For nearly thirty years, businesses in the U.S. could sell online without being required to collect sales tax in states in which they have no “physical presence.” However, the Supreme Court recently overturned the original 1992 ruling and has now left it up to states to set their own laws for collecting sales tax from eCommerce transactions, regardless of a business’s “physical presence.” Some states, such as South Dakota, already had laws regarding online transactions and sales tax in place before the new ruling and, in the intervening weeks, several others have jumped in with their own legislation to pass.
The most notable criticisms of the Supreme Court’s decision involve the effect it might have on small businesses in the eCommerce space. While the ruling may benefit independent brick-and-mortar stores, many of whom have lost customers to online retailers because of the lack of sales tax, the eCommerce landscape contains far more small businesses than large retailers like Amazon (who already collect sales tax on goods sold by Amazon, but not for items sold by individual vendors through Amazon). These small businesses could be equally impacted in the way brick-and-mortar stores have in the past. Additionally, the distinction between which states have legislation and which don’t, plus the details of the regulations in states that do, creates a mountain of information to parse through. Manual research and configuration could easily require a bulk of effort and resources that small businesses simply can’t allocate.
Fortunately, while the eCommerce industry has grown rapidly over the last thirty years, the technology surrounding it has seen a similar transformation. Keeping track of so many different tax laws in a variety of locations is daunting, so companies have emerged that develop software dedicated to calculating taxes for online transactions. One such company is Avalara, whose AvaTax product contains the most up-to-date tax information and automatically calculates the correct tax for a transaction during the checkout process. The best part: AvaTax can easily be integrated into your existing Magento, WooCommerce, Shopify, or BigCommerce store!
And, as always, your trusted friends at Inverse Paradox are also here to help you navigate the changing eCommerce landscape! Get in touch with us as soon as you can and we’ll get to work assessing your tax configurations and requirements.