Online shoppers in the U.S. may be required to pay more taxes for purchases made online, following a ruling from the Supreme Court striking down a South Dakota ruling on the matter. The State Supreme Court had previously ruled the practice of taxing online purchases made from companies with no in-state presence unconstitutional. Now the higher court has overruled that decision, which was based on a case from back in 1992 which predominantly applied to companies shipping products across state lines. Although the ruling was made with regard to a specific case in South Dakota, it will almost certainly have wide-ranging repercussions because it comes from the U.S. Supreme Court. Essentially, South Dakota will now be able to require companies operating online and out-of-state to collect state taxes on purchases. The new definition from the court regarding what is or is not constitutionally sound means that other states will be free to follow suit with their own challenges.
If that scenario comes to fruition, it will have a serious impact on the online retail industry. In the case of South Dakota, any company operating out of state which brings in $100,000 in sales or completes more than 200 transactions per year within the state will be subject to the law. That may or may not be different elsewhere, if and when more states get on board. However, South Dakota alone is predicted to bring in an additional $48 to $58 million in taxes every year following the change. Even though many companies are already charging taxes on purchases, it will almost certainly still be a big change for customers. For those who shop online, a sizeable portion of companies collect taxes which they themselves have set or which have been set based on expectations of the state they operate in. Those numbers will almost certainly go up for some shoppers.
What's more, the process could become confusing for both businesses and customers as states each settle in on their own conditions regarding which companies need to collect taxes. It could be argued that companies which fluctuate between meeting and not meeting those conditions will almost certainly have a more difficult time than larger companies. So the ruling could ultimately have the most impact on medium-sized businesses and small businesses. That's reportedly an argument which has been made by Etsy, with concerns about the effect on its peer-to-peer sales platform.