What the Supreme Court Ruling Means for Small Retailers in 2019

By Audrey Sellers

A Supreme Court tax ruling in June 2018 changed the way online retailers must operate.

In a landmark 5–4 decision in favor of a South Dakota sales tax law the Court, in essence, ruled that states can adopt laws that require online retailers to collect sales tax, even if the retailer doesn’t have a physical presence in the taxing state.

The decision reversed the long-standing decision, Quill Corp. vs. North Dakota that stated sellers only had to collect state sales tax if they had a physical presence, such as an office or distribution center in the state.

Moving forward, this could mean that small retailers must ensure they are paying taxes on everything they sell, no matter where they sell it.

This could mean billions of dollars in tax revenue that the states can now collect more easily.

According to theU.S. Government Accountability Office, state and local governments could have collected around $13 billion more in 2017 if they had been allowed to collect sales tax payments from online retailers instead of relying on purchasers to self-assess the use tax that was due.

In the U.S., there are only five states that do not impose a State level sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon.

Here is an updated list of tax laws by state following the Wayfair decision, and below is what to expect in the year ahead.

Brick-and-Mortar Retailers Get Even

The Wayfair decision levels the playing field for all retailers.

What does that mean? It means that in states with remote seller laws in place in 2019, brick-and-mortar shops may better compete with e-commerce retailers, which previously had the advantage of not needing to charge sales tax.

Shoppers who avoided state sales tax by purchasing online in some states may start frequenting physical stores in the year ahead.

Each State May Impose Tax on Remote Sales

The Wayfair decision allows states to choose whether to tax most online sales and mail orders.

Few states currently tax transactions across state lines, but watch for all 45 states to soon enact and apply new laws in an effort to boost state revenues.

Retailers Need to Develop a System to Comply With Changes

Remote sales tax collection can be complex, especially for small retailers trying to figure it out alone.

Luckily, small business owners can use QuickBooks tools to stay organized and manage their sales tax liabilities. They can also take advantage of various apps and software features to understand and pay state sales tax.

No matter how you discern and organize your online sales tax obligations, it pays to be knowledgeable.

If you aren’t knowledgeable and you don’t collect sales taxes from your customers at the time of the sale, you aren’t going to be able to go back and collect the money from your customers. The Tax Authority will still collect the money, however, so it will come out of your pocket.

Thriving in the Wake of Wayfair

The Supreme Court ruling has drastically changed the retail landscape.

States benefit from much-needed tax revenue and retailers stand to better compete on a level playing field.

In 2019, each type of small retailers can succeed by considering how they build or grow their business in light of the changes caused by the Wayfair decision.

Retailers that sell primarily online can offer faster shipping, free shipping, or in-store pick-up to attract customers and offset the requirements to charge sales tax.

Brick-and-mortar shops can highlight the many benefits of shopping in a physical store, such as immediate gratification and being able to touch and feel products.

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Originally published at QuickBooks Resource Center.