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A Supreme Ruling on Sales Tax

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Wondering why your local hardware store held a Project X-style rager last night? The Supreme Court handed down a major ruling that gives states the authority to require e-commerce companies to collect sales tax on online purchases (a big win for brick-and-mortar).

They weren't allowed to before? 

  • Nope. In 1992, this very same Supreme Court ruled that states could force retailers to collect sales tax only if they had a "physical presence" in the state.
  • So while e-commerce companies sell goods all across the country, they weren't required to collect taxes unless they had a warehouse or an office in that particular state.

That is 

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The decision overturned the 1992 ruling because it was "

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  • Translation: It's time we recognize online retail as a significant (and growing) sector of the marketplace. Or, as Justice Anthony Kennedy 
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    , "The Internet's prevalence and power have changed the dynamics of the national economy."

Let's talk winners and losers


  • States: They'll be able to bring in revenue they previously missed out on (government estimates peg it at between $8-13 billion).
  • Brick-and-mortar stores: They felt like they were put at a huge disadvantage when it came to taxes. So your disgruntled local store owner will view this as a huge step towards leveling the playing field.
  • Amazon: We know, we know, it sounds crazy. But Amazon 
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     sales tax on goods it sells directly. And with this ruling squeezing smaller e-commerce players (see below), Amazon stands to tighten its grip on the online shopping world.


  • E-commerce companies: Especially the smaller ones. They'll now be required to navigate a spider web of complicated tax laws across thousands of jurisdictions. Some won't have the capacity to make it work.
  • Congress: Only because they'll have more homework. They've 
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    on interstate commerce issues for years, so maybe this ruling will finally drive them to action.

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