One of the appeals of online shopping is that in many cases, internet-based retailers don't collect sales tax. Much to the dismay of internet shoppers everywhere, that's about to change, because of a recent ruling from the U.S. Supreme Court.
In June, the high court considered a case between e-commerce furniture retailer Wayfair (NYSE:W) and the state of South Dakota. The state had passed a law imposing sales tax on retailers selling at least $100,000 in merchandise to South Dakota shoppers, but Wayfair argued that because of previous Supreme Court cases, the law was unconstitutional. The Supreme Court reversed its previous line of decisions, allowing South Dakota to move forward with forcing Wayfair to collect tax.
The decision opens the door for the 45 states that charge sales tax to start forcing internet retailers to collect it. State sales taxes in most of the states that collect it range between 4% and 7.25%, but when you add in local sales taxes that cities, counties, and other local governments are able to tack on, combined rates can rise as high as 10%.
What the decision means is that shoppers online won't be able to avoid having to pay sales tax at the time of purchase. That'll put online retailers on an equal footing with brick-and-mortar retailers located within those states, which have always had to collect sales tax.
Technically, the decision shouldn't cost shoppers any extra money, because they've owed use tax on the goods they've purchased online. Given the near total disregard among the public for use tax laws, however, many shoppers will see the imposition of online sales tax as an extra financial burden they'll have to bear themselves.