Your love for Amazon won't be ruined by more sales taxes

When it comes to that giant inflatable pool flamingo you want, what's another few bucks?

Ben Fox Rubin Former senior reporter
Ben Fox Rubin was a senior reporter for CNET News in Manhattan, reporting on Amazon, e-commerce and mobile payments. He previously worked as a reporter for The Wall Street Journal and got his start at newspapers in New York, Connecticut and Massachusetts.
Ben Fox Rubin
4 min read

A new Supreme Court ruling should change a lot for online retailers, but little for online shopping behavior.

Ben Fox Rubin/CNET

Ever bought a backpack or TV on Amazon and didn't have to pay the taxes on it? Unfortunately, that benefit is ending.

But don't worry, your love affair with online shopping is strong enough to survive the threat of higher prices and more taxes.

Following a major Supreme Court decision Thursday, states can now require online and out-of-state retailers to collect sales taxes on their behalf. Previously, shoppers were responsible for sending tax payments for their online purchases, but few ever did. The ruling, which overturns 50 years of past tax practices, will likely force millions of Americans to start paying taxes on much more of their online spending.

Tax and e-commerce experts say this change will cause plenty of headaches for small online retailers that will now need to wade through complex and varied state tax regimes. They say it will also costs consumers more money, both in taxes they weren't paying before and higher prices for online goods, as retailers bake in the cost of complying with the new requirements.

But, what the change is unlikely to do, they added, is change your shopping habits.

"If someone sees something they absolutely want, I don't think the tax is going to make a difference," Jennifer Abelaj, a tax attorney for Davidoff Hutcher & Citron, said, adding that people buy online for convenience and selection, not just cheaper prices.

Watch this: Supreme Court ruling means you'll pay more for online shopping

The decision comes as e-commerce has exploded in popularity over the past 25 years from a small curiosity in retail into a $450 billion industry in the US. Tech titans Amazon and eBay now enable online sales of hundreds of millions of products -- from socks to industrial vehicles -- each year, illustrating how much people rely on e-retail today.

E-commerce is now so mainstream that it can survive these higher prices, a situation that wasn't the case in the 1990s, when online retail was just getting started and still building consumer trust, said Victor Rosenman, CEO and founder of e-commerce software provider Feedvisor.

Considering that situation, any brick-and-mortar retailers hoping the tax change could help them bring in new customers and fend off online players may find themselves disappointed.

New woes for mom-and-pop e-shops

While internet retail will continue to thrive following the Supreme Court decision, the change is expected to bring plenty of problems and uncertainties to the industry.

Bigger retailers like Amazon won't be harmed, experts say, since many of them already collect sales taxes on their direct sales and can afford to pay teams of tax experts and lawyers. Smaller retailers -- particularly those that sell their goods through Amazon and don't currently charge sales taxes -- may be hit the hardest. They may need to hire new accountants and lawyers to help them manage their tax payments and maintain their books, Abelaj said.

For you, that could mean you'll see higher prices online, especially from smaller sellers. You may even find fewer options on Amazon and eBay, as some sellers find they can no longer compete with bigger players or keep up with the new tax requirements.

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Thursday's decision also raises new questions for smaller retailers, said Charles Moll, a state and local tax expert at law firm Winston & Strawn. For example, if a small-time seller on eBay ships just one item a year from his home in New York to Wisconsin, he likely won't now be forced to collect and send Wisconsin sales taxes. But, while regulations protect smaller sellers from excessive tax collection requirements, Moll said, the Supreme Court didn't specify what might be considered excessive. Is it one shipment to a state? Maybe it's five -- or 200. That's an issue that may find its way back in the courts.

Whether states can go after sales taxes retroactively or charge overseas sellers are two other question marks from the decision, he added.

Major marketplaces run by Amazon, eBay and Etsy will need to start offering sellers on those sites new tools to collect and send state taxes, so those merchants aren't left to fend for themselves, said Jimmy Duvall, chief product officer for e-commerce software vendor BigCommerce. eBay CEO Devin Wenig addressed this need in a series of tweets Friday, saying his company will help sellers, but added that the issue is more complicated than just providing new tools.

"While @eBay will have all the tools necessary to help its sellers collect state by state tax, it is not at all clear what their obligations are or might be," he wrote, adding that Congress needs to step in to offer more clarity to the situation.

Some smaller sellers already use tax software provided by companies like BigCommerce's partner Avalara to make these tax payments. More of them will likely have to start using similar tools to keep up with the change, Duvall said.

"It does get insanely complex. For a smaller retailer that doesn't use a platform like ours, it will be difficult for them to manage this," he said. "It will just consume them."

But shoppers probably won't notice those issues and won't mind the new costs, Feedvisor's Rosenman said.

"I just think it's a natural step in e-commerce," he said of the tax change. "I think from the buyer perspective, it will be very natural. They won't pay a lot of attention to this."

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