Posted by 19 July 2018
The U.S. Supreme Court ruled in June that states can begin collecting sales taxes on Internet purchases. Soon after this ruling was announced, Wisconsin Governor Scott Walker said that his state would do so beginning in October. As a result, the state’s income tax rates may be going down.
In Wayfair v South Dakota, the high court held that a state could charge sales taxes for items purchased online from out-of-state sellers. A previous court decision said that states could not impose a tax on purchase made by their residents from out-of-state companies, but this ruling occurred prior to the widespread use of the Internet.
Many states, including Wisconsin, had long desired to tax these purchases but were held back by the earlier Supreme Court ruling. With the court changing direction, Wisconsin is embracing its opportunity to tax online sales. Governor Scott Walker says that this will not be a tax increase but will merely be treating all sales fairly, regardless of whether they are made in-person or online.
A 2013 state budget provision held that if the state began collecting online sales taxes, then the state’s income tax will automatically be cut to offset the new income. It is unclear how this provision will be implemented, but legislative leaders say they are willing to work with the governor to cut the income tax rate in response. One study of the potential effect from taxing online sales concluded that Wisconsin could see as much as $187 million a year in new revenue.
Do you support states collecting sales taxes on purchases made online by state residents?