What Does Online Sales Tax Mean For Shoppers?
MINNEAPOLIS (WCCO) -- Shoppers are expected to spend more than $7 billion this Cyber Monday. Thanks to a recent ruling from the Supreme Court, some of them will get charged an online sales tax they didn't pay before.
So, that has Kent from Oakdale wanting to know: What does that mean for shoppers?
It used to be some companies wouldn't charge internet sales tax in states where they didn't have physical stores. But in June the U.S. Supreme Court ruled states could require all online sellers, except the smallest ones, to collect the tax. The ruling was considered a victory for traditional brick-and-mortar stores who had trouble competing with exclusively online companies like Wayfair and Overstock.
Minnesota started collecting the online sales tax on Oct. 1.
"When people are shopping, they will notice that more online sellers are collecting the right amount of online sales tax," says Jenny Starr, an assistant commissioner with the Minnesota Department of Revenue.
The online sales tax is considered a trust tax for consumers, which means the sellers must collect the taxes and pay them to the states. Before the new tax rules, shoppers that weren't charged the online sales tax were expected to report it and pay it to the state themselves if they bought more than $770 worth of goods in a year. That rarely happened.
According to the U.S. Government Accountability Office, the tax changes could mean $8 to $13 billion in new revenue to the states.
There is an exemption for out-of-state small merchants. Remote sellers that make fewer than 100 sales in a 12-month period or make fewer than 10 sales worth $100,000 or more do not have to charge consumers sales tax.
The sales tax – whether in-store or online – depends on where a person ships the goods rather than the address to which they are billed. In Minnesota, the sales tax is 6.875 percent plus any county or city taxes. For any goods purchased or shipped to Minneapolis, that adds up 8.025 percent.
Under Minnesota law, marketplaces like Amazon collect taxes on behalf of the sellers, unless the sellers do it themselves or are small enough to be exempt.