Minnesotans value fairness in tax policy. That should be reason enough for this state’s taxpayers to concur with the U.S. Supreme Court that all online retailers, not just those with a presence in the state where a purchase is made, must collect sales taxes from consumers at the time of purchase.
A certain amount of grumbling is also to be expected. The cost of some online purchases just went up, courtesy of five justices on the nation’s highest court. The new ruling, South Dakota vs. Wayfair Inc., overturns a 1992 decision that allowed online sellers without a physical presence in the purchaser’s state to skip adding sales taxes when tallying a purchase’s cost.
But those inclined to complain should know that the ruling does not impose a new tax. State and local sales taxes have been required for all purchases all along. Until last week, however, the obligation to remit the tax to state and local governments rested in some cases not on retailers, but on consumers themselves. And consumers have been very good at dodging their “sales and use tax” duty, knowing that the requirement is nearly impossible for state and local governments to enforce.
Thanks to the court’s latest word, the gig is up for scofflaws, and the 45 states that collect sales taxes are in for a windfall — between $132 million and $206 million per year in Minnesota, according to a 2017 federal estimate. That amount is enough to fire ideas about either tax cuts or spending increases. But it’s down considerably from the $400 million-per-year estimates of a decade ago of the gain Minnesota’s public purse would see from a uniform requirement for online sales tax collection.
That’s because a number of online sellers — Amazon chief among them — gave up the fight some years ago against what legislators were then calling the “Amazon tax.” The online retailing giant began collecting sales taxes on purchases in Minnesota in 2014. Soon thereafter, Amazon opened a distribution center in Shakopee, thereby meeting the old physical presence test.
The end of that outdated distinction is long overdue. A 2016 survey found that eight in 10 U.S. consumers are now at least occasional online shoppers, up from 22 percent in 2000. Giving what amounted to a price advantage to the sellers who do not pay property taxes or contribute to their communities in the many ways that brick-and-mortar stores do had become unjustifiable policy. The Minnesota Legislature acknowledged as much in 2017. It enacted a measure that would have require all sellers to collect the tax beginning in mid-2019. That measure likely would have triggered its own lawsuit had the South Dakota vs. Wayfair case not been ahead of it in line.
It’s a sorry comment on American governance that it took action by the courts, not Congress, to set this policy right. But the Supreme Court has left the implementation details to the various state and, potentially, federal legislative and executive branches of government. That means that more attempts to dodge tax collection responsibilities could ensue. Minnesota revenue officials say they will issue guidelines for complying with the decision by mid-July.
Online retailers and their customers should know this: Lawmakers in the state that is home to Target and Best Buy had already had their fill of unfair sales tax policies before the Supreme Court acted. Now that the high court has spoken, this state should be a stickler for sales tax fairness going forward.