A recent U.S. Supreme Court ruling has many small online retailers panicking. The high court ruled that states are now allowed to collect tax from online sellers who sell to consumers in their state. In other words, if a Seattle resident orders from an online store based in Tennessee, the Tennessee-based stored will need to start charging buyers sales tax, as well as paying this tax to Washington state.
Retail giants will likely see little impact on their bottom line
For large online retailers like Amazon, Target and Walmart, this will potentially be a huge amount of money. However, since these retailers all have profits in the billions, their business will likely not suffer from such tax law changes.
Small online retailers will have to grapple with different tax rates
For small business owners who ship throughout the country, the changes could be much more damaging. There are a few states, Oregon, Montana, Delaware and New Hampshire, that do not collect sales tax. According to Forbes, however, the rest of the country collects tax at varying rates, and within those states, tax rates vary by county and city.
Goods are taxed differently in different places as well. Forbes points out that New Jersey taxes marshmallows because these are considered a candy, but does not tax marshmallow fluff because it is viewed as a food.
Washington will charge retailers with sales that hit a certain threshold
Some states have already started to move forward with changes in tax law regarding online sellers. For online stores who sell to customers in Washington, the Washington State Department of Revenue has rolled out new guidelines.
Effective Oct. 1, 2018, you do not have to pay sales tax as an online seller, if your retail sales total less than $10,000, and you have fewer than 200 transactions with Washington residents. However, if you sell less than $10,000 but conduct more 200 transactions, you will have to pay sales taxes on these transactions. For all sales totals over $10,000, you will be required to pay Washington state sales tax.
For those that are required to collect sales tax in Washington state, you are required to register with the Department of Revenue. You will also need to file a tax return and submit these taxes to the state.
For online sellers that sell throughout the U.S., the tax laws will likely continue to evolve on a state-by-state basis.