South Dakotans may see lower rate after sales tax ruling

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The US Supreme Court. Jim Watson AFP Getty Images

The court found the standard doesn't jibe with current-day online retailing.

This change is expected to boost revenue for the state and traditional main street businesses.

Now, for the first time since 1992, any of the USA states have the right to impose a tax on online shopping.

"Those kinds of businesses that are selling out of Montana, online, into other states, may lose a little bit of a competitive advantage that they might have had because they were not required to charge other state's sales taxes", Barrett says.


For small businesses, local advertising may now more effectively draw consumers away from the e-Commerce giants.

Shares in online retailers like Amazon.com (amzn), Wayfair (w), Etsy, (etsy) Overstock.com (ostk) and eBay (ebay) all fell in the wake of the decision.

"There are two very significant consequences brought about by Quill: First, our states are losing massive sales tax revenues that we need for education, healthcare, and infrastructure". Trump tweeted. "Big victory for fairness and for our country".

Legislative opponents had argued that the state would do better to wait and see how the court ruled and Congress reacted. Today's ruling on South Dakota vs. Wayfair, Baker told reporters, helps level the playing field with the brick-and-mortar retailers.


The 5-4 decision overturns the 1992 Supreme Court ruling that barred states from collecting sales tax in states where they have no physical storefront.

If an online consumer purchases an item sans sales tax, the tax is still owed but the customer bears the responsibility of reporting the amount.

Justice Anthony Kennedy wrote that the previous decisions were flawed. Kennedy wrote that the rule "limited States' ability to seek long-term prosperity and has prevented market participants from competing on an even playing field". States will now be able to force more people to pay sales tax when they make purchases online.

The majority of USA states collect some sales tax on retail purchases, typically charging customers between 4% and 8% for each transaction.


North Dakota loses out on an estimated $50 million a year in sales tax that now doesn't get collected by out-of-state sellers, according to tax department spokeswoman Jen Raab. Amazon collects sales tax for products that it sells directly, but third-party vendors that sell goods on the site may not collect sales tax.

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