Multi-State – Why The Supreme Court’s Internet Sales Tax Decision Will Hurt e-Commerce Startups

Startups have a lot stacked against them, including oligarchic competitors and the ever-present threat of running out of money. This summer, the Supreme Court added another burden.

On June 21, the Court voted 5-4 to overturn Quill v. North Dakota, a 1992 ruling that stated that internet-based businesses were exempt from state sales taxes unless they had a physical presence in those states.

In practice, this allowed online retailers (especially Amazon) to enjoy an advantage over their brick-and-mortar rivals. This likely contributed to the so-called retail apocalypse we’ve seen over the past couple of years. Some 13 major national retailers, including Nine West, have recently filed for bankruptcy this year, and in 2017, we saw the demise of Toys R Us, Payless, Gymboree and Wet Seal, among others.

But now that Amazon is established, it will be much harder for startups to compete, in part because the new ruling puts the onus on startups to figure out how to collect taxes from some 15,000 different taxing jurisdictions in the U.S.

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by Anderee Berengian
December 14, 2018