What the Supreme Court’s Tax Decision Means for Florida E-Commerce Businesses

What the Supreme Court’s Tax Decision Means for Florida E-Commerce Businesses

Generally, e-commerce businesses in Florida were exempt from collecting taxes to sales made to out of state customers. However, on June 21, 2018, the Supreme Court ruled in South Dakota v. Wayfair, Inc., et al., No. 17-494, that states have the authority to require out of state businesses to collect sales tax on sales made to residents of that particular state.

The recent ruling from the U.S. Supreme Court allows states to require your Florida based business to collect sales tax to residents of that particular state. So for example, the State of South Dakota requires Florida businesses that sell $100,000 worth of transactions in a year or 200 separate transactions to collect sales tax on sales made to residents of South Dakota. This applies even if the Florida business has nothing to do with South Dakota, except for making a sale to a resident there.

We expect other States, counties, and local jurisdictions to pass similar legislation. Best practices moving forward for e-commerce business may be to register to collect sales tax in all states that have such requirements. We will keep you informed as we continue to learn more about this ruling.

How Did This Come About?

The Supreme Court’s tax decision came out in 5-4 against Wayfair, Overstock.com, and Newegg and in favor of South Dakota in case No. 17-494. Authored by conservative Justice Anthony Kennedy, the ruling revives a much-disputed 2016 law out of South Dakota that required larger online businesses to collect sales tax from their customers. It is possible that the law could face further legal challenges, although that has yet to be decided as of the writing of this article.

A majority of the states – 45 out of 50, to be exact – already collect sales tax within their borders. It only makes sense to assume that this game-changing decision will lead to many of these states imposing sales taxes on e-commerce in the very near future.

The winners here, clearly, are states like South Dakota or Oklahoma that rely on sales tax as their primary revenue stream. It’s estimated that their income may be raised by as much as three percent. The losers are obviously those companies who thrive, or possibly even are only able to survive because of e-commerce, as this ruling has destroyed one of the stronger advantages that online businesses have held over physical stores since the information age began.

Looking to start a business or grow your current business? Contact FL Patel Law today by visiting our website or calling 727-279-5037.