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 pending digital sales tax case before the U.S. Supreme Court may turn out to be an example of being careful what you hope for, a Multistate Tax Commission attorney said.
“Most of us on the state tax side came in thinking, this is a no-brainer,” MTC Counsel Bruce Fort said April 24. Fort noted that in earlier rulings, current justices essentially invited the states to bring a case like South Dakota v. Wayfair—which challenges the 1992 decision in Quill Corp. v. North Dakota barring states from requiring remote retailers to collect sales tax. The Supreme Court heard oral argument April 17, and practitioners expect the high court will issue a decision by late June.
“It’s ironic that once it actually got in front of the court, they expressed an extreme reluctance to do anything,” Fort said, speaking during the MTC’s Audit Committee meeting in Bloomington, Minn. “Clearly they’re not anxious to rule on this case.”
The high court’s questioning of South Dakota “seemed to indicate a pushback” against the notion that the court “legislate a solution here,” Fort added.
“States did not anticipate how much reluctance there would be on the court’s side to essentially legislate a solution to this 40-year-old problem,” Fort said.
Additionally, the justices were “extremely frustrated by the lack of a record, because you could make arguments on both sides,” he said, adding that “everyone who was there thinks it will be a split decision” and not the “slam-dunk” states were hoping for.
Many states have been so focused on overturning the Quill decision that they perhaps overlooked the fact that the state sales and use tax systems are flawed—and there’s an urgent need to simplify them to reduce the burden for companies, Karl Frieden, vice president and general counsel of the Council On State Taxation, said before the MTC’s Litigation Committee.
“I would argue we have one of the worst in the world,” Frieden said. “It’s music to our ears that, if you get the decision you’re wanting, you’re going to do it in way that doesn’t lead to retroactivity, it should be prospective, it should have certain certain thresholds” for annual sales.
After Wayfair, the next big tax issue involves marketplace providers, Fort said.
Washington state, Minnesota, Pennsylvania, and Rhode Island enacted the first marketplace-provider regimes in 2017. Amazon has announced its agreement to collect in Washington and Pennsylvania.
Alabama and Oklahoma also enacted legislation this year. And a handful of other states have pending marketplace measures—including Hawaii, Kansas, and Washington.
On the litigation front, Amazon sued South Carolina in July 2017 over an assessment by the state that the online retail giant is responsible for $12.5 million in uncollected taxes, interest, and penalties for sales involving third-party merchants on its marketplace platform. Fort said a hearing likely will be held by the end of the year.
Most state statutes say “if you sell something, and you’re taking the money, and providing it to your customer, you’re selling it,” Fort said. “South Carolina did what I would argue is a common sense interpretation of their statute, that Amazon is a vendor, not only for their third parties, but for their own wares.”
When Amazon first started making agreements with states to begin collecting and remitting taxes on remote sales of its own goods, third-party transactions constituted about 20 percent of its sales, Fort said.
Now third-party marketplace transactions are more than 50 percent of sales on Amazon, Richard Cram, director of the MTC’s National Nexus Program, said.
The South Carolina ruling could have implications in other states, since South Carolina’s law isn’t any broader than that of other state laws, Fort said. “I can’t imagine a larger case than this,” he said.
To contact the reporter on this story: Tripp Baltz in Bloomington, Minn., at firstname.lastname@example.org
To contact the editor responsible for this story: Ryan C. Tuck at email@example.com
The agenda for the MTC's Spring Committee Meetings is at http://src.bna.com/yfR.
Copyright © 2018 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)