With its ruling in South Dakota vs. Wayfair, Inc. the Supreme Court has created a situation relevant to all jewelry retailers. By ruling that internet retailers can be required to collect sales tax in states where they don’t maintain a physical presence, the court has removed a meaningful competitive advantage from ecommerce while simultaneously opening the door to tax collection requirements that may be a significant burden for small business owners.
Overturned: 25+ Years of Established Business Practices
The South Dakota vs. Wayfair, Inc decision overturns a previous decision by the Supreme Court (Quill Corp vs. North Dakota) which said online retailers didn’t have to collect sales tax unless they had a substantial connection to the state. While this specific decision relates to South Dakota, it does impact the rest of the nation. The Tax Foundation, a Washington, DC think tank that researches federal and state tax policy, reports that 31 of the 45 states that collect sales tax already have laws in place that allow them to expand their collection efforts now that the physical presence standard has been eliminated. States that do not have these laws in place can be reasonably expected to add them.
What Will Online Retailers Need to Do to Comply with the Law?
Collecting and paying sales tax will not be a new experience for most jewelry retailers. The challenge lies in the fact that there are over 12,000 different state and local tax authorities in this country. Retailers who are using an ecommerce platform that includes the relevant tax tables, such as Shopify or our own proprietary platform Stella, are ahead of the curve. Retailers who don’t have these tools already in place will need to explore their options and identify the tools that will work best for them.
It will also be important for online sellers to maintain an active awareness of changing tax laws. While the law in South Dakota doesn’t allow for retroactive collection of taxes, that’s not necessarily the case everywhere. Furthermore, collecting and paying sales tax can trigger state income taxes and other taxes for the retailer. It’s a very good idea for all jewelers who sell online to consult with their financial professionals now to ensure they have necessary systems in place when they’re needed.
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