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 Ryan Prete
Overturning a 25-year-old U.S. Supreme Court opinion restricting states’ taxing authority over remote retailers wouldn’t guarantee a blanket standard for all states, according to a leading state and local tax practitioner.
Stephen Kranz, partner at McDermott Will & Emery, said he believes the high court will likely take up South Dakota Attorney General Marty Jackley’s (R) request for review of a Sept. 13 state Supreme Court ruling that found the state’s “economic nexus” law, S.B. 106 (codified as S.D. Codified Laws Chapter 10-64), unconstitutional under Quill Corp. v. North Dakota —the 1992 U.S. Supreme Court ruling that prohibits states from imposing sales and use tax collection obligations on vendors without a physical presence in-state ( South Dakota v. Wayfair, Inc., U.S., No. 17-494, friend-of-the-court briefs filed 11/2/17 ).
But Kranz questioned which states would feel the impact of a potential new standard after Quill’s death.
“We have no idea what the potential outcome could be if the Court takes up the case,” he said Nov. 6 during the Paul J. Hartman Memorial State and Local Tax Forum in Nashville, Tenn. “The Court could decide to reverse Quill completely, as a blanketed approach, or could reverse it for states who only have the same reporting laws as South Dakota.”
“The Court might also only have the new standard take effect in member states of the Streamlined Sales Taxes Initiative. What I’m saying is that there’s a wide array of possible conclusions here,” he added.
Scott Peterson, vice president of U.S. Tax Policy and Government Relations for Avalara Inc., agreed with Kranz.
“Even if the Court were to rule tomorrow, we’d still have 20 different definitions of nexus across states,” Peterson said.
Peterson, who works in sales tax automation, spoke of business woes mounting from the varying nexus models. “The Court should take the South Dakota case because all these different varieties of nexus that exist today make it virtually impossible for a business to keep up and stay in compliance,” he said.
South Dakota is furthest along among the states already embroiled in litigation over statutes and regulations targeting out-of-state sellers. Dozens of state attorneys general and interest groups have filed briefs urging the U.S. Supreme Court to grant review in the South Dakota case.
Peterson and Kranz said the larger-than-normal volume of friend-of-the-court briefs is an incentive for the high court to take up the issue.
In the meantime, similar “kill- Quill” cases are pending in other states—Alabama, Indiana, Tennessee and Wyoming. Crutchfield Corp. also filed suit Oct. 24 in Virginia Court challenging Massachusetts regulation 830 CMR 64H.1.7. The regulation, which took effect Oct. 1, orders online vendors to collect Massachusetts sales tax if they have property interests in or use in-state apps and “cookies.” Internet vendors must collect sales tax if they make 100 or more individual transactions and exceed $500,000 worth of in-state sales in a year. However, the Massachusetts DOR has said its regulation isn’t a “kill- Quill” measure.
The panel, which included Loren Chumley, principal at KPMG LLP, and Carolynn Kranz, chief operating officer at Industry Sales Tax Solutions, also predicted that more states will pursue taxing third-party marketplace sales in the upcoming year—such as Minnesota, Washington and Rhode Island. Minnesota and Washington this year were the first two states to enact laws requiring marketplace providers, such as Amazon.com Inc., to collect tax on third-party marketplace transactions.
To contact the reporter on this story: Ryan Prete in Nashville at firstname.lastname@example.org
To contact the editor responsible for this story: Cheryl Saenz at email@example.com
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)