Goodlatte’s Digital Tax Plan Possibly Buoyed by Florida Brief

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By Jennifer McLoughlin

Proponents of Rep. Robert Goodlatte’s (R-Va.) proposal for a national framework allowing states to collect sales tax from remote retailers may have found ammunition from the unlikeliest of sources.

In a Jan. 12 response brief before the U.S. Supreme Court, the Florida Department of Revenue invoked the divisive 1992 decision in Quill Corp. v. North Dakota, 504 U.S. 298-providing that only those retailers with an in-state physical presence may be subject to a state’s sales tax collection obligations—to support its call for the high court to reject a florist’s recent petition for review. In doing so, it offered language favoring an origin-based system for floral sales.

“It was a state acknowledging that an origin-based approach is simpler than a destination-based approach,” Mark E. Nebergall, president of the Software Finance and Tax Executives Council, told Bloomberg BNA. In other words, the Florida revenue department and attorney general have taken the public position that an origin-based sourcing rule—similar to Goodlatte’s proposal—is justified and preferable.

The lawmaker’s Online Sales Simplification Act, which remains a discussion draft, is a hybrid origin-based sourcing system that generally bases the taxation of remote purchases on the seller’s location, but at the tax rate of the consumer’s location.

The OSSA is one of many competing congressional plans to define states’ taxing authority over remote retailers, and has sparked opposition from several states. None of the proposals has moved, despite the continued proliferation of state bills to expand authority over digital sales—at least 25 states have introduced bills in 2017.

During a Feb. 1 event at the National Press Club, Goodlatte, chairman of the Judiciary Committee, announced the committee’s agenda for the 115th Congress, and remote sales taxation wasn’t mentioned. But he did say his comments didn’t cover all issues that the committee plans to address. And on background, a Judiciary aide has said that negotiations on the OSSA draft are ongoing.

Not A ‘Casual Statement.’

As part of its petition for review, Florida-based retailer American Business USA Corp. is challenging the state’s sales tax applied to orders placed through its website but fulfilled by out-of-state florists and delivered to out-of-state customers. The company processing the order is physically present, but the goods and customers aren’t.

However, according to Florida’s response brief, “allowing a seller to collect tax based on its own jurisdiction’s rates greatly simplifies reporting and collection obligations. As the Court has previously acknowledged, the opposite practice of requiring multistate sellers to collect and remit tax in multiple states risks ‘entangl[ing sellers] in a virtual welter of complicated obligations.’ Quill Corp., 504 U.S. at 313 n.6 (quoting Bellas Hess, 386 U.S. at 796-60).”

“They cited Quill as evidence of the complexity of a destination-based approach,” Nebergall said.

He further noted that the state’s brief didn’t offer a casual statement. Rather, it was a significant statement from state officials in one of the largest states in connection with a pending commerce clause challenge before the Supreme Court.

Florida Position Unclear

However, it is still not clear if Florida supports the Goodlatte proposal or one of the alternatives.

“Governor Scott will review any federal or state legislation that becomes law,” spokeswoman Lauren Schenone told Bloomberg BNA by e-mail. “The Governor supports continuing to cut taxes in Florida and that’s why his recently proposed budget includes $618 million in tax cuts.”

Several pieces of rival legislation have long stalled in Congress—many have indicated that Goodlatte has hindered a vote on competing measures. Alongside the OSSA, other proposals currently pending are the Marketplace Fairness Act, the Remote Transactions Parity Act and the No Regulation Without Representation Act.

Sources have told Bloomberg BNA that House Speaker Paul D. Ryan’s office has met with staffers for key sponsors of remote sales tax legislation, seeking a resolution this year.

Meanwhile, in a growing campaign to kill the Quill rule, states have increasingly introduced and adopted laws and regulations to capture more revenue from remote retailers. So far, bills related to sales tax on remote transactions have been introduced in at least 25 states this legislative session. Florida isn’t in that group.

Litigation continues to move in South Dakota and Alabama over their new “economic nexus” regimes, which enforce taxing jurisdiction over out-of-state sellers satisfying a specific threshold of sales. Those cases ultimately are designed to force the high court to revisit Quill. Supreme Court nominee Neil Gorsuch has signaled a potential interest in accepting such a case.

States generally haven’t embraced Goodlatte’s hybrid-origin system. Many have dubbed it “unworkable.”

However, Nebergall said that the opposition to Goodlatte’s proposal “belies the fact that they’ve been working with this system” in the floral industry for a long time.

He noted that the Streamlined Sales and Use Tax Agreement carves out florists from the general sourcing rules. And American Business recognized in its petition that at least 36 states and the District of Columbia have imposed taxes on floral sales with “varying degrees of similarity” to Florida’s regime.

Expanding Beyond Florists?

The Florida Revenue Department has argued there is a “lack of controversy” for the Supreme Court to resolve, as the floral industry largely prefers a taxation system based on a retailer’s location.

“Taxing floral sales like Florida and other jurisdictions have chosen to do tends to reduce these regulatory burdens on interstate commerce, not exacerbate them,” according to the state’s brief. “The emerging consensus that floral sales should be remitted by the seller to the seller’s jurisdiction, not the jurisdiction of the buyer or the recipient, tends to ensure uniform, uncomplicated treatment consistent with dormant Commerce Clause values.”

“In other words, this Court should not disrupt established state taxing practice absent some demonstrated problem or injustice of a kind requiring judicial intervention.”

While the case narrowly addresses the tax treatment of floral sales, could the state’s defense of the origin-based system branch out to reach other sales of tangible personal property?

“Because they do it for florists, there’s no reason why they couldn’t do it for others,” Nebergall said.

To contact the reporter on this story: Jennifer McLoughlin in Washington at

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

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