A Roundup of Reactions to the Supreme Court’s Decision for Online Sales Tax

by on June 22, 2018 · 0 comments

Yesterday, the Supreme Court dropped a decision in Wayfair v. South Dakota, a case on the issue of online sales tax. As always, the holding is key: “Because the physical presence rule of Quill is unsound and incorrect, Quill Corp. v. North Dakota, 504 U. S. 298, and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753, are overruled.” What follows below is a roundup of reactions and comments to the decision.

Joseph Bishop-Henchman at the Tax Foundation thinks this decision sets up a new political fight in Congress and in the states:

All eyes will now turn to Congress and the states. Congress has been stymied between alternate versions of federal solutions: the Remote Transactions Parity Act (RTPA) or Marketplace Fairness Act (MFA), which lets states collect if they agree to simplify their sales taxes, and a proposal from retiring Rep. Bob Goodlatte (R-VA) that would make the sales tax a business obligation rather than a consumer obligation, and have it collected based on the tax rate where the company is located but send the revenue to the jurisdiction where the customer is located. RTPA and MFA are more workable and more likely to pass, but Goodlatte controls what makes it to the House floor, so nothing has happened. Maybe today’s decision will change that.

Berin Szoka at TechFreedom noted:

For the last twenty-six years, the Internet has flourished because of the legal certainty created by Quill. Now, no retailer can know whether it must collect taxes, and smaller retailers face huge challenges. As Chief Justice Roberts notes, the majority ‘breezily disregards the costs that its decision will impose on retailers.’ The majority insists that software will fix the problem of calculating the correct state and local sales tax for every transaction, but with over 10,000 jurisdictions taxing similar products differently, the problem is nightmarishly complicated.

My colleague Doug Holtz-Eakin explains the tension:

What is the economic upshot of this decision? Certainly, it puts in-state and brick-and-mortar retailers on a level playing field with online sellers. In isolation, that is an improvement in the efficiency of the economy because people will shop based on the product and experience and not the tax consequences. Recall, however, that in many states a resident is liable for the “use tax” on her out-of-state purchases. If the sales tax is now being collected, it will be important for states either to drop the use tax or to make sure that there is no double taxation in some other way. If not, then the result of this decision will be less efficiency.

Another aspect of the decision is the impact on federalism and the notion of representation. The decision means that South Dakota can now dictate some of the business operations of firms that have no representation in the South Dakota legislature. Is that fair? Moreover, firms can no longer shop among states to find the sales tax regime that they like best — they will be subject to the same sales taxes across the country regardless of where they operate.

Grover Norquist at American for Tax Reform had this to say:

Today the Supreme Court said ‘yes—you can be taxed by politicians you do not elect and who act knowing you are powerless to object.’ This power can now be used to export sales taxes, personal and corporate income taxes, and opens the door for the European Union to export its tax burden onto American businesses—as they have been demanding…

We fought the American Revolution in large part to oppose the very idea of taxation without representation. Today, the Supreme Court announced, ‘oops’ governments can now tax those outside their borders—those who have no political power, no vote, no voice.

Adam Michel of the Heritage Foundation also focused on federalism at The Daily Signal:

The new status quo under Wayfair is untenable, creating a Wild West for state sales taxes. Some will point to seemingly easy solutions that have been promoted for decades. One example is the Remote Transactions Parity Act, sponsored by Rep. Kristi Noem, R-S.D.

Noem’s bill would maintain the new expanded power of state tax collectors, while imposing nominal limits and simplifications on states’ tax rules.

Such proposals that force sellers to track their sales to the consumer’s destination and comply with laws in other jurisdictions are fundamentally at odds with the principles of local government and American federalism.

Rob Port is concerned about the interstate commerce implications:

The purpose of the interstate commerce clause is to prevent the nightmare of fifty states squabbling with one another over trade wars between their constituent industries, or trying to exert political influence on one another. Congress, and not the states, is to regulate interstate commerce.

I feel like the Supreme Court, by overturning Quill and giving the states new powers to tax beyond their borders, has weakened interstate commerce protections and cracked open the lid to a real can of worms.

All Things SCOTUS has a list of reactions from conservatives.

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