The U.S. Supreme Court handed down its eagerly awaited decision in South Dakota v. Wayfair, Inc., (138 S. Ct. 2080 (2018), on June 21, 2018. Since that point in time, many states have been analyzing the implications of the case and positioning existing statutes, or proposing new legislation, to capitalize on the elimination of the physical presence nexus standard. Some states have called it a windfall and plan on using the proceeds for extraordinary expenditures. The question is whether it is appropriate for the states to enact remote seller use tax collection rules or, as the dissent argued, if Congress should address the issue.
Congress has the right to regulate commerce between the states under the commerce clause of the Constitution. It was invited to address the nexus for tax collection issue by the Court in Quill (Quill Corp. v. North Dakota, 504 U.S. 298 (1992) at 318) more than 25 years ago. While, to date, Congress has not passed a statute regulating this issue, in recent years it would appear they are more inclined to do so. Congress has considered several proposals in the 115th Session (2017–2018): the Remote Transactions Parity Act, HR 2193; the No Regulation Without Representation Act, HR 2887; and the Marketplace Fairness Act, S 976. None passed their respective bodies. The Marketplace Fairness Act passed the Senate in 2013 but failed to advance in the House.
In the past, House Judiciary Committee Chair Bob Goodlatte (R-Va.) has supposedly stated that he won’t hold a vote on federal remote sales tax collection legislation because it will overwhelmingly pass the committee and the floor of the House. Others have postulated that federal legislation has stalled to await the outcome of Wayfair, which seems to be the case. Sen. Jon Tester (D-Mont.) introduced the Stop Taxing Our Potential Act of 2018, (Stop Taxing Our Potential Act, S 3180, introduced June 28, 2018) just one week after the Wayfair opinion was released. It appears Congress is eager to weigh in on this issue based on the Senate’s previous approval of the Marketplace Fairness Act in 2013 and the introduction of the legislation this year. Goodlatte will not be running for office, which also bodes well for Congressional action. Most recently, the House Judiciary Committee held hearings on Wayfair.
Daily Tax Report: State
by Mark L. Nachbar
September 5, 2018