Why do E-commerce Entrepreneurs Need To Pay Attention To The Wayfair Case?

By admin / December 2, 2020

Ever since the supreme court has released its decision on the Wayfair case, we are getting emails from our clients about the economic legislation. Well, after getting so many emails and requests, we cannot simply sit, can we?

Hence, here we are with the Wayfair case and why aspiring e-commerce entrepreneurs must know about it.

Things To Know About Wayfair Case

The recent supreme court decision on the Wayfair case was announced on June 21, 2018, supporting the imposing of taxation on their online businesses. This decision is certainly right, but this might affect the economic nexus.

With tax imposed on even online businesses, we might see a drop in the number of entrepreneurs. Hence, if you are a college student and hope to become an entrepreneur, you can not miss this article.

To prepare for these major changes, entrepreneurs might need to change their original plan and might have to rethink their budgeting system and staffing.

The Wayfair case was all about why only traditional businesses are paying sales tax. As in the case of 1992, the court made the judgment that online businesses have no asset and location, so they are only liable to pay sales tax. But this was removed in 2018.

This decision might have had a minor attack on some of the major eCommerce platforms like Amazon and Target; small businesses were in shambles.

This made us realize that we need to do something for those small businesses. Here we have broken down the major impacts and how it can affect small businesses.

1. States Must Approve Taxes

The supreme court decision means that now the state government can tax online retailers and mailed orders. As of now, all the states are not following these methods. It is clear that with time all 50 states will start taxing online businesses. After all, it will give a significant boost to their revenue.

Hence, online businesses will now have to structure their business in the same way as the traditional market has structured in terms of sales tax collection.

2. Online Retailers Must Track Sales Level

The initial phase of the online sales tax implementation was very slow. It has been two years, and as we can see, online taxation has reached all the states. It has become very important for the online marketer and eCommerce platforms to track each sale.

For instance, the supreme court ruling made it clear that an online retailer is liable to pay tax if the sales reach 200 taxable sales Or $100,000 in gross income. This created an urgency in the online market, and the businesses started adapting to the South Dakota Benchmark Model.

3. Retailers Must Set Up A System To Collect Sales Tax

Now that new rules and regulations have been implemented for online businesses, small businesses will not have to find a new pair of hands to handle this matter. Though there are more than capable software applications to help with sales tax calculation, online retailers will now have to spend extra time maintaining these softwares.

For instance, if you have a small scale business, you are already making a low profit. Now that online businesses will have to pay sales tax, not only you have to pay tax from the profits, you have to pay for the software fees as well.

4. Online Retailer Must Re-evaluate Their Business

Small businesses that were selling their products on large eCommerce platforms will see their profits hitting low bottom. Some businesses might even see no profit at the end of the day. Hence, now these online retailers will have to re-evaluate the sales, profit, loss, and overhead expense in the form of sales tax softwares.

5. Brick And Mortar Business Will Hold A Lead Here

The Wayfair case was undoubtedly a win for the Brick and mortar businesses over the online retailers. Now you can say that the market is working on an equal footing. Consumers will no longer have to choose the type of taxed product they buy. Now they can buy products from anywhere with the same value.

The Bottom Line

This information might not seem that great for most of the online retailers and business owners, but will surely help the new aspiring entrepreneurs who wish to make their career in online marketing.


About the author


Click here to add a comment

Leave a comment: