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Playing Field Levels Today as Online Retailers Now Must Collect Sales Tax for Michigan

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The days of trying to avoid sales taxes by purchasing exclusively from online stores rather than shopping locally from brick and mortar enterprises has come to an end for Michigan residents. Nine other states also undergo that change today as sales tax collection statutes and regulations that require online retailers to collect sales tax on online orders from residents of those 10 states go into effect today, Monday, October 1, 2018.

The statutes and regulations, the details of which vary by state, apply to online retailers that do not have a physical presence in the taxing jurisdiction.

Sales tax collection laws applicable to online retail sales go into effect today not only in Michigan, but also in Alabama, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, North Dakota, Washington and Wisconsin. Similar laws will go into effect in Connecticut and Iowa in the coming months.

In deciding the South Dakota v. Wayfair Inc. case back in June, the U.S. Supreme Court overturned its previous precedent that required a business to have a physical presence, or nexus, in a state to be subject to local taxes.

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32 states have now passed statutes or regulations to require sales tax collection by remote sellers, according to Internet Retailer Magazine and DigitalCommerce360.com, the most-recognized publishing group on e-commerce business intelligence. Internet Retailer and DigitalCommerce360.com explore the online sales tax issue and its impact on online sellers and sales in the October issue of Internet Retailer.

While collection laws are going into effect at the state level, lawsuits challenging states’ moves remain active, and three bills have been introduced in Congress to address the issue. Zak Stambor is Editor of Internet Retailer Magazine. He says, “The roots of the battle over an online sales tax go back decades before the birth of the World Wide Web.” He notes, “While the Wayfair decision fundamentally alters the playing field, I’m not sure we’re done with the fight over online sales tax.”

Retailers nationwide celebrated widely back in mid-June following a blockbuster U.S. Supreme Court ruling giving every state in the union the right to collect sales taxes from internet companies regardless of whether they have a physical brick and mortar presence in the state. It was a long fought battle, and first to respond was the trade association Retail Industry Leaders Association who declared that the decision by the court “Will give every retailer the opportunity to compete on a level playing field without the government’s thumb on the scale,” and called the 5-to-4 decision, “A win for all those who believe in free markets.”

Addressing the suggestion that new collection requirements would be a burden to start-ups and small online retailers, the industry pointed to the dramatic changes in network computing and e-commerce in the last quarter century, saying, “The Court clearly didn’t buy the argument made by the Respondents in this case that remote sales tax compliance represented the same burden today that it did in 1992.”  In fact, they noted, “Through its decision, the Court has acknowledged that the same computing sophistication that has fueled exponential growth in e-commerce has also dramatically simplified remote sales tax collection.”

Those interested in learning more can visit Internet Retailer/DigitalCommerce360.com, for deeper coverage of the online sales tax issue (note that free registration is required to see the content). Additional resources and research are also available there.

Vertical Web Media, whose brands, B2BecNews, Internet Health Management and Internet Retailer (the world’s leading provider of e-commerce retailing news, analysis and research) are published on DigitalCommerce360.com, was founded in 1999. It is a journalistically driven enterprise with the mission to be the largest and most credible provider of objective business information on the market trends, technology, competitive practices and people shaping digital commerce.