Supreme Court Considering Whether Out-Of-State Businesses Must Collect Sales Tax

Last week we discussed how to organize a small business, today we discuss a legal issue that may affect your business and its customers.

The United States Supreme Court is reviewing a case about whether a state is allowed to require out-of-state businesses to collect sales taxes from customers and send them to the state.

Ohio is one of many states implementing what are often called “Amazon Taxes” on online retailers to create an even playing field for local brick-and-mortar stores.

What Does This Mean For My Business?

This is a case that everyone who takes part in e-commerce should be watching. The current state of the law is that a state can only require a company to hold sales tax for online sales if the company is located in the state or has some physical presence, like a warehouse or distribution center, in the state.

Many online retailers, especially those located in states without sales taxes, such as Oregon, are not currently set up to handle the collection of sales taxes. If these new requirements were to be allowed by the Court, every owner of an e-commerce business would need to be set up to charge sales tax, not only at their own rate but at the rate of every state in which they make a sale. For many small online retailers, these requirements and the paperwork that will come with them could become a great expense.

What Should I Do?

For now, keep an eye on South Dakota v. Wayfair. Information about the case, and recordings of the arguments are available from Oyez. Until that case is decided, the law remains as it is. A decision is expected in the case by the end of June.

Those who wish to be proactive can look to their e-commerce platform and see what support for collecting and keeping track of sales tax exists within their existing software.

You may also wish to speak with an attorney or your tax professional about the best way to keep sales tax funds separate from your own money until you send it in to the correct state.

Where Can I Hear More?

Warren’s Tribune Chronicle spoke with business leaders and officials from the Ohio Department of Taxation for an excellent piece discussing the local impact of the law.