A bad ruling. To let it stand, the more reasonable interpretation is that the purchaser has to remit sales tax to their own state. But it may not stand on further challenge. For example, why should the state the items are leaving not be entitled to sales tax?
The law already was that the purchaser should remit use tax to the state for purchasers from out-of-state vendors.
But compliance was basically non-existent; most people didn't even know that they owed use tax on such sales, much less what rate would apply. Sales tax is basically use tax, but with the burden of compliance placed on the seller.
As for why the sellers' state is not entitled to sales tax: in the old-time days, pre-Amazon, this was how many (but not all) tax jurisdictions determined sales tax. (For example, CO's sales tax regime pre-Wayfair used to use the seller's address to determine tax rates.) But the rise of Amazon and online sales meant that sales tax would go to a few jurisdictions where the sellers were located, rather than be spread out where the buyers were located. As sales tax pays for things like roads, etc., that these remote sellers used, many jurisdictions thought this was unfair, and moved to change sales tax sourcing to destination-based sourcing (i.e., to taxing based on the customer's location). And in the Wayfair decision, SCOTUS said this was acceptable. (At the national and international level, destination-based sourcing has been the law for decades, and has been part of America's tax treaties dating back to at least the 1970s.)
I was just wondering about this. I recently purchased something online, and when I got the email receipt it had all the state and county and city level tax breakdown. I thought to myself, was this tax being charged due to the billing or shipping address? Apparently it was the shipping address when I asked.
> But compliance was basically non-existent; most people didn't even know that they owed use tax on such sales
As a business owner, I would ask myself “how is this my problem?” If a stare has a problem with residents not complying with a tax, I am not sure why a business in another state should care. If I buy a product from China, are they required to collect sales taxes for Montana? Of course not. So not sure why a business located in a sovereign US state has any obligation to follow laws of some other state in which they don’t operate. It’s the purchaser that has the relationship with their local state, not the seller.
The Wayfair decision was ridiculous. The Quill decision it overturned was the correct answer in terms of interpreting the Interstate Commerce Clause. Interestingly, Amazon and other large e-commerce companies don’t have a problem with collecting sales taxes everywhere because their compliance costs are trivial as a proportion of revenue.
It happens with brick and mortar stores, too. The MO/KS border has a large population buildup. It's totally normal to shop in the state that has the best tax rate for your goods. If you apply the ecommerce logic to this, you need to have people show ID at stores so the store can apply the right tax rate.
It seems to me the seller's state has just as much claim to sales tax as the buyer's. The seller is potentially making use of business development credits etc, etc, originating in their state.
This is an issue that falls under the federal government.
No, you guys are both misunderstanding how the sales sourcing works: it's the address where the sale is deemed to have taken place.
For brick-and-mortar sales, that is the physical location of the store: you will be taxed the appropriate rate for the address of the store. Note that this includes includes online orders picked up from a store location, and in-person orders even if the goods are not actually physically located at the store, such as if they are shipped from a separate warehouse to the store. However, delivery orders might be subject to different rules, depending on the state; some states use the address provided by the customer as the location of the sale, so that in-person sales delivered to out-of-state addresses might not be subject to sales tax.
For online sales, the sale is (now) treated to have occurred at the address provided by the buyer for delivery, because that is the most expedient way to determine address. The EU has made waves about using IP addresses or geolocation to determine the actual location of the buyer at the time the order is submitted, but AFAIK both proposals are DOA due to infeasibility.
It seems to me the seller's state has just as much claim to sales tax as the buyer's. The seller is potentially making use of business development credits etc, etc, originating in their state.
No, the seller's state doesn't have a claim to the sales tax, because sales tax is a tax on the customer not the seller. It is simply collected by the seller because the compliance is easier to enforce. (Caveat: in Hawaii, the GET is a tax on the seller that can be passed on to the customer.)
You are fundamentally misunderstanding that a sales tax is a tax on the customer not on the seller. This is because sales taxes are fundamentally use taxes with the compliance burden shifted from the customer to the seller.
You can argue against reality all you want, but it won't change decades of history, nor will it change how the world actually works.
> If I buy a product from China, are they required to collect sales taxes for Montana? Of course not. So not sure why a business located in a sovereign US state has any obligation to follow laws of some other state in which they don’t operate.
Luckily, my home state of Virginia has exclusions. From what I understand, until congress acts, more lawsuits need to happen from companies challenging states to pay these bullshit taxes. VAT is also a terrible burden.
The trend in courts and legislatures, both in the US and in Europe and the ROW, is toward customer-based tax sourcing and away from seller-based sourcing.
You can thank Amazon for abusing seller-based sourcing for this shift, though it has actually been a decades-long process that began before most people on this forum were born. Amazon simply accelerated the transition.
I think due to South Dakota v. Wayfair, states now have more power to define what constitutes "nexus"... so there are all these special rules and thresholds now to keep track of (different for every state) that define whether you have economic nexus and need to collect sales tax there. If you hit the threshold and/or other rules apply, you're obligated to collect sales tax... but of course you can't do this until you have secured a license in that state. This was my read on the situation, but if I'm missing something definitely let me know.
