Life was good for a while, wasn't it? Online shopping for many web commerce sites didn't collect local sales taxes. Now, thanks to a US Supreme Court ruling (PDF) on Thursday, they have to.
Amazon has actually been long collecting state and local sales tax—but only for items it sells directly, which is about half of its business. Third-party vendors on Amazon often don't collect the tax. And many other vendors, like Overstock, Wayfair and Newegg, haven't previously collected the tax, either.
Customers who bought items without paying sales tax were technically supposed to pay this tax all along by declaring it on state tax forms. But, like most things related to taxes, things were a bit confusing. A 1992 Supreme Court ruling allowed online retailers to avoid collecting state taxes if they didn't have a physical presence in the state. That made online shopping less expensive when the industry was first starting out.
The New York State Department of Finance says it's reviewing the decision, so it's unclear when our 8.875% sales tax will officially kick in. Most likely, there will be a short window before e-commerce sites start collecting the taxes. It's likely to be a fairly heavy lift for smaller retailers, which will need to calculate the different taxes from 50 states.
The biggest beneficiary of the ruling would be the states. In his ruling, Justice Anthony Kennedy said that states were losing an estimated $8 billion to $33 billion in revenue. It's particularly expected to help states with no income tax, like Florida, Wyoming, and Washington, since those states rely more heavily on sales taxes.
Brick-and-mortar stores could also see some gains, since no-online-taxes meant that goods were more expensive if you bought them at an actual store. That price difference is part of what's lead to a massive collapse of retail.
