanlarsen 8y ago
    There are multiple companies, and none of them have anywhere near to a monopoly share. Not only that, many companies will develop this capability in house, and the margins for this service start getting excessive, those companies will have a good incentive to offer it externally. So yes, these services won't cheap, but that'll be due mostly to intrinsic costs, not monopoly rents.
- ghaff 8y ago
  As others pointed out when this topic first came up, there are services like TaxJar that will collect and file sales taxes. The challenge is that you have to set all of this up of course and connect it to your accounting systems in some way. And the cost for collecting and filing in all relevant states seems to be something over $10K/year (assuming that there aren't now also business licenses, etc. required). One can hope that states will approach this sensibly. One expects that at least some will not and, best case, there are going to be some compliance costs for small businesses.
- 8y ago
jecxjo 8y ago
My biggest issue with paying taxes in other states is what services are they providing? You pay federal taxes which covers interstates, you pay taxes on your shipping fees which should cover state roadways. So if I pay South Dakota sales tax then I should be able to contact state representatives, should be included in votes for any state referendums that affect my business and should basically be considered a citizen of that state. Otherwise I see it as taxation without representation.
- mreome 8y ago
  I'm not disagreeing with you, but the logic here is that the company isn't paying the sales tax, the individual making the purchase is.The company is "simply" transferring that tax to the appropriate state government. Except it's not simple and you can be fined or go to jail if your business does it wrong.
  - jecxjo 8y ago
    Currently the vendor is asked to take sales tax on behalf of the purchaser. If they don't, then the purchaser must pay a use tax. Only that isn't happening. So SD has now put the sole burden on the vendor which means that they are liable if the tax isn't paid. This also means that if your business currently doesn't file sales tax you will have to add that work load to your current business which you didn't have to before. That is an added cost that didn't "have to" exist prior to this ruling. Let's call a spade a spade here, this is a tax on the vendor. This all sounds like my one man SaaS site now needs to have employees and keep extra book work for states I will never physically be in and who doesn't feel they need to hirden their citizens with actually paying their taxes. That should count for something.
- dbjacobs 8y ago
  By that logic, China which pays tariffs on some goods it sells in the US should be able to vote in US elections? I'm not saying there aren't issues, but it is not anywhere close to a black and white one.
  - 8y ago
hlieberman 8y ago
Fucking roll-eyes. A clickbait title combined with a hysteric article that didn't even bother and read the decision it's quoting.
- tomhoward 8y ago
  Just flag it.
godzillabrennus 8y ago
Wouldn’t it make more sense to just incorporate offshore in the Caymans or British Virgin Islands to do an ecommerce business now? Or would that foreign entity still need to collect sales tax from USA consumers?
- lord_ring_111 8y ago
  Trump might impose tariff?
mkempe 8y ago
This decision enables a state-imposed tax on inter-state shipping of goods purchased in other states (via mail-order catalogues or internet e-commerce -- aka "virtual showrooms" as Kennedy's decision calls a website, in order to drop the now-abandoned requirement for "physical presence"). Don't be fooled by it being labeled a "sales tax". In actual fact, the Supreme Court has enabled tariffs between the US States. Which is exactly what the Commerce Clause was intended to prevent.
hiyer 8y ago
Time for the US to move to a single VAT/GST model?

16 points by pedro84 8y ago

nasalgoat 8y ago

I thought this only applied to businesses with over $100K in sales?

intopieces 8y ago
Or 200 orders.
ghaff 8y ago
That is specific to the South Dakota law that the Supreme Court made its decision on. That said, the Supreme Court also had language suggesting that one reason it decided in favor of South Dakota was that its requirements weren't onerous. This might suggest, for example, that states should have some minimum threshold but the decision didn't supply one or state so explicitly. IANAL but, if I head to guess, this isn't going t be an apocalypse but there are going to be some uncertain times, some state will probably push the boundaries, compliance costs will rise, many small businesses won't comply and try to fly under the radar especially given it's not clear what teeth a state has against out-of-state retailers with no physical presence, etc.
- LyndsySimon 8y ago
  I suspect it’ll mean a move from independent web shops to “marketplace platforms” which will handle the tax implications. Bonanza.com probably stands to gain the most from this. Shopify and similar products will likely adapt to gain as well. WooCommerce and other “self-hosted” shops might actually end up dying from it.
mreome 8y ago
From The Article: "Yes, South Dakota, which prevailed in this decision, is currently exempting, from sales taxation, small businesses with $100,000 or less in state sales or fewer than 200 individual transactions." Unless I'm miss-understating, this ruling makes every company that sells online subject to the local tax law in every state they make a sale in (for even small companies this can easily be most of the 48 continental US states). The concern is that every state will have different rules for exemptions and filling requirements, so even knowing if you are exempt and/or need to file is going to be a significant cost for a small businesses just to be sure they are in compliance... even if they owe no actual sales tax.

maxxxxx 8y ago

It may also have saved tens of thousands of brick and mortar stores. I often buy expensive items from B&H in New York instead of a local seller who has to add 9% CA sales tax.

mreome 8y ago
Except this isn't going to hurt the big online retailers undercutting local brick-and-mortar stores. Companies like Amazon have whole divisions that deal with sales tax (in the US and globally). They won't be happy about this ruling, but they won't have real problems being complaint. This hurts small online niche and specialty businesses with very thin profit margins, the mom-and-pop online shops and one-man-startups.
- ghaff 8y ago
  Except a lot of local sellers lost the fight to the big chains and then the big online retailers a long time ago. There's maybe one local photo place in the Boston area who could compete with B&H and they're inconvenient enough I haven't been there in years. B&H probably will be hurt by this a bit. Compliance probably won't be a big deal and they beat out Amazon for a lot of specialty equipment. But they also sell a lot of DSLRs and the like too. They just basically lost their price advantage of Amazon for many items. (And, for those of us with Amazon credit cards, Amazon will mostly be cheaper once these rules go in place.)
  - mreome 8y ago
    I agree that battle has largely already been lost, I was just making the point that this ruling isn't going to significantly help brick-and-mortar retailers as they are in competition with large online retailers who are already undercutting the local B&M shops by far more then the sales tax rates and won't have issues staying in compliance with lots of complex laws. I only see this negatively effecting small online business, the niche stories, single-person operations, etc. I'm not familiar with B&H specifically, so I couldn't comment on them specifically.

thrill 8y ago

If anyone has caused undue pressure on businesses - and hence customers - it's Congress. The Supreme Court interprets when Congress is unclear. Congress has incentive to always be unclear - it gives them wiggle room to negotiate for your vote.

dbjacobs 8y ago

The good news, is that so far most states seem to be modeling their legislation after South Dakotas so hopefully there won't be a ton of rule variation. The filing requirement is the real kicker. Until small business software like Quickbooks and Turbotax for business makes it trivial to file in every state. The compliance cost will be VERY high. In Hawaii for example, you have to file and pay your excise tax return every month. Multiple that by every state and you have a lot of work. I suspect those companies that sell inexpensive items will probably restrict the number of states they sell to until the software support is there.

mreome 8y ago
Further tightening the near-monopoly those companies have over the processing of legally required tax filings. They're the only real winners here. If is not possible for a small business owner or individual to realistically handle their own tax filings, the onus is on the government to address the complexity of their tax laws and regulations.
- bryanlarsen 8y ago
  There are multiple companies, and none of them have anywhere near to a monopoly share. Not only that, many companies will develop this capability in house, and the margins for this service start getting excessive, those companies will have a good incentive to offer it externally. So yes, these services won't cheap, but that'll be due mostly to intrinsic costs, not monopoly rents.
ghaff 8y ago
As others pointed out when this topic first came up, there are services like TaxJar that will collect and file sales taxes. The challenge is that you have to set all of this up of course and connect it to your accounting systems in some way. And the cost for collecting and filing in all relevant states seems to be something over $10K/year (assuming that there aren't now also business licenses, etc. required). One can hope that states will approach this sensibly. One expects that at least some will not and, best case, there are going to be some compliance costs for small businesses.
8y ago

jecxjo 8y ago

My biggest issue with paying taxes in other states is what services are they providing? You pay federal taxes which covers interstates, you pay taxes on your shipping fees which should cover state roadways. So if I pay South Dakota sales tax then I should be able to contact state representatives, should be included in votes for any state referendums that affect my business and should basically be considered a citizen of that state. Otherwise I see it as taxation without representation.

mreome 8y ago
I'm not disagreeing with you, but the logic here is that the company isn't paying the sales tax, the individual making the purchase is.The company is "simply" transferring that tax to the appropriate state government. Except it's not simple and you can be fined or go to jail if your business does it wrong.
- jecxjo 8y ago
  Currently the vendor is asked to take sales tax on behalf of the purchaser. If they don't, then the purchaser must pay a use tax. Only that isn't happening. So SD has now put the sole burden on the vendor which means that they are liable if the tax isn't paid. This also means that if your business currently doesn't file sales tax you will have to add that work load to your current business which you didn't have to before. That is an added cost that didn't "have to" exist prior to this ruling. Let's call a spade a spade here, this is a tax on the vendor. This all sounds like my one man SaaS site now needs to have employees and keep extra book work for states I will never physically be in and who doesn't feel they need to hirden their citizens with actually paying their taxes. That should count for something.
dbjacobs 8y ago
By that logic, China which pays tariffs on some goods it sells in the US should be able to vote in US elections? I'm not saying there aren't issues, but it is not anywhere close to a black and white one.
- 8y ago

hlieberman 8y ago

Fucking roll-eyes. A clickbait title combined with a hysteric article that didn't even bother and read the decision it's quoting.

tomhoward 8y ago
Just flag it.

godzillabrennus 8y ago

Wouldn’t it make more sense to just incorporate offshore in the Caymans or British Virgin Islands to do an ecommerce business now? Or would that foreign entity still need to collect sales tax from USA consumers?

lord_ring_111 8y ago
Trump might impose tariff?

mkempe 8y ago

This decision enables a state-imposed tax on inter-state shipping of goods purchased in other states (via mail-order catalogues or internet e-commerce -- aka "virtual showrooms" as Kennedy's decision calls a website, in order to drop the now-abandoned requirement for "physical presence"). Don't be fooled by it being labeled a "sales tax". In actual fact, the Supreme Court has enabled tariffs between the US States. Which is exactly what the Commerce Clause was intended to prevent.

hiyer 8y ago

Time for the US to move to a single VAT/GST model?