Online shopping may become more expensive after the U.S. Supreme court ruled on June 21, 2018 that states can require internet retailers to collect sales taxes.
The 5-4 decision broke with 50 years’ worth of legal rulings that barred states from imposing sales taxes on most purchases their residents make from out-of-state retailers.
**Online retailers were previously protected from paying sales tax if they had no physical presence in a state.**
“State and local governments have really been dealing with a nightmare scenario for several years now,” said Carl Davis, research director at the Institute on Taxation and Economic Policy, a Washington think tank. “This is going to allow state and local governments to improve their tax enforcement and to put local business on a more level playing field.”
This will mostly impact the other half of products sold online by third-party merchants on certain marketplaces like Wayfair, eBay, Etsy and Overstock just to name a few. They potentially face the added burden of collecting sales tax in states that begin taxing online sales.
The ruling would present a “compliance challenge” for internet start-ups. Independent merchants who simply post their inventory on online stores are responsible for calculating and paying the various state taxes if they are owed. In the past year, Washington State and Pennsylvania have enacted laws requiring internet retailers to collect taxes on third-party sales. More states are expected to follow suit.
Will this still be an early Christmas Gift for the Taxpayers?
Trump may wait until January to sign the tax bill into law. The reason this may happen is because once this tax bill goes into law it will add to the deficit and when that happens it will trigger a 2010 law known as “PAYGO,” or “pay-as-you-go.” Once this happens the budget law will require spending cuts to Medicare and other programs. The reductions would cut spending on Medicare by $25 billion in 2018, according to the Congressional Budget Office.
If Trump signs the tax bill into law in January it would likely defer those spending cuts until 2019, giving Congress almost a year to come up with a solution.
So what will the Taxpayers get out of the tax saving plan. Well, let’s see!
In 2018, taxpayers earning less than $25,000 would receive an average tax cut of $60, the nonpartisan Tax Policy Center found. Those earning between $49,000 and $86,000 would get an average cut of about $900; those earning between $308,000 and $733,000 would receive an average cut of $13,500; and those earning more than $733,000 would receive an average cut of $51,000.
And in 2025 these tax cuts will expire for individuals but the corporations tax cuts will remain permanent.
Senate Republicans passed President Donald Trump’s tax plan on December 2, 2017. Republicans still have a lot of differences between the House and Senate tax bills to compromise on. The House and the Senate have to pass the “same” tax bill. So which one would be “better.” Better for whom, would be the question to ask.
I’m going to keep this simple for now. After this bill is put into law that’s when things will get complicated. But for now I will go over just a few things that make the House tax bill and the Senate tax bill different.
Family and Child Tax Credit The House bill expands the credit to $1,600 per child and begins to phase it out for married couples making more than $230,000. The Senate bill expands the credit to $2,000 per child, with a phaseout beginning at $500,000 of a couple’s income.
Mortgage interest deduction
The Senate bill keeps the limit for the mortgage interest deduction in place for homeowners for the first $1 million of home debt. While the House bill caps it at the first $500,000 of debt.
Medical and Student Loan Deductions
The House bill eliminates deductions for high medical expenses and student loan interest. The Senate bill would leave the aforementioned deductions, intact.
The Affordable Care Act (ObamaCare)
The Senate bill repeals the Affordable Care Act requirement that individuals buy health insurance coverage. Currently, the mandate is enforced via a tax penalty for people who fail to purchase coverage. The House bill does not touch the mandate.