We are fresh into the new year of 2020, and yet the April deadline to submit federal income tax returns is looming. As always, the tediousness of the process will be infuriating for all. But if you thought complying with the federal tax code was wearisome, imagine being a Georgia small business having to comply with an additional 44 sales tax regimes. Well, the Supreme Court of the United States recently determined in the case of South Dakota v. Wayfair, Inc. that this would be the future plight for mail-order businesses in the U.S.
Like Georgia, South Dakota is one of the 45 states that impose sales taxes on certain products, and these tax regimes make the seller responsible for charging and collecting the sales tax. So your mom-and-pop corner shop located within Georgia charges and collects sales tax on the product it sells, and then pays them to the state tax authority. But should this mom-and-pop shop wish to expand its business by offering mail-order goods to South Dakota customers, South Dakota says mom-and-pop must comply with its tax regime.
Complying with an additional tax regime takes time, effort, and resources. For large, established businesses like Amazon, this is no problem. But for small businesses, complying with an additional 44 tax regimes can make expanding their operations nationwide cost-prohibitive.
Prior to the Court’s decision in South Dakota v. Wayfair, Inc., the law had been that a state may only impose its sales tax regime on businesses physically located within the state (Quill Corp. v. North Dakota). This brick-and-mortar standard came before e-commerce and the internet, and South Dakota argued that, given the prevalence of mail-ordering and online sales (rather than walking into, say, your local mom-and-pop, or Target, to shop) the brick-and-mortar standard is outdated, and thus Quill should be overturned.
Since South Dakota v. Wayfair, Inc. overturned Quill, compliance costs have increased for all mail-order and online businesses, and these costs will be passed on to consumers. This is important because, while not everyone sells goods, everyone consumes goods. And this is especially so when it comes to the recent mail-order “subscription box boom” – from “BarkBox,” “Birchbox,” and “Box of Style,” to the “Dollar Shave Club.” And as the consumption of mail-ordered goods increases in popularity, nothing would make established, large businesses like Amazon happier than to see additional costs imposed on its smaller potential competitors.
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