States gear up for U.S. Supreme Court decision supporting sales taxes for online transactions

Pew Stateline reports:

With the U.S. Supreme Court weeks away from hearing arguments in a landmark case on online sales taxes, several states are readying laws that would allow them to begin collecting millions of dollars almost immediately if the court rules in their favor.

States across the country are salivating at a potential windfall in sales taxes — but they’ll only get it if they have a law on the books that allows them to collect taxes

We noted earlier that a national expert on state taxes called Washington’s tax on remote sales “the one to watch.”

Today’s report from Stateline makes the stakes clear.

Currently, taxes are not collected on billions in remote sales, though Amazon, the biggest online seller, has agreed to do so in many states. The potential is huge: E-commerce sales made up 9 percent of all retail sales in the United States last quarter, topping $119 billion, adjusting for seasonal variation, according to the Census Bureau.

“It’s about the money,” said Max Behlke, who handles budget and tax issues for the National Conference of State Legislatures, which supports allowing states to collect the taxes. Behlke pointed out that in most states, sales tax revenue never rebounded after the Great Recession, despite the fact that Americans are buying more.

As the Washington Research Council’s brief on the state budget stated last year, lawmakers passed legislation in 2017 that

  • Requires remote sellers (sellers without a physical presence in Washington), referrers (people who list or advertise items for sale for a seller and receive a commission) and marketplace facilita- tors (people who contract with a seller to facilitate the sale of items through a marketplace) to either collect and re- mit sales taxes or comply with notice and reporting requirements to the cus- tomer and the Department of Reve- nue. This is not settled law at the federal level—see our report, “Washington’s Steady Move to an Economic Nexus Standard for Taxes

The Stateline story points out the pros and cons – it’s worth reading the article in its entirety. As they write,

n general, lawmakers argue that extending sales taxes to the internet is not a new tax, but rather the enforcement of an existing levy. Technically, buyers already are required to remit state taxes on things they buy on the internet, but in practice, few, if any, do so.

Others, like Amazon, are already collecting the tax. The opposition appears to be scant, though with some heavyweights.

The only major opposition among the amicus briefs, often known as “friend of the court” briefs, comes from NetChoice a trade group of online retailers that includes such behemoths as Google, eBay and as well as smaller retailers. The organization argues that assessing and collecting sales taxes from the 45 states that assess a sales tax is too complicated and would disproportionately hurt the little sellers.

The case is one with significant fiscal implications, definitely one to watch.