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 Chris Marr
Online retailer Newegg Inc. doesn’t want its legal challenge of Alabama’s digital sales tax regulation to be delayed pending a case before the U.S. Supreme Court that likely could affect the state dispute.
The retailer is opposing a motion filed by the Alabama Department of Revenue to stay Newegg’s case at the Alabama Tax Tribunal, according to attorney Matthew Schaefer of Brann & Isaacson, who is representing Newegg.
“The undisputed facts before the Tax Tribunal demonstrate that the assessment against Newegg by the Alabama Department of Revenue is invalid as a matter of both state and federal law,” Schaefer told Bloomberg Tax Feb. 13. “Newegg has asked the Tax Tribunal to enter judgment eliminating the assessment against it.”
The revenue department noted in a late January motion that the U.S. Supreme Court is expected to decide a similar tax dispute, South Dakota v. Wayfair, by the end of June. That decision could reverse existing case law, including especially the Supreme Court’s 1992 decision in Quill Corp. v. North Dakota, under which states don’t have the legal authority to enforce sales tax collection duties on companies without an in-state physical presence.
A Supreme Court reversal on Quill would be a major legal victory for state tax authorities that are trying to ensure they capture sales taxes from the fast-growing e-commerce market.
Alabama and South Dakota led the way in directly challenging the Quill standard, through the Alabama revenue department regulation and a South Dakota law that took effect in early 2016. Both states—like a growing number of others since then—established an economic nexus standard, requiring out-of-state companies to collect and remit sales tax if they reached a certain threshold of annual sales into the state.
Several similar cases are pending in other states—including Indiana, Tennessee and Wyoming—where parties likewise might seek a stay.
Massachusetts and Ohio also are facing legal challenges to their varying “cookie” regimes, which mandate sales tax collection from remote retailers storing internet cookies or placing in-state software on residents’ computers and other devices. Ohio’s Tax Commissioner has requested the state court either dismiss or stay the challenge filed by the American Catalog Mailers Association in light of the U.S. Supreme Court case.
The case is Newegg Inc. v. State of Ala., Dep’t of Revenue , Ala. Tax Trib., No. S. 16-613, response opposing abeyance 2/1/18 .
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