Many Minnesota businesses could benefit and taxpayers could see a $150 million windfall after a U.S. Supreme Court decision requiring most websites to collect sales taxes from online shoppers.
"It is about main street fairness," Minnesota House Tax Chairman Greg Davids, R-Preston, said after the high court released its ruling Thursday, June 21.
What puzzled Davids was why the high court voted 5-4 instead of 9-0. "It should be such an easy thing."
Many online sales sites, including Amazon and BestBuy, already collect Minnesota sales taxes. But after the court ruling, most others will be required to collect them.
States have not been able to collect taxes on online transactions unless a business had a physical presence in the state.
The Minnesota Revenue Department issued a statement saying its staff is "analyzing the court's decision." The department said it would provide guidance to retailers within 30 days.
The department indicated that people now collecting sales taxes should continue, but it is unclear when online sellers will need to begin collecting the taxes. Businesses that want to begin collecting the taxes right away, and send them to the state, can register with the department.
Revenue's online tax page at https://tinyurl.com/quilltax will be updated as needed with new information.
Small online businesses may be exempt from collecting taxes, but just where the line will be drawn is unclear. South Dakota law, the focus of the court ruling, requires online retailers with more than $100,000 in annual sales to collect taxes.
The decision came on a South Dakota suit against Wayfair.com, with the state claiming that the company should collect sales taxes on sales in the state. It overturns a 1992 Supreme Court decision on a North Dakota case that only required taxes on goods from a business located inside the state, letting mail-order catalog sales to go untaxed.
"From a mom-and-pop store on main street to Target and Best Buy, businesses in Minnesota can't compete if they don't have a level playing field against online retailers," U.S. Sen. Amy Klobuchar, D-Minn., said. "Unfortunately, the Supreme Court's previous rulings placed Minnesota businesses at a severe disadvantage that not only cost our state money but unfairly picked winners and losers among businesses."
While Davids estimates that the ruling would bring $150 million into state coffers, some estimates top $200 million more on top of the $64 billion, two-year budget.
Davids said if he is back next session as House tax leader, he will try to lower taxes so overall there is no tax increase.
Beth Kadoun, a Minnesota Chamber of Commerce vice president, praised the decision. "We need to update tax laws to reflect our current economic realities."
Allowing some online retailers off the hook in collecting sales taxes put small local businesses at a disadvantage, Kadoun said. The court action goes a long ways to help level the playing field for those small businesses, she added.
Some small businesses worry that their online sales will become overly complex if they have to collect sales taxes for many states.
State director Mike Hickey of the National Federation of Independent Businesses said his members are split on the sales tax issue.
"There are some strong feelings on both sides," Hickey said.