North Dakota House Defers on Digital Sales Tax Bill

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By Jennifer McLoughlin

The North Dakota House of Representatives has postponed voting on a bill the Senate passed to recover revenue lost to untaxed remote sales.

The House on March 14 re-referred S.B. 2298 without explanation to the chamber’s Finance and Taxation Committee, which reported the bill March 9 with an amendment and “do pass” recommendation. The “economic nexus” measure would require sellers without an in-state physical footprint to collect and remit sales tax if their annual sales in the state exceed $100,000 or amount to 200 or more separate transactions.

North Dakota could join a growing movement to move aside the 25-year-old sales tax standard from a federal case historically rooted in the Peace Garden State. In Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the U.S. Supreme Court ruled that only those retailers with an in-state physical presence must collect sales or use tax. Economic nexus proposals through statute or administrative action have surfaced in at least 15 states during 2017—legislative proposals in Mississippi and Utah recently died.

The House adopted the Finance and Taxation Committee’s proposed amendment March 10, changing the effective date from June 30 to a date contingent on the U.S. Supreme Court overturning Quill or “otherwise confirming a state may constitutionally impose its sales or use tax upon an out-of-state seller in circumstances similar to those” specified in the bill.

The Senate approved the measure Feb. 17 with the original June 30 effective date.

Diminished Impact

Sen. Dwight Cook (R), sponsor of S.B. 2298, told Bloomberg BNA in February that “we haven’t forgotten about Quill, and we have been trying for years to get remote sellers to remit sales tax just like our brick and mortar sellers do. This is a last resort to level the playing field.”

If ultimately passed with the House amendment, S.B. 2298’s effective date seemingly would dilute the bill’s immediate impact, given it wouldn’t take effect until a change in federal law.

A Vermont law enacted in 2016, which likewise embraced an economic nexus regime, also provides that the measure will take effect “on the later of July 1, 2017 or beginning on the first day of the first quarter after a controlling court decision or federal legislation abrogates” the Quill physical presence rule.

Several states—Alabama, South Dakota and Tennessee—have sparked challenges over similar economic nexus regimes that were intended to generate a case with legs to reach the Supreme Court and, ultimately, encourage a decision overturning Quill. South Dakota’s litigation is furthest along, with a state court ruling its statute unconstitutional March 6.

Congress has volleyed several potential solutions through the years, but has failed to build a successful coalition behind one proposal.

To contact the reporter on this story: Jennifer McLoughlin in Washington at jmcloughlin@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

For More Information

Text of S.B. 2298 is at http://src.bna.com/m3d.

Text of the amendement is at http://src.bna.com/m3e

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