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Friday, June 22, 2018

SCOTUS internet sales tax ruling

image credit: usatoday.com

This SCOTUS decision will affect all of us. Sparta Report just announced its decision to close down its little sales center at its blogsite:

effective today, the Sparta Report Shop will no longer be in operation due to the disastrous decision by the Supreme Court’s “republican wing” to allow states to charge out of state businesses with sales tax. We are not interested in complying with 2.5 thousand and more localities and states and keeping track of the various stupidities of the corrupt local political tax wrangling.

Taxes: Whatever you think about the issue of taxing internet sales, the simple fact is that the Supreme Court has just guaranteed that people across the country will now be paying more in state taxes. It's hard for us to see how this is good news.

In its 5-4 decision on South Dakota v. Wayfair, the court overturned two previous rulings that prevented states from taxing sales of out-of-state companies. That meant a catalog company based in Maine didn't have to navigate 45 state sales-tax laws to figure out how much each customer owed, and then remit that money to the right states.

Brick-and-mortar stores have been trying to lift this ban for decades, because, they say, it unfairly tilts the playing field in favor of catalog and online retailers. 

According to the Government Accountability Office, this break cost states up to $13.4 billion in lost revenue last year alone. And, retailers say it cost jobs and hurt local economies.

Not surprisingly, Amazon.com  (AMZN), Shopify (SHOP), Etsy (ETSY), Wayfair (W) and other e-commerce stocks dropped on Thursday.

The Supreme Court ruling was notable not just because it did something it rarely does — namely, overturn previous decisions. (The most recent, Quill v North Dakota, was in 1992.) The court also split in a highly unusual way.

On the majority side were rock-ribbed conservative Justices Clarence Thomas, Samuel Alito and Neil Gorsuch, who sided with Justice Anthony Kennedy's opinion. 

But so did stalwart liberal Justice Ruth Bader Ginsburg. Kennedy argued that the explosive growth of online retail rendered the court's previous rulings outdated.

Three of the other liberals on the court, Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor, sided with Chief Justice Roberts' dissent. Roberts argued that it should be up to Congress to make a change like this.

Whatever the merits of the decision, the Court's ruling means not only higher taxes for consumers, but higher prices.
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More Taxes To Come?
Worse still, the court may have opened the door to letting states impose other taxes on out-of-state firms.

Grover Norquist of Americans for Tax Reform argues that states could use this ruling to impose corporate taxes and even income taxes across state lines.

"If physical nexus is no longer required for sales taxes ,then it is no longer required for personal or corporate income taxes," he said. "Now, California (or any state or city that loses population through exit) can tax people and businesses who do their best to avoid that state or city."

If you think that's a fanciful prediction, you haven't been paying attention. State governments will take every opportunity they can to raise taxes — especially if their own residents aren't the ones paying them.

In the end, it makes Supreme Court Chief Justice Roberts' dissent look all the wiser.

Read the rest of the IBD report here.
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