The last few years have brought major improvements in how states enforce their sales tax laws on purchases made over the Internet. Less than a decade ago, e-retailers almost never collected the sales taxes owed by their customers. The result was a multi-billion dollar drain on state coffers and a competitive disadvantage for local businesses. But this holiday season looks a bit different. Some sales tax will still go uncollected, but that problem will largely be confined to a dozen states where lawmakers have dragged their feet in exercising the sales tax collection authority the Supreme Court granted in its landmark 2018 decision, South Dakota v. Wayfair, Inc.
Just two states (Florida and Missouri) lack economic nexus laws requiring online sellers to charge sales tax if they make a meaningful amount of sales into the state. Twelve states, meanwhile, fail to require that large online marketplaces like Etsy, eBay, and the Amazon Marketplace collect and remit sales tax on behalf of sellers using their platforms. In addition to Florida and Missouri, those twelve states include Georgia, Hawaii, Illinois, Kansas, Louisiana, Michigan, Mississippi, North Carolina, Tennessee, and Wisconsin.
These dozen states, which are home to more than 95 million people, will, of course, be collecting sales tax at local businesses this holiday season. But when their residents choose to order products from afar through online platforms like Amazon Marketplace, the tax will typically not be charged by the retailer and most shoppers won’t step forward to pay it themselves. Doesn’t sound fair, does it?
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just taxes blog
by carl davis | research director
november 25, 2019