Vermont retailers and state officials are pleased that the U.S. Supreme Court has decided it will not get involved in efforts by states to collect sales taxes for online purchases.
They are hoping the decision clears the way for Congressional action on the issue.
Vermonters are supposed to pay a sales tax on any purchases that would normally be subject to the tax when those purchases are made out of state or online. Despite the requirement, most people do not declare these purchases.
Tasha Wallis, executive director of the Vermont Retail Association, says the popularity of online shopping puts the state’s bricks and mortar retailers at a competitive disadvantage because online stores generally aren’t required to charge the sales tax.
“It is an increasing problem and now so often consumers are using their mobile phones and applications to check prices on sites," says Wallis. "In Vermont that can really make a difference."
The state is also losing tax revenue from online purchases.
There are exceptions: If a business has a physical presence in a state – Best Buy or Barnes and Noble, for example – then it must charge the state sales tax to residents when they make purchases through the company’s website.
In refusing to take the online sales tax case, the court let stand a New York law which also requires a sales tax for online purchases of items sold by in-state businesses through out-of-state websites (Amazon.com, for example).
Vermont Tax Commissioner Mary Peterson says Vermont has already passed a law like the one in New York, but it won’t go into effect until 15 other states pass similar legislation. Peterson says there’s a good reason Vermont didn’t implement the law unilaterally as some other states did.
“The problem is that except for New York State, in most of the states that have these affiliate laws, the out-of-state retailers have just severed ties with the affiliates,” Peterson says. “ You still don’t end up collecting. Instead, your in-state affiliates end up losing that business.”
Peterson is hoping that the Supreme Court’s decision to take a pass on this issue will prompt the U.S. House to take action.
The Senate has already passed a bill that requires that state and local sales taxes apply to online purchases, but its future in the House is uncertain.
In the meantime, the state estimates that it's not collecting $39 million in taxes, largely for online purchases.
(An earlier version of this story erroneously stated that $39 million is the estimated total for purchases for which no taxes have been collected. Instead, $39 million represents the estimated amount of uncollected taxes.)
