New taxes on e-commerce sales went into effect Monday in 10 states, making online shopping a little more costly for many consumers.
A Supreme Court ruling in June gave states the green light to impose sales taxes on e-commerce companies, even if they don’t have stores or warehouses within the state’s borders. The case, South Dakota vs. Wayfair, made it likely that consumers would pay more for online purchases from out-of-state retailers.
Several states, including Hawaii, Tennessee and Vermont, began collecting online sales taxes in July, according to the Tax Foundation. Mississippi’s taxes took effect in September.
On Oct. 1, online sales taxes arrived in 10 more states: Alabama, Illinois, Indiana, Kentucky, Michigan, Minnesota, New Jersey, North Dakota, Washington and Wisconsin.
Colorado announced last month that it will begin requiring e-commerce businesses to collect sales taxes on Nov. 1, joining North Carolina. Connecticut’s online sales taxes begin Dec. 1. Georgia, Iowa, Louisiana, Nebraska and Utah plan to start the clock on internet sales taxes on Jan. 1, 2019, the Tax Foundation said.
In most states, new online sales taxes apply to companies with a minimum amount of annual sales revenue or transactions in the state. For example, Michigan said online retailers with sales exceeding $100,000 or 200 transactions with Michigan consumers would be subject to sales taxes.
Online retailers account for a growing share of U.S. sales. E-commerce sales hit $127.3 billion in the second quarter, up 15.2 percent compared to the same period a year ago, according to the U.S. Census Bureau. That comprised about 9.6 percent of total retail sales during the quarter.
While a boon for state treasuries, online sales taxes could cost consumers billions of dollars each year. Former Supreme Court Justice Anthony Kennedy’s majority opinion in the Wayfair case noted that e-commerce businesses that don’t collect sales taxes have cost states between $8 billion and $33 billion per year in tax revenue, citing multiple estimates.