After studying this case for over 10 years, and teaching it as an Adjunct Professor at ASU (Arizona State University), Tax and Wealth Expert Tom Wheelwright is calling attention to ways small business may be impacted. Wheelwright emphasizes, “While major retailers such as Apple, Nike, and Bed Bath and Beyond may see little change to their bottom line, small businesses may see all profits disappear, if this ‘Wayfair‘ change is not managed carefully.”
6 Ways ‘Wayfair' Supreme Court Decision Impacts Small Business
- Each States Must Approve Taxes Across State Lines
- Online Retailers Must Track Tax Law Changes in All States Where They Do Business
- Retailers need to watch Transaction Levels
- Retailers may have Extra Costs for New Systems to Collect Online Sales Tax
- Online Retailers Profit/Loss Numbers need Review
- Brick-And-Mortar Retailers Win
1) Each States Must Approve Taxes Across State Lines – Each state can now decide whether to tax most internet sales and most mail orders. While all 50 states are not currently taxing across state lines, it's only a matter of time because it is a revenue-generator.
2) Online Retailers Must Tax Law Changes in All States Where They Do Business – This Wayfair decision gives states the option to charge online sales tax, but it's not applicable in every state now. While many states are on board, small businesses need to monitor these online sales tax changes for each state.
3) Retailers need to watch Transaction Levels – Because each state may set transaction levels for the online sales tax to apply, small business need to pay attention to their total dollars and sales volume by state. For example, if a retailer reaches 200 taxable sales in a calendar year or $100,000 in gross income from customers in South Dakota, retailers must pay sales tax, even if they do not have a physical presence there. Many states are already adopting these South Dakota benchmarks.
4) Retailers may have Extra Costs for New Systems to Collect Online Sales Tax – Retailers may face new costs and extra manpower expenses to collect these new sales taxes, especially small business. While there are systems to help retailers, they may be required to send new payments and reports every month to states for sales tax based on where their customers live. For example, if an online retailer in San Francisco has a customer buy from Orlando, then this California retailer may be required to send a sales tax check to Floridathat month. And for big retailers, systems may need to be set up to send 50 sales tax checks out every month.
5) Online Retailers Profit/Loss Numbers need Review – Small businesses who sell products on Amazon, eBay, and Etsy may no longer see a profit as states start charging online sales tax, unless they are careful and charge, collect and remit sales taxes to the states where they have significant sales. As a result, small business who sell products on the internet will need to carefully review their bottom line.
6) Brick-And-Mortar Retailers Win –The good news for small business is the Wayfair decision is a big win for brick-and-mortar retailers with a physical store who found it hard to compete with online retailers. Consumers will no longer be able to avoid state tax by buying online in most states, and may start going back to the stores.
Bottom line, the internet has changed everything for retailers, and expanded sales opportunities for small business across state lines. According to research firm eMarketer, U.S. ecommerce sales in 2017 grew 15.8 percent to $452.8 billion. And research firm Statista projects that ecommerce will comprise 15.5 percent of all global retail sales by 2021. The Supreme Court ‘Wayfair' decision is saying it's time to tax this significant revenue generator across state lines.