We have been receiving questions from our out-of-state customers about why we collect sales tax. While it is true that we are an online retailer and do not have to, the tide is turning, and it could turn against us.
On December 2, the United States Supreme Court upheld a ruling from the New York Court of Appeals requiring Internet retailers to collect sales taxes even if they don’t have a physical presence in the state. (Not surprisingly, the suit was brought by Amazon.com and Overstock.com, who, of course, do not want to force customers to pay sales tax.)
“The bottom line,” Chief Judge Jonathan Lippman wrote for the majority, “is that if a vendor is paying New York residents to actively solicit business in this state, there is no reason why that vendor should not shoulder the appropriate tax burden.”
According to this article in the New York Times:
The chief judge added that it might be time to reconsider the basic rule that states may not collect taxes from out-of-state companies without some physical presence in the state, a principle recognized by the United States Supreme Court in its 1992 decision in Quill Corp. v. North Dakota.
In the Supreme Court’s 1992 decision, the justices said it is up to Congress to resolve this issue. Eleven years later, the Marketplace Fairness Act is pending before Congress. It would allow states to make their own revenue policy choices, and it would open the door for states to collect more than a fraction of the revenue that’s already owed.
In short, online retailers could be forced to pay back taxes, depending on the state’s policy. As you can imagine, forcing small online retailers, like ScanMyPhotos.com, to pay back taxes would be devastating. It could force us to close our doors or limit our services to only our customers in California.
Of course, we want to avoid that fate! We love our customers, and we enjoy helping them preserve their memories, no matter where they are located. As a result, we collect sales tax from everyone.
If you have any questions, please do not hesitate to contact us!