Online sales have taken over a growing percentage of the U.S. retail market, accounting for about $1 out of every $7 spent by consumers. But through much of that rise, online sellers had an unfair advantage over brick-and-mortar retailers: They weren’t compelled to collect sales taxes from consumers in states where they had no offices. That’s because the Supreme Court had exempted mail-order companies decades ago from collecting out-of-state sales taxes.
That all changed last year. In South Dakota vs. Wayfair, the justices reversed their position and held that states could indeed compel out-of-state online retailers to collect sales taxes from in-state buyers. The court wisely recognized that the older rulings were distorting the retail market, to the disadvantage of local shops and local governments that relied on sales taxes.
California responded with a new law last month (Assembly Bill 147) that requires retailers to collect sales taxes from buyers in California even if the companies have no physical presence in the state. And to help smaller out-of-state businesses that sell their goods on the platforms provided by Amazon and other big e-commerce companies, AB 147 requires the platform operators to collect taxes on behalf of third-party retailers.
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by the times editorial board
may 1, 2019