What Congress might do on e-commerce sales taxes

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WASHINGTON – Congress should enact legislation to prevent states from retroactively forcing e-commerce retailers to reimburse them for sales taxes on transactions prior to the Supreme Court's June 21 ruling in South Dakota v. Wayfair, Inc.

That was the main consensus Monday at a forum held by the Congressional Internet Caucus Academy to discuss whether Congress will weigh in on the court decision.

Two nearly identical bills in Congress – the Marketplace Fairness Act (S. 976) in the Senate and the Remote Transactions Parity Act (H.R. 2193) in the House – both have been pending for a number of years.

The bills would require states to either join the Streamlined Sales and Use Tax Agreement compact or agree to implement certain sales tax simplification measures.

But the bipartisan sponsors of the bills have not yet said whether they will push for enactment in the wake of the recent court decision.

Nor have they discussed transitions issues the states may face in implementing the decision. A spokesman for Sen. Mike Enzi, R-Wyo., the lead sponsor of the Senate bill, said last week the senator still is in the process of getting feedback on the court ruling.

The court upheld South Dakota’s 2017 law requiring sales tax collection if a retailer has at least 200 online transactions or $100,000 in sales over the Internet in the state over a calendar year, overturning the previous standard that required a retailer to have a physical presence on the state.

George Isaacson, the attorney who represented e-commerce retailers Wayfair, Overstock and Newegg before the high court, said Massachusetts is applying the ruling retroactively to Oct. 1, 2017 while Hawaii is going back to Jan. 1, 2018.

“There are other states that are starting their obligation on July 1,” Isaacson said, citing Kentucky, Vermont and Mississippi. It's "totally unrealistic for companies to not only acquire the software but to develop the software and integrate it,” he said.

But 44 states have said they won’t impose retroactive liability, said Amanda Kellar, director of legal advocacy at the International Municipal Lawyers Association.

Kellar agreed Congress might provide clarity by preventing states any state from imposing retroactive liability.

However, Isaacson’s call for Congress to impose a moratorium period until Jan. 1, 2019 to delay states from implementing the high court ruling did not gain sympathy from two of his co-panelists at the forum.

Jennifer Platt, vice president of federal operations at the International Council of Shopping Centers, said the time for a moratorium is past.

Platt, however, said Congress could call “a hearing at the minimum” to determine what measures might be needed.

Kellar said that one of the e-commerce retailers originally involved in the South Dakota case, Systemax, did not challenge the state and complied with sales tax collection without a moratorium.

“From our perspective, the states have always been the laboratories of democracy,” Kellar said. “I think there is an opportunity for states to enact legislation to fit their needs.”

Mike Dabbs, senior director of government relations at Ebay, said his concern is for protection of small businesses.

Congress might consider a national standard for protecting small businesses from sales tax collection, Dabbs said.

The Supreme Court ruling effectively set a national threshold of around $37 million in sales for e-commerce retailers to be required to collect sales tax, Dabbs said. He came up with that number by extrapolating the South Dakota standard and applying it to applying it to every state, while also taking into consideration South Dakota is one of the nation’s smallest sates for e-commerce.

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Sales tax Online sales tax E-Commerce State and local finance Government finance SCOTUS Washington DC South Dakota Vermont Hawaii Massachusetts Kentucky