internet_shopping

Blog: Online Shopping is at a Legal Crossroads

by Spencer Mead, Associate Staff

Shopping today looks very different than it did 20 years ago. Online retailers like Amazon have forever changed the way consumers shop. A person can hop on the internet, travel to a website such as Amazon.com, and order a wide variety of items in a matter of minutes. This method saves time traveling to the store, walking around to find what you want, and in most states shopping online is cheaper. The reason for this is because most states have not enacted any form of taxation on online retail sales. Thus, making the total cost cheaper to shop online than in a local store.

In this day and age of budget cuts and deficits, should online retailers be taxed by states? The taxation would help generate revenue for states desperate for income, and remove the incentive for people to buy online instead of going to their local retail store. But it would come at a cost to the average consumer having to pay slightly more for all online purchases. Now this probably would not have a significant impact on consumers overnight, but the few dollars of tax on each purchase would add up over time. Eventually, these dollars could add up to having a significant impact on families already stretched thin from the recession.

 18 states have determined that they are allowed to tax online retailers, and these states have enacted some form of law taxing sales that take place on the internet. However, the Illinois Supreme Court invalidated a state law allowing taxation of online retailers.[1] The Court determined that the state tax was superseded by Federal Law, and therefore not valid.[2] You might be thinking to yourself, “So what? I don’t live in Illinois so this can’t possible impact me.” However, that would be looking at this issue very narrowly.

This split created by the states could lead to the Supreme Court stepping in to determine if states are allowed to tax transactions taking place on the internet. This has the potential to have an impact on online shoppers across the United States, not just Illinois. This would also have an impact on how states can or cannot generate extra income from taxes on the internet as a whole. A Supreme Court ruling could also greatly affect how retail chains approach online shopping. Even if you are not an online shopper, this can impact you in the future. Large retailers like Wal-Mart and Amazon believe the future of retail lies somewhere between in-store shopping and online shopping.[3]

Regardless of how you shop, you need to be aware of the taxation of online goods. In the future, all goods might be bought and sold online. That is not the case today, but the current decisions of the courts and lawmakers will have a significant impact on the future of retail shopping.




[1] John O’Connor, Ill. High Court Invalidates ‘Amazon tax’ for sales, Yahoo! News (Oct. 18, 2013, 6:27 PM), http://news.yahoo.com/ill-high-court-invalidates-amazon-tax-sales-214307802–finance.html.

[2] Id.

[3] Claire Cain Miller & Stephanie Clifford, To Catch Up, Walmart Moves to Amazon Turf, N.Y. Times, Oct. 19, 2013 available at http://www.nytimes.com/2013/10/20/technology/to-catch-up-walmart-moves-to-amazon-turf.html?ref=technology&_r=0.

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