Attorneys in High Court ‘Wayfair’ Case Debate Online Tax Precedent

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By Ryan Prete

Lawyers representing clients in the biggest U.S. Supreme Court tax case in years agreed that simplified federal legislation addressing online taxation would be the best thing for all parties involved.

Attorneys George Isaacson and Eric Citron debated multiple topics related to South Dakota v. Wayfair, the long-awaited direct challenge to the 1992 decision in Quill Corp. v. North Dakota. Quill, which states for years have tried to kill through lawsuits and legislation, prohibits states from imposing sales-tax collection obligations on vendors lacking an in-state physical presence. The case was argued April 17, and practitioners expect a decision by late June.

Isaacson argued before U.S. Supreme Court Justices in favor of Wayfair Inc., Newegg, Inc., and Inc. Citron represented South Dakota in the debate.

“If you locked Eric and I in a room with no bathroom privileges, we would probably be able to come up with simplified legislation on the matter, which is what we all want and need,” Isaacson said.

Citron, who debated Isaacson on a variety of topics before a crowd at Georgetown University Law Center’s Advanced State and Local Tax Institute, concurred.

“We don’t need a system with many different tax rates, we need nationwide simplification, when it comes to policy matters, I agree with George, we need reform that is uniform,” Citron said.

Retroactivity Issue

The two attorneys disagreed over whether states would retroactively apply taxes to prior years if Quill is repealed.

“It is my genuine view that retroactivity will never come up, because states don’t want to take on taxpayers,” Citron said. “If they did, there would be many lawsuits challenging the move. That’s something states wouldn’t want to face.”

Isaacson wasn’t convinced of that, in part because no state has gone on the record firmly against retroactivity, he said.

“There’s no questions about it, states will impose retroactivity,” Isaacson said. “We are operating on a thin line if all we’re going to do is hope states don’t take action.”

Just an hour after the two debated, a coalition of state interest groups met at the offices of the National Conference of State Legislatures to address the case, which is expected to be ruled on in mere weeks.

Veranda Smith, deputy director at the Federation of Tax Administrators, told Bloomberg Tax that every state she’s talked to has said they don’t want to hurt small businesses, and she doesn’t expect retroactive taxes to be a factor.

“They all say something along the lines of ‘We are good people, we just want the chance to start collecting,’” Smith said.

Max Behlke, director of budget and tax for the NCSL, agreed with Smith.

“States do not want to go after small sellers,” he told Bloomberg Tax. “I’ve spoken with many states, and I’m not aware of a single one that wants to pursue retroactive back taxes.”

‘Really Odd’ Arguments

Behlke and Smith spoke alongside David Parkhurst, general counsel of the National Governor’s Association, Greg Matson, executive director of the Multistate Tax Commission; Craig Johnson, executive director of the Streamlined Sales Tax Governing Board Inc.; John Hicks, executive director of the National Association of State Budget Officers; and Gale Garriott, executive director of the Federation of Tax Administrators.

The group also briefly discussed the April 17 arguments. Parkhurst noted that the four justices seemed to be in favor of South Dakota.

“After the Wayfair decision, what measures states take internally could have an effect on what happens to that state externally, somewhat of a Golden Rule to think about,” Parkhurst said.

Matson said the arguments seemed unique and bizarre, notably because the law at issue—South Dakota’s digital sales tax statute, S.B. 106 (S.D. Codified Laws Chapter 10-64)—wasn’t specifically debated.

“The arguments were a policy discussion, and that’s really weird for the Court—that’s really odd,” he said.

To contact the reporter on this story: Ryan Prete in Washington at

To contact the editor responsible for this story: Ryan C. Tuck at

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