WASHINGTON — The House Judiciary Committee plans to hold a hearing Tuesday to examine the impact on consumers and small business of last month’s Supreme Court decision that paved the way for e-commerce sales tax collection.
“We’re in a new era,” Alan Viard, resident scholar on federal tax and budget policy at the American Enterprise Institute, told those attending a luncheon meeting of the National Economists Club Thursday.
Viard predicted “the new rules are likely to be more economically grounded” than the physical presence standard that was overturned in the high court's 5-4 ruling in South Dakota v. Wayfair, Inc.
But Viard — who previously served on the White House Council of Economic Advisers, the congressional Joint Committee on Taxation and at the Federal Reserve Bank of Dallas — said the new rules may not be clear initially.
E-commerce retailers may challenge some state laws they consider to be burdensome, but a number of states already have adopted laws identical to the South Dakota statute which they are treating as a safe harbor.
Some states that earlier adopted click-through laws treating Internet transactions as satisfying the physical presence standard are using the Supreme Court ruling as a validation of their laws, but they may be open to legal challenges by remote sellers who claim they are applying the ruling retroactively.
“So states and courts and sellers definitely face a number of decisions and Congress does potentially does as well,” Viard said.
Tuesday’s House committee hearing will be chaired by Rep. Bob Goodlatte, R-Va., a steadfast supporter of the previous standard that said a remote seller had to have a physical presence in a state in order to be required to collect sales tax.
Goodlatte joined Reps. Anna Eshoo, D-Calif., and Jim Sensenbrenner, R-Wis., last month in describing the Supreme Court ruling as “a nightmare for American businesses and small online sellers, who will now have to comply with the different tax rates and rules of, and be subject to audits by, over 10,000 taxing jurisdictions across the U.S.”
Four U.S. senators from states without a statewide sales tax led by Sen. Jon Tester, D-Mont., recently introduced legislation seeking to restore the physical presence standard, but it is not expected to attract many supporters.
Many members of the Senate and House, however, have long supported two other bills that would ease the collection of sales taxes from e-commerce transactions by requiring states to either join the Streamlined Sales and Use Tax Agreement compact or agree to implement certain sales tax simplification measures.
Sen. Mike Enzi, R-Wyo., has 27 cosponsors for the Marketplace Fairness Act while the House version, the Remote Transactions Parity Act sponsored by Rep. Kristi Noem, R-S.D., has 50 bipartisan cosponsors.
Viard said the Supreme Court ruling is putting pressure on lawmakers supporting the physical presence standard to consider legislation to ease the burden on remote sellers.
“Now they’re saying to Congress, you need to do something,” he said. “You need to put in rules providing clarity and protecting small sellers. Mandate a threshold. Bar retroactive taxes. Mandate simplification. Do something like that.”