On January 12, the U.S. Supreme Court announced it will consider the case of South Dakota v. Wayfair during the 2018 session. This case, in which South Dakota is seeking the authority to collect existing sales taxes on purchases made from sellers outside the state, will cause the court to review its 1992 decision in Quill v. North Dakota. In Quill, the Supreme Court ruled a state or locality cannot collect sales taxes from a vendor unless the vendor has a “physical presence” in the state.
Since 1992, the landscape of commerce has significantly changed. Online sales and marketplaces are increasingly popular, allowing individuals to purchase nearly anything from the comfort of their home. Retailers, however, still use public property – including county roads, bridges and airports – to deliver these goods, most of which is supported by brick and mortar retailers collecting and remitting state and local sales taxes.
If the Supreme Court overturns Quill, states and local governments would be allowed to collect existing sales taxes on purchases made within their jurisdiction, even if the vendor is outside the state.
In the 1992 ruling, the Supreme Court noted Congress ultimately has jurisdiction over inter-state commerce. In recent years, Congress has struggled to pass legislation reforming the collection of sales taxes on remote purchases. In 2013, the U.S. Senate easily passed the Marketplace Fairness Act (MFA) (S. 336) on a bipartisan vote. Since then, the issue has stalled in the U.S. House Judiciary Committee on several occasions, as Chairman Bob Goodlatte (R-Va.) has rejected the MFA in favor of an approach maintaining state jurisdiction within its own borders.
Both the MFA and its House companion bill, the Remote Transactions Parity Act (RTPA), have been reintroduced in the 115th Congress (S.976 and H.R. 2193 respectively). Proponents argue these are existing sales taxes that should be collected, not new ones, and that these bills would provide a structured approach to the collection of remote sales taxes across state lines. A ruling by the Supreme Court, on the other hand, could open the doors to an extreme patchwork of sales tax laws and rates, which would create complicated and costly compliance issues for businesses.
NACo supports both the MFA and RTPA and encourages Congress to provide a solution to this issue which grants counties the authority to enforce the collection of already existing sales and use taxes from remote sellers. We will continue working with Congress and the administration to pursue a solution that reduces the complexity of state and local sales tax laws and does not undermine county government taxing authority and revenue streams.