Country Barn Babe can fill and ship orders from its Gainesville online-only business with ease, but a new U.S. Supreme Court ruling has the owner simply shaking her head.
“We’re in wait-and-see mode to see what the actual impact will be for a small business such as ours,” Nicole Oliver said last week. “We’re entirely not concerned about profit, as this is just part of our times changing — just the potential headache.”
The Supreme Court ruled last month that online retailers with no “physical presence” are no longer exempt from paying sales taxes.
The case the court ruled on involved a 2016 law passed by South Dakota, which said it was losing out on an estimated $50 million a year in sales tax because of the inequity.
Basically, the court overturned previous cases that said if a business was shipping a customer’s purchase to a state where it didn’t have a physical presence, such as a warehouse or office, the business didn’t have to collect sales tax for that state.
“Each year the physical presence rule becomes further removed from economic reality and results in significant revenue losses to the states,” Justice Anthony Kennedy wrote in an opinion.
Country Barn Babe doesn’t have a retail store, but it does have a building at 1603 Gibbs Drive in Gainesville, where Oliver and her employees make personalized gifts and crafts and ship them out across the country.
Still, the sales tax ruling “logistically ... seems complicated, since every state — and county and municipality — has different tax rates,” Oliver said. “I don’t even know how it would work, to be honest. It would be a full-time job for somebody.”
The ruling helps pave the way for a law passed earlier this year in Georgia’s General Assembly.
It takes effect Jan. 1, and requires online retailers who ship to Georgia customers to pay sales tax if they make at least 200 sales per year or at least $250,000 per year in retail sales.
It’s a move state Sen. Butch Miller, R-Gainesville, said will not only add an estimated $500 million in state revenue but “level the playing field” for all retailers.
Businesses in storefronts “were (charging) sales tax all along and, of course, the online giants were not,” Miller said. “It was cheaper to buy online in many cases because there were no taxes involved.”
“The South Dakota case is a win for folks who want a level playing field in terms of competition and felt like the physical presence didn’t really matter,” he said. “That’s archaic. I don’t know where Amazon is ... or where Zappos is.”
It’s a move also applauded by the Georgia Retail Association.
“It’s great news for brick-and-mortar stores,” spokesman James Miller said. “For years, online companies have exploited that legal loophole that didn’t require them to collect sales taxes. Customers were supposed to do it, but that’s never happened.”
The Marietta-based group doesn’t have any online-only retailers “as of yet,” but that doesn’t mean online retailing is being ignored, he said.
“We try to work with small businesses and encourage them to expand their online presence. That’s where it’s going. People want ease of ordering,” James Miller said.
Rahab’s Rope, a Gainesville ministry that strives to spread awareness and help eradicate sex trafficking, is in a unique position: Not only is it a nonprofit organization, but it operates a retail store and has an online presence.
“Our catalog will actually put in sales tax per state, so we can do it, but it’s going to be more expensive for us, for sure,” said David Moore, chief operating officer. “It would be nice if all the states would be in sync with this, so no one state has the advantage over the other.”
The Associated Press contributed to this report.