WASHINGTON — Shoppers in Nevada and a handful of other states who purchase holiday gifts online are finding they’re being charged sales tax at some websites where they weren’t before. The reason: the Supreme Court.
A June ruling gave states the go-ahead to require more companies to collect sales tax on online purchases. Nevada is one of 11 states that began enforcing requirements Oct. 1, and about a half-dozen states are set to follow suit in the next two months.
Before the Supreme Court’s recent decision, the rule was that businesses selling online had to collect sales tax only in states where they had stores, warehouses or another physical presence. That meant that major retailers such as Apple, Best Buy, Macy’s and Target, which have brick-and-mortar stores nationwide, were generally collecting sales tax from online customers. But that wasn’t the case for businesses with a big online presence but few physical locations.
Now, states can force out-of-state sellers to collect sales tax if they’re doing a fair amount of business in the state. That means retailers such as Overstock.com, home goods company Wayfair and electronics retailer Newegg can be required to collect tax in more states. Those companies were involved in the case before the Supreme Court, but a wide range of businesses are also affected.
Before the Supreme Court’s decision, Overstock was collecting sales tax in eight states. Now, it’s collecting sales tax nationwide. Jonathan Johnson, a member of Overstock’s board of directors, said a small number of customers asked about the change when it happened, but the company hasn’t had a question about it in months. Wayfair was collecting sales tax in 25 states before the decision. Now it’s collecting sales tax in 36 of the 45 states with a sales tax.
States had a strong interest in taking advantage of the Supreme Court’s decision by passing laws or publishing regulations prior to this holiday shopping season if possible, said Richard Cram of the Multistate Tax Commission, which works with states on tax issues. Those that did have generally been following the lead of South Dakota, which brought the issue to the Supreme Court. South Dakota requires sellers that don’t have a physical presence in the state to collect sales tax on online purchases if they do more than $100,000 in business in South Dakota or more than 200 transactions annually with state residents.
In Nevada, estimates show $850 million more in sales will get taxed with the new rules. That brings the total amount of online retail sales the state can tax to about $2.1 billion, about 5 percent of all taxable sales, according to the state Department of Taxation.
Department estimates show that collecting sales tax from online businesses could add between $17 million and $29 million annually to the state general fund, which receives 2 percent of the sales tax, according to the department.
In addition to Nevada, the states that implemented new requirements Oct. 1 were Alabama, Illinois, Indiana, Kentucky, Maryland, Minnesota, New Jersey, North Dakota, Washington and Wisconsin.
— The Review-Journal contributed to this report.