How Will the Supreme Court's Recent Sales Tax Ruling Affect Marketplace Sellers?

Mason Wright

June 28, 2018

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Last week, there was a ruling by the Supreme Court regarding the collection of online sales tax from marketplaces and sellers. The suit in question was South Dakota vs Wayfair, Overstock.com, and Newegg. The decision was made 5-4 to override the previous 1992 ruling in ‘Quill Corporation vs North Dakota’ where SCOTUS ruled that the constitution bars states from collecting sales tax from companies that did not have a ‘substantial connection to the state’ or ‘nexus’.

It has been estimated that this tax loophole results in roughly $13 billion in lost in revenue annually. As it currently stands, all states are now justified in being able to collect sales tax from online sellers doing business with customers located in their state. It will no longer be required only by businesses that are deemed to have ‘nexus’ in the state.

INCREASED EXPENSE & COMPLEXITY FOR BUSINESS

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Although businesses using some of the more advanced third parties (Avalara, TaxJar, Taxify, etc.) have the ability to deal with the change; these third-parties still require the business to register with the states and file each month with the information provided by the platforms. For those attempting to navigate the ruling on their own, there are now more than 12,000 sales tax districts being taxed at different rates in the United States compared to 10,000 in 2014, and the sales tax situation continues to get more complicated.

In the ruling, Justice Roberts acknowledges the problem: “One vitalizing effect of the internet has been connecting small, even 'micro' businesses to potential buyers across the nation. People starting a business selling their embroidered pillowcases or carved decoys can offer their wares throughout the country - but probably not if they have to figure out the tax due on every sale.”

In their legislature, South Dakota has acknowledged that this could lead to a problem for small business and so has incorporated a rule of tax collection exemption for what they consider to be ‘small business’. Their law states that any entity is considered to be a ‘small-business’ unless it has more than 200 transactions or more than $100,000 in sales.

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The interesting aspect of the suit is that it was filed in the name of fairness for brick & mortar retail companies; however, the marketplaces decimating this industry such as Amazon.com, Walmart, and Jet.com are already collecting sales tax for all services and goods that they personally sell. The untaxed sales are coming from the third party sellers on these sites and the smaller retailers such as Wayfair, Overstock.com, Etsy, and Newegg. Small business sites that operate through third-party software such as Shopify, BigCommerce, and Magento will also now be liable for these expenses.

 “One vitalizing effect of the internet has been connecting small, even 'micro' businesses to potential buyers across the nation. People starting a business selling their embroidered pillowcases or carved decoys can offer their wares throughout the country—but probably not if they have to figure out the tax due on every sale.”


MORE TO COME

The ruling by SCOTUS did not address the minute details that arise around the discussion of online, inter-state sales tax. This seems to be done intentionally as highlighted by Justice Roberts: “E-commerce has grown into a significant and vibrant part of our national economy against the backdrop of established rules, including the physical-presence rule. Any alteration to those rules with the potential to disrupt the development of such a critical segment of the economy should be undertaken by Congress.” This means that a battle in congress over the future of the tax is likely to ensue. Until then, states will begin to pass their own legislature and go after businesses and brands as they see fit, just as South Dakota has.

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Given the approval of SCOTUS with the way South Dakota has handled the situation, it is likely to become a precedent for other states moving forward; including the provisions to ‘protect small business’ that are grossly insufficient. Additionally, it is probable that most state legislatures will agree with SCOTUS on the decision and pursue their own taxes. In a survey conducted by Thomson Reuters with the different state revenue agencies it was found that 14 out of the 19 agencies surveyed considered electronic transactions to be taxable according to their laws.

Assuming these states do indeed pursue taxes from businesses across the United States it will become impossible for businesses without a thorough understanding of all 12,000 tax districts, complex technological infrastructure, and the ability to continually file in and monitor all districts for rate and rule changes to continue normal operations. In addition, no clarification was given in the ruling in relation to the ability of states to collect tax retroactively. It is possible that congress will make a clarification allowing states to collect taxes that would have been owed for a certain number of years previous to the ruling date.

Moving forward, businesses will now need to attempt to find a way to navigate these changes or face lengthy and expensive battles with numerous state revenue agencies. 

To learn more about shifting tax complications and liabilities to a third-party seller like Pattern, click learn more below. 

State

State Rate

Rank

Avg Local Rate

Combined Rate

Combined Rank

Max Local Rate

Alabama

4.00%

40

5.10%

9.10%

5

7.50%

Alaska

0.00%

46

1.76%

1.76%

46

7.50%

Arizona

5.60%

28

2.73%

8.33%

11

5.30%

Arkansas

6.50%

9

2.91%

9.41%

3

5.13%

California (b)

7.25%

1

1.29%

8.54%

9

2.50%

Colorado

2.90%

45

4.62%

7.52%

16

8.30%

Connecticut

6.35%

12

0.00%

6.35%

33

0.00%

Delaware

0.00%

46

0.00%

0.00%

47

0.00%

Florida

6.00%

16

0.80%

6.80%

28

2.00%

Georgia

4.00%

40

3.15%

7.15%

20

4.90%

Hawaii (c)

4.00%

40

0.35%

4.35%

45

0.50%

Idaho

6.00%

16

0.03%

6.03%

37

3.00%

Illinois

6.25%

13

2.45%

8.70%

7

4.75%

Indiana

7.00%

2

0.00%

7.00%

22

0.00%

Iowa

6.00%

16

0.80%

6.80%

27

1.00%

Kansas

6.50%

9

2.18%

8.68%

8

4.00%

Kentucky

6.00%

16

0.00%

6.00%

38

0.00%

Louisiana

5.00%

33

5.02%

10.02%

1

7.00%

Maine

5.50%

29

0.00%

5.50%

42

0.00%

Maryland

6.00%

16

0.00%

6.00%

38

0.00%

Massachusetts

6.25%

13

0.00%

6.25%

35

0.00%

Michigan

6.00%

16

0.00%

6.00%

38

0.00%

Minnesota

6.88%

6

0.55%

7.42%

17

2.00%

Mississippi

7.00%

2

0.07%

7.07%

21

1.00%

Missouri

4.23%

39

3.80%

8.03%

14

5.39%

Montana (d)

0.00%

46

0.00%

0.00%

47

0.00%

Nebraska

5.50%

29

1.39%

6.89%

25

2.00%

Nevada

6.85%

7

1.29%

8.14%

13

1.42%

New Hampshire

0.00%

46

0.00%

0.00%

47

0.00%

New Jersey (e)

6.63%

8

-0.03%

6.60%

30

3.31%

New Mexico (c)

5.13%

32

2.54%

7.66%

15

4.13%

New York

4.00%

40

4.49%

8.49%

10

4.88%

North Carolina

4.75%

36

2.20%

6.95%

24

2.75%

North Dakota

5.00%

33

1.80%

6.80%

26

3.50%

Ohio

5.75%

27

1.40%

7.15%

19

2.25%

Oklahoma

4.50%

37

4.41%

8.91%

6

6.50%

Oregon

0.00%

46

0.00%

0.00%

47

0.00%

Pennsylvania

6.00%

16

0.34%

6.34%

34

2.00%

Rhode Island

7.00%

2

0.00%

7.00%

22

0.00%

South Carolina

6.00%

16

1.37%

7.37%

18

3.00%

South Dakota (c)

4.50%

37

1.90%

6.40%

31

4.50%

Tennessee

7.00%

2

2.46%

9.46%

2

2.75%

Texas

6.25%

13

1.92%

8.17%

12

2.00%

Utah (b)

5.95%

26

0.82%

6.77%

29

2.65%

Vermont

6.00%

16

0.18%

6.18%

36

1.00%

Virginia (b)

5.30%

31

0.33%

5.63%

41

0.70%

Washington

6.50%

9

2.68%

9.18%

4

3.90%

West Virginia

6.00%

16

0.37%

6.37%

32

1.00%

Wisconsin

5.00%

33

0.42%

5.42%

44

1.75%

Wyoming

4.00%

40

1.46%

5.46%

43

2.00%

D.C.

5.75%

(27)

0.00%

5.75%

(41)

0.00%

 

(a) City, county and municipal rates vary. These rates are weighted by population to compute an average local tax rate.

(b) Three states levy mandatory, statewide, local add-on sales taxes at the state level: California (1.25%), Utah (1.25%), Virginia (1%), we include these in their state sales tax.

(c) The sales taxes in Hawaii, New Mexico, North Dakota, and South Dakota have broad bases that include many services.

(d) Special taxes in local resort areas are not counted here.

(e) Salem County is not subject to the statewide sales tax rate and collects a local rate of 3.3125%. New Jersey’s average local score is represented as a negative.

**Tax rate information from www.taxfoundation.org

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Sept 27, 2022

Global Ecommerce Weekly News: 27th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon drives renewable energy push with 71 new projects Amazon is planning to add 2.7 gigawatts of clean energy capacity through a couple of new projects as the company attempts to use 100% renewable energy by 2025. The ecommerce business will soon have a total of 329 renewable energy projects, generating 50,000 gigawatt hours of clean energy, which is equivalent to powering 4.6 million US homes every year. [Read more on Reuters](https://www.reuters.com/business/sustainable-business/amazon-drives-renewable-energy-push-with-71-new-projects-2022-09-21/) Amazon launches Prime Early Access Sale Amazon is launching a new 2-day shopping event for its Prime members only, beginning on the 11th of October. Across 15 countries, Prime customers will have access to the shopping event, with thousands of deals on offer globall, ranging from fashion to electronics to essentials. The event has the purpose of giving Prime users the chance to spread the cost of items over the winter months, 6 weeks ahead of Black Friday. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/26/prime-early-access-sale/) --- Other Marketplace News --- Shopify unveils new localisation tool Shopify is launching a new localisation tool, called Translate & Adapt, which works with Shopify Markets to offer localisation for sellers who are looking to expand into new markets. The tool translates a user’s online store into different languages, including product pages and information pages. Merchants are also able to create different shipping terms for each market using the new tool, which allows international expansion and offers a more localised consumer experience, unveiling new potential. [Read more on Ecommerce News](https://ecommercenews.eu/shopify-launches-new-localisation-tool/) Etsy is set to invest hundreds of millions into its marketing platform Etsy CEO claims that the company is on route to spend more than $570 million USD on marketing this year. Even during a time of macroeconomic pressure, inflation and rising interest rates, the company is preparing itself and its sellers for the upcoming holiday season and is focused on retaining interest from buyers. [Read more on Yahoo News](https://uk.news.yahoo.com/etsy-600-million-on-marketing-ceo-154054219.html) --- Other Ecommerce News --- Meta looks to cut costs by 10% in the coming months Meta employees are facing job redundancies as the company plans to cut its costs by 10% over the next few months. Meta reported a 22% YoY increase in costs and expenses, totalling over $20 billion USD. The cuts are expected to come in the form of job redundancies as a result of department reorganisations rather than formal layoffs. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/22/meta-to-slash-costs-by-10-over-coming-months/) DHL teams up with Quadient to offer smart locker deliveries in the UK DHL and tech company, Quadient, have partnered to offer smart lockers parcel pick-up throughout the UK. The new contactless, secure locker stations will give recipients more choice and flexibility to receive their parcels at a time and location best suited to them. The partnership plans to install 500 locker stations across the country by the end of 2022. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/21/dhl-partners-with-quadient-to-offer-smart-locker-delivery/) The online fashion market is set to be worth nearly $170 billion USD in 2025 The European online fashion retail market is set to grow 50% by 2025, with an online turnover of $170 billion USD, which is 33% of the retail branch’s total. Cross-border marketplaces prove to be the largest drivers of this growth, with online websites and apps like Vinted largely pushing the market’s online growth. Zalando recently became the largest cross-border fashion retailer/marketplace, responsible for 11.7% of the online market’s share. [Read more on Ecommerce News](https://ecommercenews.eu/online-fashion-market-worth-e175-billion-in-2025/)
Sept 22, 2022

How an Amazon SEO Agency Should Be Serving Your Brand

If you’re in the global ecommerce space, you are most likely aware of Amazon, and probably selling your products on the marketplace. With over $470 billion in sales in 2021 alone, Amazon stands as the third largest company in the world based on revenue. The ecommerce giant is a household name in the U.S. and working hard to grow its market share across five continents worldwide.

Having your products available on Amazon and being competitive there, though, are definitely two different things. If you want to really succeed on Amazon, you’ll need specialized insight into how Amazon works and how to make it work for you. So, for many brands, it’s a great idea to work with an Amazon Search Engine Optimization (SEO) agency.

At Pattern, Amazon SEO optimization service is one of our key competencies. We understand that technology, data-driven insights and expertise  are the most important tools brands can leverage to win top listing spots on digital marketplaces. With expert teams and years of experience, we help brands conquer the Profitability Death Spiral as they compete with other products and sellers online. We offer Amazon SEO agency services as a core solution to brands that need more resources to get ahead. 

What is an Amazon SEO Agency?

An Amazon SEO agency serves brands by improving their products’ rank and listing performance on Amazon. They make strategic decisions about ad spending and placement that lead to higher traffic, conversions, and revenue for ecommerce brands.

A great Amazon SEO Agency partner will:

Prioritize Your Success

Unfortunately, many Amazon SEO agencies profit in unfair ways from your brands’ perceived success based on the ROAS numbers they provide. This is done through including branded search terms in ROAS reports, which naturally skew listing performance

Let’s say, for instance, your brand is called “Annie’s” and you sell lollipops. Your brand has a very high likelihood of winning the top listing spots on Amazon for lollipop search terms that are paired with “Annie’s,” your brand name. So, SEO agencies will spend your ad money on those terms and report a very high ROAS. 

To avoid scenarios like these, it’s best to look for an agency that either calculates their profits on metrics other than your ROAS scores or weighs branded search terms differently in the performance metrics reports. Regardless of your Amazon SEO agency’s cost structure, you should align onbranded search terms before committing to a scope of work.

Provide Detailed Competitive Insight

A great indicator of a high-quality Amazon SEO agency is the level of insight they can provide into your competitors’ listing positioning and how it compares to yours. Data fanaticism is so important at Pattern that we’ve developed proprietary technology to display this exact information with precise detail for every brand we work with. In fact, you can find our free version here to see how you compare to some of your top competitors based on ASIN.

It’s certainly possible to improve your Amazon search performance with blind spending strategies. But a truly great solution will help you to know where your dollars are at their most powerful and competitive.

Reduce Your Ad Spend Over Time

Amazon’s A10 algorithm prioritizes customer satisfaction—it wants to show consumers the best products that align with their search intent to improve conversions and sales. So, the best way to gain momentum on Amazon is to work on incremental wins. 

Improving your performance on more obscure search terms that align with your customers’ search intent is a great way to increase ROAS for the long term. A10 will reward your success with better rankings on higher-volume search terms and the virtuous cycle can help you conquer your most-coveted listing spots. And the best part? This process of gaining momentum, if done right, will naturally decrease your ad spend over time as Amazon recognizes your value and works with you to keep your products at the top of consumers’ search results.

Amazon SEO Optimization and More

As an Amazon SEO specialist, Pattern knows how to help your brand win better success for long-term profitability on Amazon. With our data-driven tools and brilliant teams of ecommerce experts, we help brands with listing management, content optimization, Amazon ad strategies, and more.

Contact us to learn more about our SEO optimization services.

Sept 20, 2022

Global Ecommerce Weekly News: 20th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon to raise pay and add extra work benefits for delivery drivers Following the rise in fuel prices and protests by Amazon workers, the ecommerce giant is raising its delivery drivers’ pay and adding more work benefits. Amazon has mentioned that it will be investing $450 million into rate increases along with an education program and a Delivery Service Partners program. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/14/amazon-to-raise-delivery-drivers-pay-and-add-more-work-benefits/) Amazon announces it will give away shipping software to merchants at no cost Amazon has recently announced that it will be giving ecommerce merchants free software to manage shopper orders on and off its platform as it extends its reach. The ecommerce giant will be ending monthly costs for sellers using Veeqo, a shipping software it recently acquired and instead offer to them a new, free shipping software. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/16/amazon-to-give-away-shipping-software-to-merchants/) --- Other Marketplace News --- Walmart unveils new virtual fitting rooms In an effort to drive clothing sales, Walmart has launched virtual fitting rooms while competitors reduce spending amid the cost of living crisis. The virtual try-on tool can be used by Walmart customers to virtually measure the clothing items and see how the products would look on them. Shoppers will now be able to see how over 270,000 clothing items on Walmart’s ecommerce site would look on their bodies. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/15/walmart-launches-virtual-fitting-rooms-to-drive-clothing-sales/?utmsource=Retail+Gazette+Subscribers&utmcampaign=2da7f0f8f8-EMAILCAMPAIGN202209150742&utmmedium=email&utmterm=0d23e2768b6-2da7f0f8f8-61040615) THG slashes sales and profit expectations The Hut Group has slashed its forecasts for 2022 as rising interest rates, inflation and energy costs take a toll on consumers. Previously, THG estimated its sales growth to be between 22-25% but after a recent evaluation, has lowered this prediction to between 10-15%. Initial predictions did not take into account the negative effects of ceasing sales in Russia and Ukraine along with the impact that the cost-of-living has had on consumer spending. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/15/thg-slashes-forecast-as-cost-of-living-crisis-hits-consumers-wallets/) --- Other Ecommerce News --- DHL and Post Office team up to provide click and collect services Through a partnership between delivery company, DHL and Post Office, a new click and collect service is to be tested at Post Offices before rolling out to over 1000 branches across the UK. Online shoppers will now have the option of choosing their local Post Office as a collection point, and DHL will fulfil the delivery aspect, opening up networks for both parties. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/14/post-office-partners-with-dhl-express-to-provide-click-and-collect-services/) US consumer watchdog plans to further regulate the BNPL sector The US Consumer Financial Protection Bureau (CFPB) has raised concerns regarding the collection of consumer data and the fast-growing nature of the BNPL sector, which includes companies such as Affirm and Klarna. The CFPB is worried that these companies could be negatively impacting consumers’ financial health and aims to put better regulations in place to ensure consumers are safe and empowered. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/16/us-consumer-watchdog-to-start-regulating-bnpl-sector/) Japanese ecommerce market estimated to grow by 6.9% in 2022 The ecommerce market in Japan, largely dominated by domestic online retailers including Reakuten and Mercari, is set to reach $194.3 billion USD in 2022, after seeing an annual compound growth rate of 5.2% between 2018 and 2021. This makes Japan the fourth leading ecommerce market globally, following China, the US, and the UK. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/13/japan-ecommerce-market-to-grow-by-6-9-in-2022/) Ecommerce brands are spending more on TikTok ads TikTok may soon be surpassing Facebook and Google as the most lucrative advertising channel, with ecommerce brands spending 60% more on TikTok ads in Q2. Facebook is still ahead as the top choice for ecommerce advertisers but only grew by 5.6% from Q1, while Google grew 20.5% in Q2, and Snap declined 10.8% in Q2. [Read more on SearchEngineLand](https://searchengineland.com/ecommerce-brands-spent-60-more-on-tiktok-ads-in-q2-387876)