A controversial topic for years, the question whether to legislate mandatory tax collection for all online purchases has come to the forefront once again. Dissatisfaction on the part of local retailers and state governments who feel that they have unfair competition and smaller coffers respectively has fueled the latest visitation on this topic.
Should states legislate taxation changes, or should the courts rule what taxes, if any, should get collected? So far, a variety of solutions are being attempted.
A Hybrid Existence
Some of the more successful and established online retailers have physical presences in several states that already require them to collect taxes. They are in-between both the brick-and-mortar and the digital worlds because of existing regulations.
A notable example of a state taking the taxation matter to task is South Dakota. The state enacted a law requiring online retailers that make more than 100,000 dollars in annual sales in the state to start collecting sales tax. Unsatisfied with the lack of revenue from three major online retailers, South Dakota took them to court for violation of the recent law.
Supreme Court Split
Currently, justices have split opinions on the appropriate venue for a decision on online retailer taxation. They are also divided about whether to overturn a prior court ruling. Their deliberations on the present South Dakota v. Wayfair case should be thought-provoking.
Reconsideration in a digital age
A 1992 decision by the Supreme Court is under reconsideration by some of the justices. Advocates for an overturn of the Quill Corporation v. North Dakota decision cite the increase of IT capability from over 25 years ago.
The previous viewpoint that keeping track of tax rates and collections would be too much of a burden is losing steam. A recent comment about record keeping from Justice Ruth Bader Ginsburg echoes the spirit of Robert Collier’s famous quote “Supply always comes on the heels of demand.” Ginsburg states “entrepreneurs would produce software that would meet the market need.”
Consultation with a legal firm experienced in a wide variety of business law can help you determine your legal obligation to collect taxes from your online retail presence. Whatever the Supreme Court decides, the business landscape in regards to taxation will remain dynamic for some time.