If you’ve reached the end of the online checkout process recently only to find that your purchase is about 6 to 10 percent more expensive than you expected, you’re not alone.
Many e-commerce retailers have begun collecting sales tax nationwide for the first time ever as a result of a June decision by the U.S. Supreme Court. After hearing opposing arguments from companies like eBay and Etsy, the court ruled 5-4 in favor of allowing states to require online retailers to collect tax even on out-of-state purchases.
Until recently, e-commerce sites could avoid charging taxes in states where they did not have a significant physical presence, such as a store, office or warehouse, but as of Oct. 1, 11 states — Alabama, Illinois, Indiana, Kentucky, Maryland, Minnesota, Nevada, New Jersey, North Dakota, Washington and Wisconsin — have begun enforcing legislation intended to bring in funding as more shopping moves online, with others on track to start by the end of the year.
The states are following in the footsteps of South Dakota, which brought the case against online home goods retailer Wayfair Inc. and which requires out-of-state retailers to collect sales tax if they “deliver more than $100,000 of goods or services into the state or engage in 200 or more separate transactions.” South Dakota claimed to be losing out on $48 million to $58 million annually, the court stated. According to the Government Accountability Office, states could have collected an extra $13.7 billion in taxes in 2017 if e-commerce sites charged customers nationwide.
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Shoppers who don’t live in any of the states named above can still get away with scoring a tax-free Cyber Monday purchase if they buy from a company located out of state (read: not Amazon or Walmart, which have stores and warehouses all over). In these cases, consumers are supposed to pay the sales tax to their state themselves, but as the court itself noted, they rarely do.