Digital Sales Tax Changes Drawing Near in Next Year: Panelists

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By Ryan Prete

States’ taxing authority over remote retailers will change dramatically in the next 12 months, according to state tax practitioners.

“The nexus standard will change under a more aggressive interpretation of Quill,” Richard D. Pomp, the Alva P. Loiselle professor at the University of Connecticut School of Law, said July 28 during the Advanced State and Local Tax Institute at the Georgetown University Law Center. “I don’t like the frontal attacks on Quill, where states hope a petition will be granted and won on merit, but it’s what us lawyers do for a living. If you don’t like a precedent, you marginalize, trivialize, and set an agenda aside.”

Quill Corp. v. North Dakota is the U.S. Supreme Court’s 1992 decision that prohibits states from imposing sales and use tax collection obligations on vendors without a physical presence in-state. States have employed multiple measures to manage or overturn the 25-year-old restraint in an ever-expanding digital economy, and litigation is pending in South Dakota, Alabama, Tennessee, Indiana, and Wyoming.

Douglas Lindholm, president and executive director of the Council On State Taxation, said the force behind a changing nexus standard is states’ lost revenue to untaxed remote sales. He identified three options that could potentially solve the issue:

  •   Congress may enact legislation, which Lindholm said will never happen because “anyone who votes to allow states to collect will be subject to a political ad next November saying they are voting to tax the internet, which is incorrect, but the demagogue Congress faces.” Three bills proposing a federal solution are pending before Congress—two measures would expand states’ taxing authority over remote retailers, while one measure would curb states’ ability to tax out-of-state sellers.
  •  The U.S. Supreme Court may take a case, an option that Lindholm also views as impossible. “ Quill says that Congress is better suited to resolve this issue, and they’re not going to go back on that decision,” he said.
  •  States can collaborate to resolve the issue themselves through the Streamlined Sales Tax Project, which Lindholm sees as the best case scenario.

Streamlined Effort

Lindholm said additional collaboration from one or two of the five largest states—California, Texas, Illinois, New York, and Florida—in the Streamlined Sales Tax Project would “revive the effort.” Those states aren’t member states.

Twenty-four states, representing more than 31 percent of the nation’s population, have adopted the simplification measures of the Streamlined Sales and Use Tax Agreement, which “aims to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance,” according to the Streamlined Sales Tax Governing Board.

“For those of you who are vested in the streamlined sales tax project, I commend you,” Lindholm said. “Keep at it. And to those of you in the five key states, let’s get on board here. There is a lot of money out there.”

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

To contact the editor responsible for this story: Jennifer McLoughlin at

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