Sales tax ruling to aid state
Oklahoma sales tax collections should make a significant jump thanks to a decision issued Thursday by the U.S. Supreme Court.
A 5-4 ruling in the South Dakota v. Wayfair Inc. case allows states to pass laws requiring online retailers to collect sales tax and remit it to the state where the customer is.
Mike Neal, president and CEO of the Tulsa Regional Chamber, said Oklahomans spend nearly $3 billion online annually.
“That has meant about $300 million in lost revenue every year, including $160 million for the state, $112 million for cities and $24 million for counties,” Neal said.
The decision is largely viewed as a victory for states and local businesses. Under a previous ruling, if a business was shipping to a customer where the company didn’t have a physical presence, the business didn’t have to collect sales tax for the purchase. Customers bore the responsibility for paying those taxes, but many were unaware of the responsibility, and states felt they were losing out on potentially billions in lost revenue.
Local business owners have long felt disadvantaged by the ability of some online retailers to undercut their prices by excluding the local sales tax. The Supreme Court decision is seen by many as a start to a solution for both issues.
“I applaud today’s decision by the U.S. Supreme Court overturning an earlier ruling that a business had to have a physical presence in a state in order for that state to collect state sales tax on online purchases,” Gov. Mary Fallin said in a statement. “I again call on Congress to level the field for small businesses and retailers in Oklahoma and across the country by implementing a fair system for online sales tax. We have to help our local communities keep local businesses healthy so that cities and towns can fund core services.”
The governor also expressed gratitude for some online retailers, including Amazon, which “already have agreed to collect Oklahoma sales tax on items sold directly through their companies.”
Local business owner Morgan Harris is thrilled with the Supreme Court’s decision. Harris owns the Green Bambino, 5120 N Shartel Ave. in Oklahoma City, and has worked for years to lobby for changes in the system.
“It’s really, really good news,” Harris said. “I have been traveling to Washington, D.C., for years with the National Retail Federation ... to lobby to get sales tax collection fair across the board, no matter where it was purchased.”
Harris operates some of her business online, but it’s a struggle for her brick-and-mortar location to keep pace with bigger online retailers that don’t charge sales tax.
“It levels the playing field for me,” Harris said. “I can fight fairly against these big companies like Wayfair and Overstock.”
The economic impact of the decision in Oklahoma now depends on action taken by legislators, but estimates indicate substantial increases in revenues.
“We are currently reviewing the Supreme Court ruling to measure the impact on the state of Oklahoma,” Oklahoma Tax Commission spokeswoman Paula Ross said. “The combination of HB 1019 and this decision today will bring in tens of millions of dollars.”
HB 1019, which goes into effect July 1, deals with sales tax collections of third-party vendors on websites like Amazon. com.
Nationally, shares for online retailers dropped, while large chains with more stores traded higher following the ruling.
Wayfair lost 1.9 percent to $114.22 and Overstock.com fell 7 percent to $36.15. Etsy slipped 1.4 percent to $43.60 while Amazon lost 1 percent to $1,730.22. Target gained 1 percent to $76.15 and Nordstrom added 1.8 percent to $52.78.
As the bigger financial impact begins to unfold, the uncertainty still doesn’t diminish Harris’ spirits regarding the matter. She feels hopeful the decision will lead to significant changes at the local level.
“It brings up a lot more questions, but it feels good to have a solid decision that levels the field between brick and mortar and online stores,” Harris said.