Today the Supreme Court is hearing South Dakota v. Wayfair.
And depending on the decision– it could make the difference of millions of dollars in the state’s budget.
Our Malique Rankin explains the case and what it could mean for you.
South Dakota has taken Wayfair, the online furniture website, to court for not paying their state’s sales tax for online purchases.
The current precedent was set in Quill v. North Dakota in 1992.
Which says a business must have a physical presence in a state to be required to collect sales tax.
This ruling was decided in a time where purchases were made through mail order catalogs.. and the internet didn’t play a role in retail.
This leaves big corporations, like wayfair, exempt from sales tax.
In North Dakota, it adds up to a pretty penny that could make a difference in balancing the state budget.
Ryan Rauschenberger; ND Tax Commissioner: “Well based on national estimates, we figure from 25 to 50 million dollars is being lost every year because online retailers aren’t collecting and remitting tax.”
For small businesses, why would a consumer shop local and pay an extra tax when you can find the same product, tax-free elsewhere?
Ryanne Papa; Owner of Exposure: “It’s really hard to compete with places like Amazon, they don’t pay the taxes, they can give you the fast shipping, they can give you a much broader market size. Especially these days in the winter where it’s all crappy and people aren’t coming out, they’re turning to online shopping. And we might have the same products on our online store, but Amazon is more readily available.”
Ryan Rauschenberger; ND Tax Commissioner: “But, it’s really about leveling the playing field in the sense that, a hardware store, retail or sporting good stores here in North Dakota that has a brick and mortor storefront, means they have to collect sales tax. That’s the law. But right now, the online competitors don’t have to.”
If the Supreme Court sides with South Dakota, small businesses can expect a more leveled playing field, according to Rauschenberger.
Ryanne Papa; Owner of Exposure: “I don’t think we’ll have a huge increase in online sales, but I think it’ll open peoples eyes to what’s available and hopefully they’ll look more and shop more.”
The Supreme Court is expected to make a decision in the next month.
If the Supreme Court sides with South Dakota.. not only will it mean millions of dollars each year in sales tax, but more money flowing in to local budgets as well, according to the tax commissioner.