House Judiciary Schedules Hearing on State Online Sales Taxes

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Tripp Baltz

The House Judiciary Committee will hold a hearing July 24 to examine the U.S. Supreme Court’s pivotal Wayfair decision and its widespread ramifications for online consumers and small businesses.

The hearing was scheduled at the direction of Rep. Robert Goodlatte (R-Va.), chairman of the committee, a lawmaker that the state and local tax community has long viewed as the biggest hurdle to congressional action on online sales tax reform. The hearing will take place at 10 a.m. in Room 2141 of the Rayburn House Office Building.

In its June 21 ruling in South Dakota v. Wayfair, the U.S. Supreme Court tossed out Quill Corp. v. North Dakota, the 1992 physical presence threshold for when states could tax remote sales and suggested the South Dakota’s law would pass constitutional muster. The South Dakota law would impose sales tax on sellers who exceed defined thresholds for in-state sales.

The decision has many states looking to expand their authority over online sales taxation, with several states already enforcing their myriad tax laws or targeting Oct. 1 as licensing deadlines for online sellers to start collecting under their South Dakota-esque laws.

The Wayfair ruling has fueled the circulation of bills in Congress that would reverse Wayfair and codify Quill. One of them introduced after the Wayfair ruling, the Stop Taxing Our Potential (STOP) Act (S. 3180), was introduced by Sens. Jon Tester (D-Mont.), Jeanne Shaheen (D-N.H.), Jeff Merkley (D-Ore.), and Maggie Hassan (D-N.H.)—all of whom are from states that don’t have a statewide sales and use tax.

The bill “is specifically targeted to reverse the impacts of Wayfair,” Dave Kuntz, spokesman for Tester, told Bloomberg Tax.

The second bill that has been pending with several others for years, the No Regulation Without Representation Act of 2017 (H.R. 2887) (NRRA), sponsored by Rep. Jim Sensenbrenner (R-Wis.)—would codify Quill, among other things. Goodlatte has come out in support of that bill in the past.

It’s unclear which of those will be on the table at the Judiciary hearing, but “the committee is tuning-in to the growing chorus of state tax collectors demanding back taxes, interest, and penalties,” Steve DelBianco, president and CEO of NetChoice Inc., told Bloomberg Tax. “There’s enough noise here for Congress to step in and say, stop the music.”

NetChoice, an industry association for e-commerce, has been at the heart of many of the lawsuits designed to stop states’ online sales taxation efforts.

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