Get Ready for Online Sales Tax as Supreme Court Screws Small Online Businesses


from The Daily Bell:

Small businesses aren’t disappearing, they are just moving online.

The American dream is alive and well and more accessible than ever!

Even while Amazon takes 44% of e-commerce sales, half of those sales are through small businesses using Amazon as their platform. Over one million small and medium-sized U.S. businesses sell on Amazon.

Owning an online business, you don’t need the capital to open a store and pay the overhead on a physical location. Countless people are finding freedom in this changing economy. This includes the couple used as an example in The Daily Bell’s free guide on how to make and stick to a two-year plan.

When another family could not get pregnant, they found that selling collectible cards online was the easiest way to raise the $35,000 it costs to adopt a child. Here’s what they said before the decision:

If the Supreme Court reverses its precedent and allows states to enforce sales taxes on online sales, it won’t affect the Amazons, Walmarts, Targets and other big retailers. They have all become “multichannel” retailers selling from their physical stores and distribution centers in almost every state and online. They collect and pay state taxes because of their physical presence in those states. For these large retailers and many other multichannel sellers, tracking the complexities of taxes across the 45 states that levy sales taxes is just another back office process, and they have the staff and budget to do it.

For us, an Internet sales tax would mean the certain end of our business. We can’t afford specialty software to help us manage taxes. We don’t have the staff, lawyers or accountants.

It’s just us.

If state sales taxes are imposed, we would also find ourselves competing in many markets with unsophisticated sellers, often high school students, as well as unscrupulous sellers who wouldn’t pay the tax and would consistently underbid our pennies-on-the dollar margins.

Worst of all, we would be living under the constant threat that out-of-state tax agencies would turn our lives upside down with an audit. We would be defenseless against the tax authorities of California or New York.

A Supreme Court decision just royally screwed small online businesses.

In a 5-4 decision Thursday, the Supreme Court ruled that a physical presence in a state is not required for the state to charge sales tax on online purchases.

Previously, only companies that had a physical presence in the state had to collect sales tax when shipping an item to a customer in that state.

For instance, if you bought something from, you had to pay sales tax, because there is a Walmart down the road.

But if you bought something from an artist five states away, that small business owner did not have to collect sales tax. Technically your state expects you to report the purchase, and pay up, but almost no one does that.

The court did not split along party or ideological lines. Trump’s Supreme Court pick, Gorsuch, cast the tie-breaking vote to drop the guillotine on online small businesses. Congress is equally divided on the issue, again not along partisan party lines.

Trump praised the decision:

On Thursday, the president exulted. “About time! Big victory for fairness and for our country,” he said in a tweet. The Wall Street Journal reported in April that failed to collect taxes for more than 40 states, including New York, where the flagship store is in Trump Tower.

Congress could still act, with its power to regulate interstate commerce, to eliminate the power to collect out of state sales tax or require exemptions for small online businesses.

But as it stands, states can now enact crushing regulation on online retailers. These online businesses now must know each individual state’s tax rate, as well as exempted items, and face the possibility of 50 different government audits come tax time.

As shares of Etsy and eBay fell, unsurprisingly, the stock price of a new business that offers tax compliance software rose.

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