Small businesses in Louisiana and across the country received some good news last week from the United States Supreme Court.
In a ruling that is being called a victory for local brick-and-mortar businesses, the Supreme Court ruled to close a loophole that allowed online retailers to only charge sales tax in states they were physically present in.
South Dakota challenged the retail stores Wayfair Inc., Newegg and Overstock.com. The challenge was over a state law that required online retailers to pay the South Dakota sales tax.
Under the South Dakota law, merchants must collect a 4.5 percent sales tax if they had more than $100,000 in sales or over 200 separate transactions.
In a five to four judgment, the Supreme Court ruled that it is an unfair advantage for online sellers to avoid a sales tax that local businesses cannot.
It isn’t expected to majorly impact online giants like Amazon, Overstock.com or Wayfair. These large online retailers already collect sales tax in most states. But it should help physical stores offer competitive pricing.
This ruling only affects those states that implement online tax laws, but several states are already drafting legislation similar to South Dakota’s following the ruling.
The New York Times estimates states miss out on $33 billion in tax revenue each year because online retailers did not charge state sales tax. This Supreme Court ruling fixes that.
While it remains to be seen how many states capitalize on this ruling and create online sales tax laws, the ruling is generally considered a boon to local businesses.
If you have any questions about business law, a qualified business attorney can help.