It happened to me when I was purchasing dog food at my favorite online retailer. The total was a few dollars higher and this was unusual, so I checked the invoice. There it was. Over $3 in sales tax. I could have sworn it wasn’t there before so I checked my order history and sure enough, it had never been charged before. Luckily the website had online chat so I asked about it. I know it’s only a few bucks, but hey it wasn’t there before and I’m a curious person. The rep explained to me about this new law in place for online retailers. These retailers have to now charge tax according to the state the purchaser is in, as opposed to where the actual business is located in.
I dug into this new sales tax law for online retailers a little more…
It all started with South Dakota…and Wayfair. You see, South Dakota was really upset that they felt they were losing tax money when Wayfair would sell so much to their citizens, but the state wouldn’t receive a dime in taxes. So, you have South Dakota basically saying, “Hey, if you sell to our SD residents, we should be able to collect tax from that.” The reason that hadn’t been the case is because Wayfair isn’t located in South Dakota. It went to the Supreme Court and the ruling came down in favor of South Dakota.
The Supreme Court changed the online game for all of us (retailers and consumers) by saying just because you don’t have a physical location in that state, does not mean you get out of paying taxes.
You’ll start to see online retailers charging sales tax where it wasn’t charged before. They charge based on the state you’re ordering from…and the list of states is growing.
This is a pretty big loss for the online world and a not-so-surprising win for the states and taxes.
Here’s a current list of states that require your online store to charge tax for their orders:
Alabama, Colorado, Florida, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New York, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, Texas, Vermont, Washington, and Wisconsin.
The list is growing and the specificities in each state are unique to that state, so make sure to stay up to date on all this information and implement on your eCommerce site right away.