As we have all heard, the US Supreme Court ruled on Thursday that all states can collect sales tax for any online purchases. While this will take years to play out as states decide the amount to tax, what to tax (inbound transactions, outbound distribution) and who to tax (in-state, out of state), there are some clear winners and losers.
- States: Most state and local budgets desperately need the money.
- 139 of Top 500 internet Retailers: Not all collect but this levels the field in the pricing game (where consumers care or seem to notice)
- Tax Service Providers: Avalara (nice IPO timing), Taxjar, H&R Block and other service providers. This will complicate tax collection and remittance for businesses of all sizes. The sheer number of jurisdictions is in the thousands.
- Amazon: The behemoth already collects where required for 48% of their business and this will force their 52% of their 3rd party sellers to start collecting. Amazon charges a fee to sellers they collect on behalf of.
- Amazon Small and Medium Size Sellers: Most Amazon 3rd party sellers don't collect. Once they start, Amazon will charge a fee and the sellers will add the cost and labor burden of collecting and remitting.
- Wayfair, Ebay, Etsy and Other Smaller Marketplaces: Most sellers on these platforms and the marketplaces themselves do not collect unless they are larger businesses.
- Consumers: Eventually the cost purchasing goods will be higher on almost all purchases.
So does this ruling really matter and will this slow the shift to online? I don't believe so for a number of reasons:
- Time - This change won't happen overnight as states grapple with the best way of implementing, communicating and policing the new requirements.
- Sales Taxes are Hidden - Collection and recognition of taxes happens at the checkout and isn't stated upfront in the cost of the product, most customers are already captive or convinced of the purchase.
- Convenience - What drove most customers to online isn't changing. Online purchasing will still remain incredibly convenient and convenience is the number one attraction to ecommerce.