Washington state this week wisely got on board the sales-tax-revenue train in the wake of a Supreme Court ruling this summer that gave it and 39 other states the green light.
The U.S. Supreme Court ruled states can require online retailers without a physical presence in the state to collect the sales tax owed to them.
Forty states, as well as the Trump administration, asked the high court to overturn its 1992 decision — Quill v. North Dakota. The states argued the court’s decision in that case, which focused on mail-order catalogs, is now obsolete because of the growth in e-commerce.
South Dakota enacted a law in 2017 that required out-of-state retailers with sales exceeding $100,000 or 200 transactions annually to pay sales tax. The law was challenged by online retailers Wayfair, Overstock.com and Newegg. South Dakota claimed it was losing $48 million to $58 million a year in revenue because of the e-commerce expansion as well as online businesses failing to pay sales tax.
Now, Washington and 29 other states are acting to pass regulations to collect sales tax from online retailers.
In Washington, according to The Spokesman-Review newspaper, companies that have more than $100,000 in retail sales or 200 transactions must register and collect sales tax from customers and pay it to the state.
These new rules are going to be an administrative headache for online merchants, and that’s unfornate. Retail business, whether online or at a brick-and-mortar store, have to work hard to make profits.
But as a matter of fairness, it’s past time that online retailers are on a level playing field with Main Street merchants.
Merchants with a physical store in Washington state are required to charge up to 10 percent more for goods than internet-only sellers so they can pass the tax collections to the state and local governments.
Adding to the unfairness was U.S. Supreme Court ruling that restricted tax collections to retailers that had a physical presence in that state. As a result, some online merchants were collecting taxes while others were not.
Washington state simply changed its tax code to bring it into the 21st century.