The recent U.S. Supreme Court decision that modernized sales tax collection and leveled the playing field for small retailers against global internet-only giants is already stirring up ambulance-chasing attorneys waving proposed subpoena papers.
The Court’s June 21 decision in South Dakota v. Wayfair rejected the 1992 pre-internet Quill decision that exempted catalog and so-called remote sellers that don’t have a physical location in a state from collecting and remitting sales tax. The Quill decision didn’t ban tax collection, only ruled it too complicated to manage.
The recent Supreme Court ruling does not authorize new internet taxes, only says that the “undue burdens” of tax collection are no longer a factor and gives states authority to require current tax laws to be enforced equally whether products are sold in state or online.
Several attorneys have said they are ready to challenge the decision because they believe the change affects interstate commerce and subjects internet, TV, radio and catalog retailers to collection responsibility for thousands of different state and local sales and use taxes across the country. However, a result of the 26-year old Quill ruling has been the development of a national clearinghouse that enables simplified tax collection and submission to local jurisdictions.
The Streamlined Sales Tax Governing Board reports 24 of 45 U.S. states with general sales and use taxes have passed legislation to conform with the Streamlined Sales and Use Tax Agreement, an agreement for a national system that simplifies sales tax collection and settlements.
These states include South Dakota, which brought the Wayfair lawsuit, plus Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming. Illinois passed a law to match North Dakota’s right after the Court ruling was announced. Several other states are in the process.
The agency’s Governing Board applauded the Court ruling, saying, “South Dakota and the other Streamlined member states recognized that if they wanted the authority to require remote sellers to collect and remit their state and local sales taxes, the ‘undue burdens’ on interstate commerce needed to be removed.”
In a statement, the Streamlined Sales Tax Governing Board said, “Through an open and cooperative process between the states and the business community, the Streamlined Sales and Use Tax Agreement was developed. This Agreement contains numerous simplification and uniformity requirements states must adopt to remove or reduce the undue burdens on all sellers.”
The Board said it will continue to work with the business community to ensure that implementing the Court’s decision “is fair, efficient and transparent for all taxpayers and administrable for sellers, purchasers and the states.”
The agency has approved retail support in the form of free software and technical assistance to help retailers easily comply with tax laws.
Part of the problem has been the inability of Congress over the years to pass versions of the Main Street Fairness Act. The proposed legislation could never get out of committee, despite protections for small internet retailers who would have been exempt from tax collection requirements with sales less than $500,000 annually—up to $1 million annually in one version. The Court sided with South Dakota’s smaller exemption of less than $100,000 annually.
CBA has worked with other retail associations and groups to support fair-tax legislation to help indie retailers. Some retailers face double-digit pricing disadvantages. Tennessee, for example, home of Cedar Springs Christian store, has no income tax and a 12 percent sales tax.
The ability of online retail giants to undercut pricing in predatory ways using unfair tax advantages have impacted the ability of Christian stores to fairly compete and to support their local communities through sales tax collection, said CBA President Curtis Riskey.