As you may have heard, Supreme Court overturned the precedents that imposed physical presence rule on state sales tax systems in a 5-to-4 ruling.
Essentially, this means that in as little as 30 to 90 days, eCommerce merchants will have to begin collecting sales tax on all of their new sales, instead of just the sales where they have fulfillment warehouses or headquarters. Some states like South Dakota are already starting to implement sales tax on all purchases. The Supreme Court didn’t decide whether states may retroactively seek sales tax.
How does this affect sellers?
In simple terms; the ruling means that as states pass their laws on sales tax, you will have to start collecting and remitting sales tax on all of your eCommerce sales.
How does it impact my fulfillment strategy?
We believe the most profound impact this ruling has will be on location of warehouses. Before this law, the location of a warehouse was helpful to avoid sales tax in states with large population centers and high sales tax, such as New York and California. This provided a price advantage to the sellers, as the consumers in these states would not have to pay sales tax if the product wasn’t shipping from those states.
This changes with the recent court ruling’s effect. As this ruling goes to state legislatures to form a new law, consumers will likely have to pay taxes regardless of where the product is shipping from. This means that as an eCommerce seller, you will have to collect sales taxes on all your sales.
This ruling will essentially eliminate any tax advantage of operating from a single warehouse in a state with no sales tax or low population. It will expose the long transit times and higher transportation costs making your eCommerce business less competitive.
Therefore, it’s more important than ever to have your inventory distributed close to the customers, so sellers can meet ever-growing delivery speed promises.
What should as I do as a seller?
Moving forward, the tax code will no longer drive purchasing decisions. Instead, businesses (sellers) will compete based on the quality of the goods, speed of fulfillment, and the total prices they charge.
Speed of fulfillment is an important factor here and at Deliverr, we make sure that this factor is optimized in the fastest way possible. With our affordable pricing and access to Amazon Prime-like fast shipping tags on your products. We make sure you have the edge in your eCommerce Business without any hassle.