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Online Sales Tax: SCOTUS Rules States Can Force Retailers to Collect

WASHINGTON - The days of online purchases that are sales tax free would seem to be over.  

The U.S. Supreme Court says that states have the right to collect sales tax for most online purchases.  

The high court's decision comes in the case of South Dakota vs Wayfair.

In local reaction, Little Rock Mayor Mark Stodola applauded the decision, highlighted the potential positive impact for Little Rock retailers and called on the Arkansas legislature to take action, stating:
"Online retailers should be required to follow the law and pay taxes just like our local small businesses. Congress has failed to act for 26 years as the impact on cities, including Little Rock, has continued to skyrocket. I applaud the Court's decision and Arkansas cities and towns will now look to our state government to take action so that we can collect the estimated millions of dollars that are not currently available to provide services, including those that allow for safe delivery of packages purchased online, for our citizens."

The City of Little Rock has closely followed the debate over online sales tax fairness both in Congress and in the United States Supreme Court. The Little Rock Board of Directors has been actively engaged on this issue, including directing City Attorney Tom Carpenter to file an amicus curiae brief in the Wayfair case detailing the impact of the inability to collect sales tax on remote sellers on Little Rock. The Supreme Court was told of the estimated $1.4 million in revenue that goes uncollected each year - a number that continues to rise as online sales rise.

In other local reaction, UCA Assistant Professor of Economics and Arkansas Center for Research in Economics Scholar Jeremy Horpedahl says: "With the Wayfair decision, the Supreme Court has provided an important clarification for states on taxing remote sales. The exemption of remote sales from the sales tax base has always been a legal distinction, not one of good tax principles. Good tax policy is to treat all transactions equally, regardless of where the seller is physically located. 

Arkansas must now decide how to implement a law that will comply with Wayfair, and what to do with any new revenues. Arkansas already has a provision in law that any revenue from remote sales in excess of $70 million will go to cutting income taxes, which is a good principle to follow. The Wayfair decision gives Arkansas a good opportunity to broaden its sales tax base while also lowering income tax rates."

The Arkansas law he references can be read here.


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