Position Statement: U.S. Supreme Court ruling requiring tax collection for out-of-state and online retailers helps level the playing field for local brick-and-mortar businesses

On June 21st, 2018 the U.S. Supreme Court issued a ruling that gives states the authority to require out-of-state and online retailers with no physical presence in the state to collect sales tax.

We support the decision by the U.S. Supreme Court as a win in the fight to level the playing field for local brick-and-mortar businesses and the recognition of the changing nature of commerce.

The South Carolina Municipal Association provides further detail on the implications for the decision for the state of South Carolina, citing a 2017 U.S. Government Accountability Office report:

(Prior to the recent U.S. Supreme Court decision) “by law, the consumer is supposed to pay the sales taxes owed on purchases bought from out-of-state online retailers on his income tax return as a use tax. However, there’s a good chance most consumers didn’t if they ordered from an out-of-state online retailer.

This puts South Carolina’s hometown brick and mortar businesses at a 5 to 10 percent competitive disadvantage to these out-of-state online retailers. Plus, millions of dollars in owed state and local sales taxes goes uncollected annually.

According to report, if state and local governments had been allowed to require all remote sellers — companies located outside the state — to collect taxes on all remote sales last year, South Carolina could have seen between $132 million and $193 million in revenue.

This report also found that nearly half of those potential revenue gains to state and local governments would have resulted from collecting sales taxes on all e-marketplace sales, transactions on sites such as eBay, Etsy and Amazon Marketplace. The current dynamic also works against local brick-and-mortar businesses that lose out on sales when customers visit to try on or try out a product only to go home and purchase the item online state-tax free.”

With the rise of online shopping and as the marketplace evolves with large online retailers capturing a larger share of American purchasing, we applaud this development. Giving out-of-state and online sellers a competitive market advantage over the hometown brick-and-mortar businesses that contribute to taxes that fund our infrastructure, fire departments, parks, and schools does not create parity in a free-market economy.

Local, independent businesses recirculate a three times greater share of revenue back into the local economy than national chain businesses and corporations. We continue to advocate for both consumer action to support these businesses and policy change to level the playing field.

For more information, please contact:

Lauren Gellatly
Community Development Director
Lowcountry Local First
lauren@lowcountrylocalfirst.org
843-801-3390

Featured photo of a Wayfair distribution center in Cranbury, N.J. Credited to John Taggart, NYTimes.com.

Lauren Gellatly
Community Development Director at Lowcountry Local First