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>The Internet Taxes that Could Be Coming

>The Internet Taxes that Could Be Coming
Mike Brownfield April 12, 2012 at 9:02

If you’ve ever bought anything on the Internet, over the phone, or from a catalog, you might have noticed that when you buy from some stores, you don’t pay any state sales tax, but if you buy from other stores, you do. That’s because a Supreme Court decision protected out-of-state businesses from revenue-hungry states. But a new bill working its way through Congress would change all that, turning every online retailer into a sales tax collector. And that’s legislation Congress should reject.

Back in 1992, the Supreme Court ruled in Quill Corporation v. North Dakota that a state cannot force a retailer who doesn’t have any physical presence in that state to collect sales taxes from Internet, phone or catalog sales. So if you ordered a book online from BarnesandNoble.com and there’s a Barnes and Noble store right down the street from your house, you’d have to pay sales tax. But if you ordered that book online from a mom and pop bookstore with one location halfway across the country, they wouldn’t have to collect sales tax from you.

In the Quill case, North Dakota tried to force out-of-state retailers to collect sales taxes and remit them to North Dakota, even if they didn’t have a physical presence in the state. Quill Corporation, which sells office supplies and is based in Delaware, had offices and warehouses in Illinois, California and Georgia, but didn’t have any bricks, mortar, employees, or sales representatives in North Dakota. It did, however, have 3,000 customers there and $1 million in annual sales, so North Dakota wanted Quill to collect tax on those sales.

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