Author Topic: South Dakota v. Wayfair Inc.  (Read 2395 times)

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Offline ear3

  • Posts: 3546
South Dakota v. Wayfair Inc.
« on: April 16, 2018, 01:33 PM »
Just wondering if the dealers on this site are aware of and/or following the oral arguments that will be made tomorrow in the South Dakota v. Wayfair case, which has the potential to overturn the state-tax "exemption" for online and out-of-state retailers (I put exemption in quotes, as by law the customer is still obligated to pay the sales tax, which I know all of us scrupulously do!).  The Supreme Court last addressed the issue in 1992, before internet sales were a thing.

This could be great news for brick and mortar dealers, but obviously could be an existential crisis for dealers who primarily do online sales.  More details here: http://www.scotusblog.com/2018/04/argument-preview-justices-to-reconsider-sales-tax-collection-in-internet-era/

Mods feel free to move thread to General Friendly Chat if deemed appropriate.
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Offline RDMuller

  • Posts: 284
Re: South Dakota v. Wayfair Inc.
« Reply #1 on: April 17, 2018, 06:35 PM »
I hope South Dakota wins.  The current system of paying taxes on out of state purchases is a joke and makes liars out of the populace!  These are the first people to complain about the roads the schools, etc

Some folks are cheapskates!

Offline neilc

  • Posts: 2399
Re: South Dakota v. Wayfair Inc.
« Reply #2 on: April 17, 2018, 07:11 PM »
The large retailers are already moving to charge sales tax on out of state purchases.  Walmart, Target, BestBuy, and Amazon are there.  Other of the big buys following pretty quickly.  Not nearly as easy for small retailers.

There are several thousand taxing authorities across the US, not just 50 states.  As a small business person selling online, the amount of software, paperwork, administration and cost for them to collect and remit taxes in all of those locales would be significant.  Add to that the differing sales tax amounts on different classes of goods and it's a huge challenge.  And if they get it wrong, the last thing they'll want is an attorney general or collector of revenue from a state or locale to come knocking on their door to do an audit.  So they will likely decide not to sell online. 

When you consider that online sales only represent about 9-10% of total sales across retail categories, I don't know that this is THAT big of an issue in terms of potential revenue to states and localities.  Categories like clothing and electronics are the highest, while food is maybe 2-3% of all retail sales.

Here's a quick summary of percent online sales by category - https://www.cbre.com/research-and-reports/E-Commerce-by-Retail-Category-Finally-Revealed-by-US-Census-Bureau
« Last Edit: April 17, 2018, 07:16 PM by neilc »

Offline JimH2

  • Posts: 568
Re: South Dakota v. Wayfair Inc.
« Reply #3 on: April 18, 2018, 11:17 AM »
The excuse that the playing field is not level for mail order retailers is just a crutch for the reality that Main Street stores are not viable solutions. When Amazon started adding sales tax it did not slow me down (nor would paying slightly more). They make it too easy to shop and if there is an issue make a return and I don't have to drive anywhere.

The sales tax that the states will get will be blown just like the tobacco settlement money. If it is all of the money they are claiming then a reduction in the income tax and/or sales tax will be in order since they have gotten by for this long. The reality is that the amount of sales tax they are missing out on is getting smaller every year as more retailers start collecting it and I think almost all of the big retailers already do. There are some outliers, but they are few and far between and going after small businesses selling a few thousand items in different states is not going to result in a big return.

My concern is that once they get this money there will be a push to collect a "mail order tax" since the playing field will still not be level: Mail order businesses do not pay any local property taxes or local business taxes (a percentage of revenue, not profit) or use the services of other local business that Main Street stores do. The future of local business is selling something that cannot be shipped (e.g. services, manufacturing and food). More and more people are moving out of high tax states and into ones that don't have sales tax or income tax. The government needs to scale back or find other revenue sources.

Looking to the future 3D printers will make a lot of businesses obsolete. No need to buy something when you can get plans to make it yourself. This is done on a very small scale due to cost and other limitations, but that will change. Also, the auto industry is going to succumb soon. There dated model of states requiring dealerships is going to die off as are the need for car repair. Just look at Tesla's cars that require very little maintenance due to the not having transmissions or engines.

Online McNally Family

  • Posts: 599
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Re: South Dakota v. Wayfair Inc.
« Reply #4 on: April 18, 2018, 01:45 PM »
I wonder what percentage of Festool sales are conducted online/out of state?  I suspect it is much higher as is the general trend year over year for other items (see Amazon's record holiday sales this year over say 5 years ago).

If I was a business dependent on out of state online sales, I would be very worried right now.

https://www.racked.com/2018/4/17/17242952/south-dakota-wayfair-online-sales-tax-supreme-court 
« Last Edit: April 18, 2018, 04:44 PM by McNally Family »
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Offline neilc

  • Posts: 2399
Re: South Dakota v. Wayfair Inc.
« Reply #5 on: April 19, 2018, 08:27 PM »
This was in today's Wall Street Journal. 

‘Our states are losing massive sales-tax revenues that we need for education, health care, and infrastructure,” South Dakota’s Attorney General Marty Jackley told the U.S. Supreme Court Tuesday. His state’s Supreme Court opined that sales tax revenues have “declined.” The state Legislature, citing its own “finding” to this effect, enacted a law requiring out-of-state retailers to collect sales tax on purchases shipped to South Dakota.

But in addition to running counter to decades of precedent governing interstate commerce—which Mr. Jackley was in court asking the justices to overturn—the law is based on a false premise.

The state’s (South Dakota) own data show that sales and use tax revenue grew from $787.7 million in 2013 to $974.7 in 2017—considerably faster than the state’s rate of economic growth. The governor’s budget for 2018 projects the state’s sales and use tax revenue will be more than $1 billion, 4% higher than last year, with no change in rate. That’s 29% higher than five years earlier. Sales-tax revenues have been booming in other states, too.

How did a case get all the way to the U.S. Supreme Court with such basic facts still in dispute? South Dakota did not have to prove its claim because its legislature created a “fast track” litigation procedure to move the case up to the state’s high court without the usual elaborate fact-finding, discovery, witnesses and trial.

Offline Gerald_D

  • Posts: 297
Re: South Dakota v. Wayfair Inc.
« Reply #6 on: June 21, 2018, 10:50 AM »
I think the national news is reporting on this too, but local news here in South Dakota is reporting that Supreme Court ruled in favor of state of South Dakota in this case.  I understand both sides of this issue- I'm thinking the winners from this ruling will be brick and mortar retailers and big online retailers (who can absorb the compliance costs) but will hurt small businesses that sell across state borders (think Etsy-type retailers).  No matter what side of the issue you are on, no doubt we will all feel the impact of this one.

Regards,
Gerald

EDIT:  OK- I guess I didn't understand this as well as I thought  (I wonder if anyone really understands tax law anyway...  [embarassed])- talked with a couple 'tax' folks and it sounds there could be some minimum thresholds for this change.  I suppose these could be different for each tax jurisdiction in the US, so may still be a compliance issue.  In the end when the dust settles, the states will be happy and it remains to be seen if anyone else will.
« Last Edit: June 21, 2018, 11:27 AM by Gerald_D »
Gerald
I have Festools- Big and Small and a few other tools

Offline DeformedTree

  • Posts: 54
Re: South Dakota v. Wayfair Inc.
« Reply #7 on: June 21, 2018, 11:04 PM »
It's not going to change things much.  It's a myth that "no tax" is why people bought stuff online. If that were the case, no one in Sales Tax free states would have done online shopping.

People bought stuff online because for the first time they could

A) buy stuff they couldn't find locally
B) be able to buy the specific combo/version/model of what they wanted, no what the local store carried.
C) not have to pay an exorbitant price because there was 1 place in town selling what they wanted.
D) convenient hours.

Sales tax never was a real part of the equation, shipping negated tax savings for most purchases and having to wait days/weeks was a huge drawback.

Brick and Mortar stores used the sales tax reason to dodge the fact a lot of them just simply ran bad businesses that people were more than happy to see die, the internet killed bad/flawed businesses.  Lots of brick and mortar stores have done great since the internet, it's not about being online store or brick and mortar, it's about what you do/how you do it and so forth.  There are markets where major names are all but gone (Blockbuster Video), yet video rental stores live on (Family Video), simply because other businesses in the same game were run/managed vastly better/smarter, not because the market died, or some other industry destroyed them.

Offline RussellS

  • Posts: 202
Re: South Dakota v. Wayfair Inc.
« Reply #8 on: June 21, 2018, 11:21 PM »
People bought stuff online because for the first time they could -
A) buy stuff they couldn't find locally
B) be able to buy the specific combo/version/model of what they wanted, no what the local store carried.
C) not have to pay an exorbitant price because there was 1 place in town selling what they wanted.
D) convenient hours.

I would add E) It so much Easier to buy stuff.  It takes hours to figure out which store is selling what you want to buy and then to go to that store and buy it and go back home.

I'm glad the court ruled this way.  It levels the playing field, or reduces the excuses of local stores.  My main reasons for online buying are the ease I just mentioned, AND the far better prices.  Everything online is half the price of local stores.  Same products.

Back to Festool sine this is a Festool forum.  This decision could affect the online Festool retailers.  Guessing they sold with no sales tax.  And are small sellers.  Now they will be required to collect sales tax, so no price advantage due to sales tax for customers who have a local Festool retailer.  And for the small time online Festool sellers, they will have costly processes for collecting sales tax for the hundreds or thousands of different places/categories across the US.  Might put some of them out of the online business due to the increased cost.  I have two local Festool retailers so buying Festool online was never appealing.

Offline DeformedTree

  • Posts: 54
Re: South Dakota v. Wayfair Inc.
« Reply #9 on: Yesterday at 12:38 AM »
I'm not an e-commerce sales person, so I could be wrong, but I would think pretty much any platform someone would use for handling their sales would handle all the sales tax stuff automatically.  After all, the buyer just gave you their address, and it's all electronic in a database. It should do everything that is needed just fine.  Now if you say don't take online sales, but are doing it all buy "call us" or "email us" and doing the whole process by hand, that's a different story, but at that point that "online" retailer is basically a brick and mortar just not one you are walking into.

Eventually the US will get to a VAT tax like system across the country.  End the madness of taxes being different for everything in every state.  Wonder how well it works out right now if someone in one state that has sales tax but has no sales tax on food orders food from someplace across the state line  [unsure].

Far as stuff being cheaper, that varies a lot. Plenty of stuff is more expensive online.  The old tricks of retail stores still apply,  start cheap, get a buyer base, kill off some competition then start raising the prices and people don't notice because they just assume online is cheaper. 

Online RKA

  • Posts: 1055
Re: South Dakota v. Wayfair Inc.
« Reply #10 on: Yesterday at 07:35 AM »
You’re partially right, the only overhead that remains to be solved is getting the money to the state AND local taxing authorities. That’s solvable by allowing the payment processors to act as a clearing house for the funds and directly forward to taxing authorities in exchange for a small percentage.

Not enough have wanted the change until now. So here it is.
-Raj

Offline DeformedTree

  • Posts: 54
Re: South Dakota v. Wayfair Inc.
« Reply #11 on: Yesterday at 10:27 AM »
Sounds like something that will change very quickly now.  Since it's no longer "Stores: oh this is to much burden since the tools don't do this so we can't make such a change". now it's "Software/Processor: Since you all have to do this, all our tools for commerce do this automatically"