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Sales Tax Ruling

Sales tax ruling by the supreme court overturned a 26-year-old decision that effectively will enforce small businesses to collect sales tax. Thursday’s Supreme Court decision overturned a ruling from 1992.

WILL YOUR BUSINESS BE IMPACTED?

 

Do you have an online e-commerce website and need help updating?

This sales tax ruling could potentially affect all small businesses that sell online. This will impose taxes for all internet purchases regardless of whether you have a physical presence in that state. Hence, what should you do if you have a website and sell online? Well, as of right now, nothing is concrete. But it would be best if you started preparing and getting ready for this switch.

The supreme court stated that it got it wrong 26 years ago when catalog shopping had just started. Hence, this online sales tax ruling was the right decision based on today’s online dynamics. Of course, this change will help local states collect billions each year from this ruling. Hence, such additional revenue will help local government economies.

Biggest Losers and Winners

The likes of Amazon, Etsy, eBay, and the larger online retailers will be the bigger losers. Along with the micro businesses they represent. But, it seems that Amazon will have the leverage to absorb this as it already collects tax for items they sell. On the contrary, third-party merchant sellers will potentially face the burden of managing these taxes. As well as independent online stores. Hence, all small businesses, small or big, will need to update and invest in systems that collect taxes. For example, changes to existing websites will need to be made accordingly so that sales tax can be collected.

The winners are the brick-and-mortar stores and local states. For example, Macy’s, Best Buy and mom and pop shops. However, this sales tax ruling is decades late. They will now feel on a level playing field and be able to compete when it comes to consumers comparing prices. This will result in consumers thinking twice when buying online or from a  physical store. But will this change allow them to survive this online revolution, or will they continue to sink?

Online sales revenue in the United States is only projected to go up. Local states will gain a lot from this sales tax ruling, especially as they have been losing (except in states that don’t collect sales tax) revenue since online shopping came about.

Sales Tax Ruling - e-commerce sales in USA

Ref: Statista – https://www.statista.com/statistics/272391/us-retail-e-commerce-sales-forecast/

What next?

If you have a small business with a website, you should start planning how to collect taxes. Several systems are in place if you already have a modern website. For example, a website like WordPress with an e-commerce plugin will not be challenging to configure for tax collection.  Visualwebz.com has over a decade of experience assisting small businesses with e-commerce platforms. We will re-configure and set your website to function correctly with this change. Yes, this will cost and potentially hurt you initially. But will be required if you wish to continue selling via your website. On the contrary, Congress could discard smaller businesses making under a certain threshold per year. But this is something we will wait for and see.

Finally, this sales tax ruling will help local states and potentially create a leveling field for brick-and-mortar stores.

Sales Tax Ruling

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