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According to 1992 Quill v. North Dakota ruling, online businesses were exempt from sales tax, and only if there was a physical presence of the business in that state the business, were liable for taxation. Online retailers gained a significant advantage by this law, but the new Supreme Court decision overturned this and came as a gatecrasher to start-ups. E-commerce giants like Amazon, Alibaba, or eBay are well-established business, but start-ups have to deal with the burden of figuring out taxing in 15,000 different jurisdictions in the U.S.
Congress regulates interstate commerce for over 26 years, but it didn’t make an effort to fix the law because it would’ve been seen as a tax hike. The big loophole in the ruling costs $33.9 billion in lost revenue for the state. The major player Amazon initially didn’t support the verdict since it has warehouses across various states it decided to collect sales tax according to the individual state laws. Smaller e-tailers were affected because of the complex tax laws which made tax collection a burden. Amazon has prospered long enough not to be affected by the massive changes in the market. Start-ups lack resources to classify items according to the varying tax rate. The online-only retailers have now started to set up a brick-and-mortar system to add as an extension to their online stores; this move will furthermore affect the growth of start-ups. The new ruling makes it difficult for anyone to agitate the retail industry further.
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The Quill court didn’t have a vision about the boom of online selling or market place. The expansion of online retails increased revenue deficiency faced by states. Brick-and-mortar couldn’t make a surge because of the taxing policies against a non-taxing policy that benefitted online sellers. The previous policy allowed the e-sellers to cut down prices because of the tax exemptions they received, but the recent taxing policy has brought equality which will pave the way for fair competition to exist. The new policy is predicted to rake $500-$600 million in revenue for local and state government. Start-ups are anticipated to limit their reach because of the audit and compliance costs that are hard to meet. Congress is now expected to make the necessary amendment to help start-ups sustain.
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