Online sellers consider how to comply with sales tax ruling

NEW YORK (AP) — While a Supreme Court ruling on sales taxes will create more obligations and expenses for many small online retailers, owners are already thinking about how they’ll comply.

The decision allows states to require out-of-state businesses to collect sales tax from customers in other states — for example, a retailer in Utah who sells goods to a customer in New York would have to calculate and collect the New York sales tax. The ruling potentially means thousands of small businesses that never collected sales tax except in their home states will be responsible for tax in some 10,000 state and local jurisdictions nationwide.

The ruling has angered many small online retailers and advocates for small companies because it will increase their expenses, mostly from the cost of software and services to help sellers collect the taxes and send the money to state authorities. But brick-and-mortar retailers who have had to collect tax simply because they have a store, office or warehouse in a state say the court has leveled the playing field, as online retailers will no longer have an advantage created by tax-free shopping.

The decision overturned two decades-old Supreme Court decisions that allowed companies without a physical presence in a state to avoid collecting sales tax. The internet has changed retailing, and Justice Anthony Kennedy, who wrote the new decision, said, “each year, the physical presence rule becomes further removed from economic reality.” Kennedy also noted the existence of software that “may make it easier for small businesses to cope” with compliance.

Some internet retailers are shrugging and making plans to adhere to the new rules.

“I’ll do what needs to be done and get it taken care of,” said Dave “Lando” Landis, owner of Rocker Rags, a New Mexico-based online seller of clothing with photos and logos of rock musicians. “It’s not something that needs to be a panic situation.”

Adrienne Kosewicz who pays $3,300 a year for tax compliance software for sales in her home state, Washington, expects that collecting taxes in other states will raise costs by a manageable 10 percent at her Seattle-based online business, Play It Safe World Toys.