Many online shoppers may have to start doing something new: pay sales tax.
The U.S. Supreme Court ruled today states can force online shoppers to pay sales tax.
The decision came in a case that pitted the state of South Dakota and online shopping giant Wayfair.
The 5-4 ruling Thursday is a win for states, who said they were losing out on billions of dollars annually under two decades-old Supreme Court decisions that impacted online sales tax collection.
The high court ruled Thursday to overturn those decisions. They had resulted in some companies not collecting sales tax on every online purchase. The cases the court overturned said that if a business was shipping a product to a state where it didn't have a physical presence such as a warehouse or office, it didn't have to collect the state's sales tax. Customers were generally supposed to pay the tax to the state themselves if they don't get charged it, but the vast majority didn't.
This week's ruling effectively compels online companies to collect sales taxes, instead of letting shoppers pay on the honor system.
Michigan Treasury officials are reviewing the court’s decision. It could have very big consequences.
By one estimate, the state of Michigan loses upwards of a half billion dollars a year in unpaid remote sales tax revenue from online purchases.
And that number is rising as online retail grows.
A state Treasury Department spokesman describes the decision as “an important step forward in the fair administration of our tax system.”
In 2015, Gov. Rick Snyder signed a law allowing the state to collect sales tax from online companies with a footprint in Michigan. The Main Street Fairness Act is expected to collect more than $70 million this year.
