U.S. Supreme Court Decides upon Online Sales Tax

Chad Silver

Chad Silver

Managing Partner of Silver Tax Group, author of the book "Stop the IRS". Practicing a variety of tax issues, regulations, laws and rights. Specializing exclusively on tax matters involving IRS audits, negotiation, settlements & compromises.

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Prior U.S. Supreme Court decisions have placed restrictions on state when it comes to taxing interstate commerce. However, its most recent case upon this issue appears to change all of that.

In South Dakota v. Wayfair, our nation’s highest court decided that one state’s tax on internet retailers placed no burden upon such commerce. In the court’s opinion, the state’s tax system had “several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce.”

How the court came to its conclusion

The court’s opinion highlighted three points in support of the state law:

  1. The law provided a “safe harbor” for those only doing a limited amount of business within that state.
  2. The law contained no retroactive payment requirements.
  3. This particular state was one of 20 in adopting the Streamlined Sales and Use Tax Agreement. This meant the state followed a uniform set of rules, tax rate structure, and definitions pertaining to products and services.

The dissent felt it was up to Congress to fix any existing problem. But as of yet Congress has not come to a decision regarding any version of a federal solution.

Michigan is currently one of 31 states to implement laws taxing internet sales. Whether Michigan will make any additional revisions to its sales tax laws as a result of this decision is impossible to yet predict.

What should the taxpayers do?

As both federal and state officials have the power to tax its citizens, taxes will remain complex. And online income will always be revenue both the state and federal government will wish to tap. Having experienced tax attorneys on your side to help you understand your obligations and options is thus a great benefit.

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