US Mimics Australia, Rules in Favour of E-Commerce Tax

Reading Time: 2 mins
By Published On: June 22, 20180 Comments

In a landmark ruling, the US Supreme Court has voted in favour of South Dakota enforcing sales taxes on online purchases, causing share prices of Amazon, eBay and Etsy to fall.

Under previous legislation from 1992, US companies only had to collect sales tax if merchants had a physical presence in the same state they were selling goods from, giving pureplay retailers more tax freedom.

If a tax is put on e-commerce purchases, states could potentially begin to earn the estimated $US34 billion in revenue per annum that they’ve been missing out on under the current sales tax laws.

The decision was reportedly made to level the playing field between bricks-and-mortar and e-commerce businesses, as the country’s retail industry continues to buckle under the growing pressure of digital shop fronts.

The five to four ruling made by the Supreme Court on Thursday means e-commerce companies will have to collect sales tax if they conduct 200 or more transactions within a state, or generate $100,000 plus in revenue.

Presently, some major American businesses already collect online taxes in the 45 states that have them, including the likes of Walmart. However, many other sellers, like Amazon Marketplace, use the previous legislation requiring a seller to have a physical location in the state as justification to bypass online sales tax requirements.

This news from the US comes just weeks after Amazon cited Australia’s new tax laws as its reason for geoblocking Australian shoppers from its international marketplaces. As of July 1, Amazon will be re-directing traffic from Australia to its local marketplace.

This is in light of the Australian Government’s decision to enforce a 10 percent GST standard on all overseas purchases that are less than $1,000. According to Amazon, updating its systems to comply with the new regulations is too onerous. Although, the e-tailer has been criticised as commentators claim it’s a thinly veiled attempt to increase traffic and revenue on its Australia site, which has been referred to as “underwhelming”.

It’s believed the online GST collection scheme for international purchases will raise as much as $300 million in extra revenue for the Australian Government each year.

Europe is also in the process of implementing online taxes to suit the new digital economy, proposing a three percent tax on online revenue.

Never miss our best stories. Sign up for Power Retail’s free weekly newsletter and find our daily stories on FacebookTwitter, LinkedIn, and Instagram.

About the Author: Power Retail

Share this story!

Leave A Comment