The Supreme Court
voted in favor of internet sales taxes, but wants Congress to take this hot
potato and pass new law, but Congress will let this mess twist in the wind,
further demonstrating their ineptitude. Congress never gets excited about
fixing things.
Supreme Court Clears Way to Collect Sales Tax From
Online Retailers, By Adam Liptak, 6/21/18
A Wayfair distribution center in Cranbury, N.J. State officials in South
Dakota sued three online retailers for violating a law that required merchants
to collect sales tax. Credit. - John Taggart for The New York Times.
WASHINGTON — Internet
retailers can be required to collect sales taxes in states where they have no
physical presence, the Supreme Court ruled on Thursday.
Brick-and-mortar
businesses have long complained that they are disadvantaged by having to charge
sales taxes while many of their online competitors do not. States have said
that they are missing out on tens of billions of dollars in annual revenue
under a 1992 Supreme Court ruling that helped spur the rise of internet shopping.
On Thursday, the court
overruled that ruling, Quill Corporation v. North Dakota, which had said that the Constitution
bars states from requiring businesses to collect sales taxes unless they have a
substantial connection to the state.
Shares in Amazon were
down just 1 percent in morning trading after the ruling, at $1,731.59. But
other e-commerce companies suffered far tougher blows: Shares in Etsy, the
marketplace for artisanal crafts, fell 4.5 percent, to $42.21, while those in
Wayfair, a popular home goods seller, were down 3.2 percent, at $112.42.
Writing for the majority
in the 5-to-4 ruling, Justice Anthony M. Kennedy said the Quill decision had
distorted the nation’s economy and had caused states to lose annual tax
revenues between $8 billion and $33 billion.
“Quill puts both local
businesses and many interstate businesses with physical presence at a competitive
disadvantage relative to remote sellers,” he wrote. “Remote sellers can avoid
the regulatory burdens of tax collection and can offer de facto lower prices
caused by the widespread failure of consumers to pay the tax on their own.”
Justices Clarence
Thomas, Ruth Bader Ginsburg, Samuel A. Alito Jr. and Neil M. Gorsuch joined the
majority opinion.
In dissent, Chief
Justice John G. Roberts Jr. agreed that the court’s rulings in this area had
been “wrongly decided.” But he said there were insufficient reasons to overrule
the precedents and that Congress should have been left to address the matter.
“E-commerce has grown
into a significant and vibrant part of our national economy against the
backdrop of established rules, including the physical-presence rule,” the chief
justice wrote. “Any alteration to those rules with the potential to disrupt the
development of such a critical segment of the economy should be undertaken by
Congress.” Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan joined
the dissent.
In the years since 1992,
three members of the Supreme Court had indicated that they might be ready to
reconsider the Quill decision.
In a 2015 concurring opinion, for instance, Justice Anthony M.
Kennedy seemed to call for a fresh challenge to the decision. “It is unwise to
delay any longer a reconsideration of the court’s holding in Quill,” he wrote.
“A case questionable even when decided, Quill now harms states to a degree far
greater than could have been anticipated earlier.”
South Dakota responded
to Justice Kennedy’s invitation by enacting a law that required all merchants
to collect a 4.5 percent sales tax if they had more than $100,000 in annual
sales or more than 200 individual transactions in the state. State officials
sued three large online retailers — Wayfair, Overstock.com and Newegg — for
violating the law.
Justice Kennedy singled
out Wayfair, an online retailer of home goods and furniture. “Its advertising
seeks to create an image of beautiful, peaceful homes, but it also says that
‘one of the best things about buying through Wayfair is that we do not have to
charge sales tax,’ ” he wrote. “What Wayfair ignores in its subtle offer to
assist in tax evasion is that creating a dream home assumes solvent state and
local governments.” Lower courts ruled for the online retailers in the South
Dakota case, citing the Quill decision.
On Thursday, Justice
Kennedy wrote that world has changed since 1992, when mail-order sales totaled
$180 million. “Last year,” he wrote, “e-commerce retail sales alone were
estimated at $453.5 billion. Combined with traditional remote sellers, the
total exceeds half a trillion dollars.”
Justice Kennedy said the
decision left open the possibility that some transactions were so small and
scattered that no taxes should be collected. The court also did not decide
whether states may seek sales taxes retroactively.
“These issues are not
before the court in the instant case; but their potential to arise in some
later case cannot justify retaining this artificial, anachronistic rule that
deprives states of vast revenues from major businesses,” Justice Kennedy wrote.
President Trump has criticized
Amazon for its tax
and shipping practices. Amazon, which is not
involved in the case before the Supreme Court, collects sales taxes for goods
that it sells directly, but not for merchandise sold by third parties. Some
analysts have said Mr. Trump’s critique was motivated by his displeasure with
reporting from The Washington Post, which is owned by Amazon’s founder, Jeff
Bezos.
Chief Justice Roberts
addressed Amazon in his dissent.
“Some companies,
including the online behemoth Amazon,” he wrote, “now voluntarily collect and
remit sales tax in every state that assesses one — even those in which they
have no physical presence.”
He added that small
businesses will face new burdens in trying to comply with a tangle of tax laws,
giving examples.
“Texas taxes sales of
plain deodorant at 6.25 percent but imposes no tax on deodorant with antiperspirant,”
Chief Justice Roberts wrote. “Illinois categorizes Twix and Snickers bars —
chocolate-and-caramel confections usually displayed side-by-side in the candy
aisle — as food and candy, respectively (Twix have flour; Snickers don’t), and
taxes them differently.”
“One vitalizing effect
of the internet has been connecting small, even ‘micro’ businesses to potential
buyers across the nation,” he wrote. “People starting a business selling their embroidered
pillowcases or carved decoys can offer their wares throughout the country — but
probably not if they have to figure out the tax due on every sale.”
Comments
I prefer to use brick
and mortar stores to buy groceries and lawn tools, but repair parts are easier
to get on line and impossible to get at stores, because they don’t carry the
inventory.
I understand that
State and local taxes pay for government services that benefit the brick and
mortar stores and on-line retailers do not benefit from these government
services.
I will chalk this up
to another mistake by the Supreme Court that will have “unintended
consequences’
It would make sense
for Congress to recognize that internet sales companies benefit very little
from local government services like police, fire, etc. Brick and mortar
companies do benefit from these expensive services.
Congress could limit
state internet sales tax to a flat 1% or 2%, but that would limit the
“unintended consequences” this court ruling would create. Congress needs to avoid enacting a federal
sales tax because it grows into a 25% VAT.
Congress did not push
back on “separation of church and state, legalized abortion, gay marriage,
anchor babies or any other court initiated helter-skelter opinions. Congress did not define “Life” beginning at
conception or “Born” to exclude foreign citizens’ children.
Congress has a history
of not responded to Supreme Court errors and the Supreme Court should know
this, especially when their campaign contributors prefer the chaos.
Norb Leahy, Dunwoody
GA Tea Party Leader
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