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Goodlatte urges Supreme Court to let Congress deal with remote sales tax

  • Nexus
  • December 12, 2017 | Gail Cole

internet sales tax supreme court

State and federal lawmakers on both sides of the aisle are divided on an issue that’s coming to a head with the close of 2017: remote sales tax. The latest to weigh in is Virginia Congressman Bob Goodlatte, Chairman of the House Judiciary Committee. On Dec. 7, he filed an amicus brief asking the Supreme Court of the United States to deny review of a South Dakota case that could cause it to reconsider its decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). If Quill is overturned, states would likely have more freedom to tax out-of-state sellers.

South Dakota wants Quill overturned

Like many states, South Dakota wants Quill overturned. To that end, it created a remote seller compliance law that directly challenges the physical presence precedent upheld and cemented by Quill, by which a state can only tax a business that has a physical presence in it. The state has petitioned the Supreme Court to hear South Dakota v. Wayfair, Inc., Overstock.com, Inc., and Newegg, Inc.

Numerous parties have submitted amicus briefs in support of the state, including the National Governors Association, the Streamlined Sales Tax Governing Board, and 35 states. They’re urging the Supreme Court to take the case and reconsider Quill for a variety of reasons, some of which are listed here.

Goodlatte and others want Quill to stand

Amicus briefs are typically “only filed by those who agree with the petitioner that the court should review the case.” However, On Dec. 7, the court received seven amicus briefs in support of Wayfair, Overstock, and Newegg. Americans for Tax Reform, the National Taxpayers Union Foundation, and six federal lawmakers, including Congressman Goodlatte are urging the court to reject the case, as are the American Catalog Mailers Association (ACMA), NetChoice, and several other parties.

The brief filed by Congressman Goodlatte was co-authored by Sen. Ron Wyden, Rep. F. James Sensenbrenner, Jr., Rep. Anna G. Eshoo, Sen. Michael S. Lee, and Rep. Steven J. Chabot. It exhorts the court to deny certiorari so that Congress can solve the problem of untaxed interstate sales, asserting that “the Constitution assigned to Congress the domain and power to regulate and control commerce among the States.”

Let Congress handle it

Few, if any, would dispute that claim. Many states also prefer a congressional solution, and the Supreme Court itself invited Congress to take up this matter in Quill.

Yet as South Dakota points out in its petition, Congress has not come up with a solution: “It is no answer to hope (as Quill did) that Congress might ‘fix’ the problem created by this Court’s own doctrine … as 25 years of congressional inaction on this issue have vividly shown.”

This is not for lack of effort. Over the years, numerous bills seeking to expand states’ right to tax remote vendors have been introduced, to no avail. When the Senate overwhelmingly approved the Marketplace Fairness Act (MFA) of 2013, Congressman Goodlatte and his committee refused to bring the bill to the full House. Subsequent versions of the bill have also stagnated, as has a similar bill, the Remote Transactions Parity Act (RTPA). Learn more about the 2017 versions of MFA and RTPA here.

According to Congressman Goodlatte and peers, “The fact that Congress thus far has not enacted a federal solution … should not be seen by the Court as a reason to give up on Congress.” They say the House Judiciary Committee “has been working diligently and assiduously” to find a solution that allows taxation of remote sales without “violating the fundamental principle against States regulating activity that occurs beyond their borders.” Congressman Goodlatte’s favored solution is the Online Sales Simplification Act (OSSA), a bill he co-authored with Eshoo. However, it’s in draft form only and has never been brought to the full House for review. Learn more about OSSA 2016 here.

Arguments for denying review

Those in favor of a federal solution present many arguments for denying review of South Dakota v. Wayfair, Inc. These include the following:

Congressman Goodlatte and peers agree with the arguments presented in the respondents’ petition. They oppose any action (i.e., reversing Quill) that would lead to a contradiction of “constitutional tradition and the principle of ‘No Regulation Without Representation.’”

The American Catalog Mailers Association emphasizes the continued importance of catalog sales, “especially in rural areas,” and says sales tax compliance is especially challenging for retailers with many off-line customers. It would like to see a “meaningful substitute” to the physical presence standard before it is overturned.

Americans for Tax Reform fear that accepting the South Dakota case “would encourage unconstitutional state action and threaten the rule of law.”

The National Taxpayers Union Foundation argues that “the case’s failure to consider due process concerns and its narrow record render it an inappropriate vehicle for abrogating Quill.” Denial of certiorari would “permit Congress to continue its efforts to establish a legislative standard for remote sales tax collection.”

NetChoice, an ecommerce trade association, says “South Dakota has no factual record upon which to base an argument for overturning Quill.” Furthermore, states “have not sufficiently simplified tax collection and will impose undue burdens on collecting businesses.” The solution should be left to Congress.

All petitions regarding South Dakota v. Wayfair, Inc. are available on the SCOTUS blog.

It’s unclear exactly when the Supreme Court will make a decision about the case. In the interim, states are looking for alternative solutions, such as basing a remote vendor’s physical presence on web cookies placed on in-state devices. Learn more about these and other efforts at the Avalara Resource Center.

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Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.