Supreme Court overturns Quill, subjects all internet transactions to sales tax
 

Today is a day many of us have known would come. It was a 5-4 decision. While many giant etailers already collect tax, I feel ebay sellers like many on this board are going to feel the change most. The Post mentions over 11,000 jurisdictions affected-so municipalities will get their taste as well.

:mad:

No further comment.

As a small business owner, so far, I want to see how this plays out. There should have already been taxes being collected on many items. A lot of my ebay stuff has sales tax added. All (or almost all) of my Amazon purchases do.

This law could help the small, especially brick and mortar businesses, who get hurt by the current law. We shall see. I am generally never in favor of new taxes otherwise.

Fortunately we (Net54) already have this covered

Buy
Sell
Tax

;)

With a small seller, which tax gets charged? Does the sale happen where I am? Where they are?

If I buy something from a seller in NH, which has no sales tax do I pay the MA rate? And if I do, then as it probably works now, the seller gets the MA sales tax and has to file forms to pay it. And probably the forms to be allowed to collect it. Being in NH they probably won't do that, so they benefit by 6.25%
If I sell something to someone in NH, will I have to collect the 6.25% that I'll probably owe Mass?

What a miserable decision. The overhead alone of tracking what's owed to who will probably kill off most small sellers.

As best I can tell, the sales tax charge will be based on the seller's zip code. The burden will then be on the seller to determine if the item falls under state, local and county tax codes.

I think it will be based upon the buyer's ship to zip code, and not the seller's zip code. Therefore, unless ebay changes their software to automatically collect the tax for all sellers, each seller may have to collect tax for all of their buyers and then send these taxes that they collected to all 50 states (or those that have a sales tax), which would be a huge pain. Right now, I only collect tax for buyers in California, and I have to complete a form every year for that. If I have to do that for all 50 states, it would be a tremendous overhead.

Have not read the decision -- when is it effective? I mean, by what date do sellers need to charge/buyers need to pay, sales tax?

I believe you are correct, that the tax would be based on the buyer's ship to zip code.

This case originated out of South Dakota, which enacted a law that required all merchants to collect a 4.5 percent sales tax if they had more than $100,000 in annual sales or more than 200 individual transactions in the state. State officials sued three large online retailers — Wayfair, Overstock.com and Newegg — for violating the law. Those lawsuits led to this decision today.

I would hope that states, as they move forward with this new taxing power, would institute similar statues in regards to which merchants they would require to collect sales tax.... ie annual sales over X number of dollars or Y number of transactions.

I wonder what impact this will have on COMC, too...

If the SD law is mirrored by other states, the 200 transactions part would be an easy one to surpass just breaking a single box of cards and selling singles. Could be a few hundred transactions at a total of maybe $100...

The problem with # of transactions in the state (or something similar) is that at the beginning of the year, who knows if you are going to hit that limit. Let's say in a hypothetical case, New York decides that if a seller has 50 or more transactions in that state, you need to collect the sales tax. Based upon my previous sales, I haven't hit 50 in New York before. But then what if by June, you are up to 40 New York sales, so it seems likely you are going to cross the threshold. What are you going to do? You can't retroactively ask those 40 previous New York buyers to cough up sales tax now for the past sales. You'd have to either eat the sales tax amount yourself, or say after sale 49 to New York, try to say that you will no longer sell to New York residents.

What a nightmare.

And how will this affect Auction House sales...I assume all winners would be paying some sort of sales tax. Even more pain on top of hammer price painl for the buyer, an extreme hassle for the auction house (if sales tax is to directed to state of buyer).

Brian

It’s not only having to collect and remit the sales taxes for the 45 states that have it, and fill out all those forms, but for many cities and counties too. That’s why the number is 11,000 jurisdictions.

The worst part is the rules. For cards they may be simple. But I saw how in one particular state you must collect sales tax for Snickers, but not Twix, because Twix has flour in it and can be considered food, not candy.

That is hilarious. What a world we live in!



Sent from my iPhone using Tapatalk

Leon,

These aren't NEW taxes. States have had Sales AND Use tax laws in effect so that if the seller isn't required to collect the Sales tax, the buyer is supposed to report and pay the comparable Use tax on what they purchased. Very few people voluntarily do this. Just look back at the threads where people complain about having to pay Sales taxes on auction winnings from some AHs and not others.

It is exactly because of all those people that have not followed the law and properly calculated and paid the Use tax on their online and other such purchases that the states have had to resort to finally going after the large online retailers to make them start collecting it. To try going after all the individual buyers would be unbelievably complicated, difficult, and most likely political suicide for any state politicians who tried to get that going and backed such a plan. By going after the big online retailers instead, the states can get more revenue all at once than they would by trying to go after each individual buying online. And even though the individual consumers/buyers would still end up ultimately paying the sales taxes, the states and politicians have a little more cushion and less direct anger by not going directly against the individual buyers themselves.

On the state's side of things, as more and more people switch to online/internet buying, the states are losing out on Sales tax revenue they used to get from the brick and mortar stores. It is also helping to more quickly kill off many brick and mortar stores as they can't compete with online retailer prices. When the buyers know they aren't going to get charged Sales tax from an online vendor but, if they buy the exact same item from a store down the street from where they live, they know they are going to get charged sales tax at the store. So guess where the buyer is more likely to make their purchase from, especially the higher the price of the item they are looking to buy?

All the states are trying to do is figure out how to best get the current laws on their books complied with by the buyers, the majority of whom seem to always be trying to figure out how to get around paying Sales or Use taxes they actually owe.

We can play semantics all you want. It's taxes being collected that weren't before. Maybe they shoulda, coulda, woulda, but they weren't.
But again, please call it whatever you want to. As I said, I think it could help some small brick and mortar retail sales stores and they are the ones that seem to be hit hardest by the internet sales tax avoidance issues.

Leon,

Not sure I'd call it semantics but, as a small business owner yourself, I understand where you are coming from and what you mean by it. Though the Sales and Use taxes themselves aren't new taxes per se, what is new is who they are now going to look to for going after and collecting these taxes, and then sending the money to the state. The actual sales tax doesn't come out of your pocket but, the hassle, work, time and expense of collecting and remitting it to the state is now possibly on you and other small business owners, as well as the big online retailers. I understand exactly where you are coming from. It's potentially new tax compliance requirements on small sellers like yourself, not new taxes.

If ebay is able to change their software to both collect and report collections for each state, from there submitting will be a much more manageable task. For my state, I self track my in-state sales and submit one form at year end. It takes me longer to find my password to access my on-line state tax site than it does to submit my taxes. Last year it was less than a 5 min process total to submit for my state. So if ebay automatically tracked and provided a record of all of the annual collections for each state, and each state is as simple as my state, this whole process would probably take no more than an additional 4-5 hours per year.

In regards to increased costs to card collectors, just like every other added cost, sales tax will just get figured into the price. A $3k card will still be a $3k card, now just 5-8% off the price will go to the buyer's state.

I see a whole new venture for online sales tax management.

I would doubt eBay has any need to change software, I can not see where that line of thinking is coming from. Much like why you do not charge sales tax at a garage sale, future laws should in all cases not affect a occasional seller on eBay.

As was quoted earlier South Dakota brought this forth will a set of guidelines that the seller have 100k in business or a minimum of 200 transactions. To take it lower as was theorized earlier would be a enforcement nightmare, the states see this as some cash cow, but will soon find the costs of an enforcement group for this will outpace easily the rewards against crossstate small sellers.

This is for large internet sellers and companies.

I would assume that if you are an eBay seller that is big enough to be going after as a state agency and have it think there is a reward in it, you are either already collecting it or known this was coming eventually because you have been using this income on your 1040 as a job.

I don't think you will see states going after small retailers. It took South Dakota's levels to get 5 votes in the Supreme Court. Anthony Kennedy, who was the driver of this case, praised South Dakota for taking a moderate approach. He also pointed out that states may not place undue burden on interstate commerce. Trying to collect sales tax on every online sale with individuals would certainly fit. Probstein and PWCC will be affected. Most eBay sellers will not.

Totally agree on the point with small retailers,

The case was pushed because of Wayfair.com. Those are the folks in the crosshairs, retailers that have millions in sales and only charge tax in states of operations.

My initial reaction before loopholes:

So if I get back to selling off my extra stuff, I should bear the burden of
A) Figuring out what your state tax is
B) Finding out if you have a county and /or city sales tax
C) Filing paperwork with possibly multiple agencies and paying multiple agencies whatever that tax comes out to.
D) figuring out how to pay them, because I'm sure some will only take electronic payments and filings, others will want hard copies, etc.

Because it's "too unbelievably complicated/ difficult" for the state to handle their own tax collection in THEIR state?
Hey, how about we just make sure that every store makes the customer total their own sale, and handle their own paying, and if it's cash make their own change. Cause, you know all that stuff about getting paid is just way too hard.....

So if I sell a couple 1981 Topps commons to someone, it looks like I'll have a couple hours of overhead. Because politicians and their relatives they've made tax collectors are too lazy.

The only local card shops that have survived are the ones that are good at using the internet. That's true for a lot of small businesses.
This won't help brick and mortar at all, and I believe it will essentially shut down many small businesses especially ones that deal in hobby stuff.

Sorry to be a contrarian, but unfortunately, I suspect that in the not too distant future, we will see eBay adding sales tax to ALL invoices from ALL sellers, except for purchasers who are exempt because they are resellers. Being a huge organization, it should not be difficult for eBay to do this. eBay would transfer the sales tax info to PayPal so that PayPay can collect the taxes and remit them periodically to all the state and local jurisdictions on behalf of ALL the eBay sellers. Being a huge organization, it should not be difficult for PayPal to accomplish this. While eBay sellers will thus not be burdened, I assume that eBay and/or PayPal will increase their fees to sellers for handling the sales tax collections and remittances.

Just another way to generate more money for the stinking politicians and their pork projects

This reminds me that Heritage, who has a physical presence in Illinois, charged me sales tax before and it was at the rate of it's office address in Chicago. The levy was significant-over $200.

I concur with this sentiment, and I do have some evidence to back it up. On May 31, I received an email from ebay asking me to sign a useless petition-the "last chance" to "make my voice heard". I disregarded it as absurd, since the Supreme Court makes decisions based on reasoned argument-not whining. It got my radar up however, because I forgot the Court was considering it, and I realized ebay had a dog in the fight in the from of seller backlash. Considering how expensive it is do business on ebay, combined with the risks-I firmly believe it is the administrators' responsibility to integrate the new tax initiatives into the site.

I assume Supreme Court decisions are effective immediately. South Dakota may be able to retroactively collect from the time the court case began. But if the SC overturns a criminal conviction, that person is freed pronto. If anyone sees sales tax crop up on ebay seller/buyer invoices this week please let me know.

I don't see that ever happening. Why would EBay want to destroy their business? Why would they want to take on an unnecessary burden? If they force all sellers to charge sales tax when 90%+ don't need to, most of those sellers will leave. I collect sales tax on sales within my state and send it to them. In the unlikely event I need to do it for other states I will. I will not charge people sales tax on items they don't need to pay it on.

This decision is aimed at large resellers like Warfare, who hurt small business by not charging sales tax and states who have seen revenue decrease because of large online retailers. It is not aimed at trying to collect on every single sale, even if it is an individual selling an used item that they no longer have need of.

The South Dakota law says that they can't collect tax retroactively. The Supreme Court pointed this out in their decision as a point to their law being resonable and not placing an undue burden on retailers.

It is interesting to note, as I just am finding out myself while reading articles on all if this, that several states including my home state of Pennsylvania (also Oklahoma, and Washington at least) have Marketplace Facilitator Laws in place. Pennsylvania's just went into effect April of this year.

The Marketplace Facilitator Law for PA requires facilitator sites such as Etsy, Ebay and Amazon to either collect sales tax on items purchased by PA residents, or in lieu of collecting the tax the facilitator must supply a notice to the purchaser that sales tax was not collected and that a use tax might be due on the sale by the purchaser. If the facilitator elects the 2nd method of notification, the facilitator must submit to the state an annual report by January 31 of each year to the Pennsylvania Department of Revenue that includes the following:

The purchaser’s name, billing address, delivery address and, if different, the purchaser’s last known mailing address.
The total dollar amount of purchases from this marketplace facilitator.
The name and address of the marketplace facilitator that made the sale.

Each failure to comply with the notice and reporting requirements can result in a penalty of $20,000 per violation, per year, or 20 percent of total Pennsylvania sales during the previous 12 months, whichever is less.

Marketplace Facilitators

So Pennsylvania now has a law on the books, but where the state will now know from information provided by Ebay, Etsy, etc.. how much every resident of Pennsylvania paid for items bought through 3rd part facilitators.

What will be interesting is the competitive imbalance and state politics due to differing state sales tax rates. Here in Washington State, there is no state income tax but a high sales tax.

I'm in PA too; in simple terms, what does this mean for me as an ebay seller?

Goodbye Quill
 

I’m a very small time seller, so I’m guessing I will be exempt from many states’ sales tax laws. But I’m not really sure what to do at this point. I’m guessing most states have de minimus exemptions, but that’s just an assumption. Does anyone know a quick hit resource of state sales taxes and exemptions?

Well, I just got around to scanning through the PDF of the decision and now I am going out to reset my eyeballs to their original positions. My reaction hasn't changed pending loopholes:

It seems as though it would have to be based upon the seller's location. How much of Wayfair's sales would be in South Dakota? SD would want a piece of the pie for the sales going out of the state I would think.

As a collector that solely relies on the internet to find my items, I’m not a fan of the change.

As a person that solely relies on sales tax to pay my local government salary, I’m a big fan of the change.

It’s an enigma wrapped in a paradox and shrouded in a conundrum. :)

I love this part of the ruling which is just going to open a wonderful can of worms:

"(d) In the absence of Quill and Bellas Hess, the first prong of the Complete Auto test simply asks whether the tax applies to an activity with a substantial nexus with the taxing State, 430 U. S., at 279. Here, the nexus is clearly sufficient. The Act applies only to sellers who engage in a significant quantity of business in the State, and respondents are large, national companies that undoubtedly maintain an extensive virtual presence. Any remaining claims regarding the Commerce Clause’s application in the absence of Quill and Bellas Hess may be addressed in the first instance on remand. Pp. 22–23."

This isn't the last word. This is just the commercial break after the first quarter of this football game.

What about sales on BST? Hmmm...

:D

Oy!

Well, at least there is one politician chiming in with a viewpoint I support (admittedly a bit of grandstanding):

http://www.4-traders.com/WAYFAIR-INC...fair-26812903/

It should be interesting how this plays out and the way the herding of cats will be resolved.

Supreme Court Overturns Quil/ Sales Tax
 

It does not appear to me that every small retailer, with limited sales in most jurisdictions, will necessarily be burdened with having to collect and remit sales tax in all jurisdictions. It appears to me that the Wayfair decision serves to support an "economic" nexus standard already employed by many jurisdictions, and potentially now to be employed by many more. This economic standard is often based on a minimal $ amount or based on # of transactions in a given year. For example, North Dakota (Wayfair case) employs a minimal $ amount of $100,000 of economic sales in the state. So, the threshold is and would be measured jurisdiction by jurisdiction.

Prior to this decision, the Quill case had supported the long standing Hess case decision that there must be some sort of "physical presence" in a jurisdiction (state or local) in order for that jurisdiction to force a seller to collect and remit sales tax as a defined "retailer." The Wayfair decision reverses that exclusive requirement of physical nexus, and gives jurisdictions the ability (by Supreme Court "National" applicability) to employ minimal economic nexus standards.

"So, the threshold is and would be measured jurisdiction by jurisdiction." That is where it gets messy.

Wayfair Supreme Court Decision/ Sales Tax
 

Brian, yes indeed! Some jurisdictions have a much lower threshold than the ND $100,000 threshold. Here's something I located online for states with "current" thresholds...$10,000 is lowest $ threshold (i.e. PA and Washington State), $500,000 is the highest. Some states base it on # transactions.

https://blog.taxjar.com/economic-nexus-laws/

Obviously, the Wayfair decision opens it up for jurisdictions that employ current standards to consider new economic and marketplace thresholds, as well as additional jurisdictions employing new such standards.

Glenn

You mean trades? Lol...

Just a thought, there's enough junk wax out there that if enough people started selling it card by card repeatedly the volume of sales would pretty much cripple the systems the states use to collect the tax.

I agree with all except the last sentence: this is not the enactment of a new tax. This is a court ruling overturning a prior court ruling that banned the enforcement of an existing tax. Nor does it inflict a new burden on the buyer. If your state collects sales tax you are supposed to pay a corresponding use tax on anything you bring into the state untaxed. It is supposed to equalize the playing field for local businesses. Fact is, most people don't bother to pay the use tax, they just blow it off, so it feels like a new tax. But it isn't.

Where the real new tax will come is when Congress enacts a value added tax (VAT) on each level of sale, which exists in virtually all other Western nations.

No, that is incorrect. The sales tax system is self-reporting: the merchant calculates, collects and remits with a tax return the merchant prepares. The harder it is to calculate and track the more trouble it is for the merchant and the more likely the merchant will mess up and owe penalties and interest. Having to collect tax on interstate and intrastate sales will actually be a relief for some businesses because there will no longer be a need to keep track of as many forms of sales. Right now, they have to track sales by jurisdiction and make intra v inter state calculations.

Wayfair Decision/ Sales Tax
 

I agree with everything Adam just said.

Glenn

Below what I had said, I said I know it was not a new tax. But in reality *(as in really paying) it is for a lot of people. As you might remember I sold computers and services for many years. I fought this issue many, many years ago when I sold out of a brick and mortar and the internet popped up. I was at an immediate tax disadvantage. At that time, this mess was just starting and usury taxes weren't as talked about as they have been since then, at least from what I remember in pre-internet sales days.