Supreme Court Ruling on Online Sales Tax Stirs Mixed Reactions Among Retailers

Reaction has been swift following Thursday’s ruling by the Supreme Court that opens the door for states to require online businesses to collect sales taxes from companies no matter where they’re based.

While groups like the Retail Industry Leaders Association and the National Retail Federation praised the development as a way to level the playing field for brick-and-mortar stores, the other side of the argument has been equally vocal.

Taking up the former position, Jerry Storch, former CEO of Hudson’s Bay Company, called the ruling “a victory for common sense” on CNBC’s “Squawk Alley.” “The previous law rewarded what amounted to tax evasion that accelerated the demise of Main Street and all brick-and-mortar retailers, including the mom-and-pop retailers and Main Street, who were the hardest-hit,” he said.

As for the claim that it would be burdensome for e-commerce companies to calculate the taxes for each jurisdiction nationwide, Storch said it’s a complete “red herring,” adding online stores are “totally capable” of doing so.

Now that the court has paved the way, Storch expects local legislatures to rush to take advantage of the ruling. And they should, he said. “It’s as if the FedEx trucks don’t use the roads or something,” Storch said. “They use the infrastructure. It’s time for them to pay the taxes.”

On the other side of the argument is Overstock.com, one of the e-commerce companies at the heart of the Supreme Court case. It released a statement saying it will have no problem complying with any laws resulting from the decision; however, it isn’t so sure that will be the case for every business selling online.

“Today the U.S. Supreme Court has reshaped the interstate commerce landscape in a move that could impact small-business innovation on the internet, which has been a driving force behind our nation’s economy for the last 15 years,” said Jonathan Johnson, an Overstock executive and board member.

For that reason, the company is continuing efforts to push for federal intervention. “The framers of the Constitution intended Congress to regulate interstate commerce by thoughtful legislation. To lessen the potential impact of today’s ruling on internet innovation, Congress can and should pass sound legislation allowing states to accomplish their aims while still permitting small internet business to thrive,” he said.

Overstock’s position aligns with Chief Justice John Roberts’, who wrote the dissenting opinion in the 5-4 decision. In it, he writes, those enterprising crafters that have been able to build businesses online will possibly be discouraged by having to deal with state taxes. Ultimately, he said, it would undermine the “vitalizing effect of the internet” on small businesses.

Calling e-commerce “a critical segment of the economy,” Roberts made it clear that he too believes the matter should be handled by Congress. Now, he said, state legislatures will be less inclined to work with Washington on a national solution and more focused on drawing up their individual sales tax laws.

Joining Roberts in his opposition is New Hampshire, one of five states that does not collect sales taxes.

The state’s governor, Chris Sununu, expressed his opinion in a tweet, calling the ruling “outrageous.”

Senator Maggie Hassan said in a statement, “New Hampshire’s lack of a sales tax is a competitive advantage for our state, and this decision will unfairly punish small businesses that are the backbone of our economy.”

Editor’s Note: This story was reported by FN’s sister magazine Sourcing Journal. For more, visit Sourcingjournal.com.

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