Business development · 1 October 2019

Small British traders have been hardest hit by US sales tax

If you were not aware, America’s South Dakota v Wayfair Supreme Court ruling paved the way for US states to impose sales taxes on out-of-state and overseas sellers.  Combine this with on-going Brexit inflation woes and it does not paint a pretty picture for small traders who operate in Britain.

What is the Wayfair tax

On June 21, 2018, the Supreme Court of the United States ruled in favour of the state in South Dakota v. Wayfair, Inc. The decision allows states to tax remote sale.

Why Wayfair is unfair

How does this case affect British SMEs today?

Though the Wayfair judgement was aimed at larger companies who achieve over $100,000 in the US. A recent study by Parcel Hero has shown that the major UK multinationals are sitting tight and waiting for the US to begin acting against UK sellers.

Head of Consumer Research at Parcel Hero David Jinks MILT, says: ‘Wayfair is unfair on small British online marketplace traders.’ More unjustly it appears that the big companies have slipped through the cracks.  While the legislation was originally meant to target corporation giants such as Amazon and Ebay because they are registered as a seller, not an individual trader on their sites it means they will not have to take the hit.

So does this mean that British SMEs will feel the burn?

British SMEs are set to feel the burn

Unfortunately yes, already if a UK company sells to the US on a site such as eBay they automatically collect the online sales tax on the sellers’ behalf for the affected states. Although it claims that there are no extra charges or fees for this service.

But what does the practise really mean?

For example, a $200 item bought from a British online marketplace trader will now cost the buyer around $213. A steep 6.5% sales increase is going to harbour an environment where consumers and traders alike will no longer wish to engage in transatlantic transactions.

Big companies should be worried

Now $200 item bought from a British online marketplace trader will now cost the buyer around $213.

Jinks continues to say that “‘UK multinationals with sales above the average $100,000 state threshold, could soon find themselves pursued aggressively by US states. Whatsmore is that there’s no time limit on when these taxes can be demanded meaning the clock is already ticking”.

This tax increase will come as a major shock to the major UK multinationals

Until last summer, no US state’s sales tax applied to online sellers who did not have an employee or property in that state. That meant e-commerce traders from outside, including, from another country such as the UK, were exempt from local sales taxes. As there is no nationwide VAT system in the USA, this meant international companies such as UK online retailers paid zero sales taxes in the US.

 

 

 

 

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ABOUT THE EXPERT

Laura is the Junior Reporter at Real Business and Business Advice. She's the first point of call for any PR, business owner or industry insider looking to tell a story of entrepreneurial inspiration, retell some key advice, or a ground-breaking news story. She is the core ambassador for the brand(s) and can be found attending high profile events and meeting disruptive business owners across London – and beyond.

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