KANSAS CITY, Mo. --- The next time you buy something online, expect to pay more.
The U. S. Supreme Court Thursday ruled 5-4 in South Dakota vs. Wayfair that states can now collect sales taxes from all internet purchases. This reverses the Court's 1992 decision that state's could only collect sales tax from online retailers with a physical presence in that state, such as a warehouse or office building.
Many brick and mortar stores have shut down in recent years as they’ve struggled to compete with online retailers. If you buy something at a store in Kansas City, you're going to pay a nine to 10 percent sales tax. But if you buy that same product online, you can likely avoid that charge.
That could now change with this decision.
Lawmakers in each state will first have to pass laws forcing online businesses to charge sales tax for all online purchases made in their state. Missouri officials believe this law will bring in an extra $275-million more in sales taxes every year.
In Kansas, it could mean an extra $200-million to spend on education, senior services, roads - whatever lawmakers decide.
Many believe brick-and-mortar stores will get a boost in traffic if shoppers see there is no clear financial advantage to shopping online.
"Out-of-state retailers get a price advantage, and all we’re asking is the Supreme Court to make it a level playing field and treat everyone the same," South Dakota Attorney Marty Jackley said. "This is not a new tax. This is a tax already due."
But some fear this decision will hurt small online businesses. If they are forced to charge sales tax, how will they keep track of the amount they owe each state?
"It’s a real terrible burden on small business people who are simply just trying to make a couple extra bucks on the side," Jonathan Hoenig, founder of Capitalist Hedge Fund, said. "That’s who the internet has benefited and that’s who this new ruling will hurt the most."
Some are now calling for Congress to pass a law limiting online sales tax to the large online retailers like Amazon and eBay, giving an exemption to smaller businesses.