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Supreme Court needs to recognize 21st century marketplace


Right now thousands of local businesses across the country are at a competitive disadvantage because they have to collect state sales and use taxes while their online and other out-of-state competitors do not. In some states that can mean a 5 to 10 percent price advantage for the online seller.

For example, in most places, when you purchase a book from a local store, you expect to pay sales tax on your purchase. But if you go online, in many instances the business you buy your book from is not obligated to collect that tax and you’re expected to remit the tax on your own. It also means customers are liable for calculating and paying sales and use tax for all their online purchases when they file their taxes. And, because this is difficult for individual customers to do with accuracy, states and local governments lose billions of dollars in revenue when people don’t self-report their remote purchases.

{mosads}It’s time to level the playing field.  

Earlier this year, the U.S. Supreme Court heard oral arguments in South Dakota v. Wayfair, Inc. on whether it should overturn the 26-year-old Quill Corp v. North Dakota decision. This case, which was brought by Sen. Heidi Heitkamp as North Dakota’s tax commissioner and decided long before e-commerce began to grow, prevents states from requiring out-of-state and online businesses to collect state sales taxes on purchases that are already owed. 

With consumers spending more than $450 billion last year on online retail purchases — a 16 percent increase from the year before — the disparity created by the 1992 Quill decision between brick and mortar stores versus remote sellers is hurting Main Street retailers more than ever.

It is estimated that, as of 2015, total uncollected state sales and use taxes amounted to almost $26 billion annually, according to a joint study by the National Conference of State Legislatures and the International Council of Shopping Centers. And those taxes go directly to state and local governments, which maintain our schools, fix our roads, and support local law enforcement, fire departments and emergency management crews.

If online sales continue to grow as expected, states may be forced to consider new state and local taxes — such as income or property taxes — to offset the growing loss of state sales tax revenue. We may also see more traditional Main Street businesses suffer, which means fewer local jobs and less local economic growth.

This is a troubling situation, but the solution is fairly simple — level the playing field by closing a tax loophole and ensuring that remote sellers also have to collect a sales and use tax. And in the case of South Dakota v. Wayfair, Inc., the U.S. Supreme Court has the opportunity to do just that.

In 2015, U.S. Supreme Court Justice Anthony Kennedy wrote that the decision in Quill was “questionable even when decided, [and] now harms States to a degree far greater than could have been anticipated earlier.”

We have urged the Court in an amicus brief to overturn its earlier decision in Quill because this is about fairness. It is about ensuring that we are not creating a system that gives an advantage to some businesses while punishing others.

Contrary to what opponents say, this is not about creating an “internet tax.” It is about allowing states to collect the taxes they are already owed and which some online and remote businesses already collect.

As the Court considers how to rule on South Dakota v. Wayfair, Inc., we again urge the Court to overturn its earlier decision in order to allow states to enforce their own laws. If the Court does so, Congress stands fully prepared to step in if states impose excessive burdens on out-of-state retailers that become obligated to collect sales and use taxes.

It’s time for the court to modernize our tax law for the 21st century.

Tags e-commerce Heidi Heitkamp

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