E-Commerce

House Judiciary Chairman Bob Goodlatte, R-Va., blasted the Supreme Court’s 5-4 decision in South Dakota v. Wayfair, Inc. as having “the potential to unleash chaos for consumers and remote sellers, particularly small business sellers.”

Tuesday’s House hearing will be chaired by Rep. Bob Goodlatte, R-Va., who was a steadfast supporter of the previous standard under which a remote seller had to have a physical presence in a state in order to be required to collect sales taxes.

State and local governments were advised Thursday to avoid imposing burdens on out-of-state e-commerce retailers that could spark a new round of litigation as they begin implementing the Supreme Court’s June 21 South Dakota v. Wayfair, Inc. ruling on sales taxes.

During a webinar Thursday moderated by the National League of Cities, officials pointed out that the South Dakota v. Wayfair, Inc. sales tax case has been remanded by the U.S. Supreme Court back to the South Dakota Supreme Court.

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

Membership in the Streamlined Sales Tax Governing Board is voluntary, but the Supreme Court ruling may serve as an impetus for more states and e-commerce retailers to join.

Sen. Jon Tester, D-Mont., and co-sponsors of a recently offered bill want to prevent businesses in their states from being forced to collect sales taxes from e-commerce transactions.

With the need for Congressional action lessened, governors and state legislatures can focus on fine tuning their own laws, officials said.

Thursday's 5-4 ruling involves a 2016 law enacted by South Dakota requiring out-of-state e-commerce retailers to collect sales tax if they have more than 200 transactions annually or $100,000 in sales within the state.

Only nine states reported making midyear budget cuts totaling $830 million this year compared to 22 states that cut $3.5 billion in 2017.

States could gain $8 billion to $33.9 billion in additional annual revenue if the high court rules in favor of South Dakota, while a loss would mean the status quo.

Tax administrators will consult with governors and governors, in turn, will consult with their legislatures before responding to any of several possible rulings in the case by the high court, officials said.

Many lawmakers in Congress have deferred to the high court on the issue in the belief that helping state and local governments collect sales tax for e-commerce might be construed as a new tax rather than an enforcement measure.

The case involves as much as $100 billion in state and local sales tax revenue over the next decade, according the e-commerce retailers that are defendants in the lawsuit.

The justices and attorneys both sides in a case involving South Dakota all appeared to prefer action by Congress to regulate this area of interstate commerce that has been forced on the high court by legislative gridlock.

Both sides of the e-commerce sales tax debate tee up their arguments before the high court hears the case on Tuesday.

The report illustrates how federal, state and local laws must be changed if the Supreme Court rules in favor of South Dakota and against Wayfair Inc. in an online sales tax case.

Some states don't remit all of the sales tax funds that are due to local governments from e-commerce retailers.

South Dakota, which has no state income tax and relies on sales and use taxes for much of its revenue, will make its oral arguments to the high court on April 17.

The court’s announcement on Friday that it will hear arguments in South Dakota v. Wayfair comes as lawmakers have been divided over the online sales tax issue.