On April 17, the Supreme Court heard oral arguments in South Dakota v. Wayfair, in which South Dakota is seeking the authority to collect existing sales taxes on remote purchases, regardless of the retailer’s physical location. In this case, the Supreme Court is reconsidering a previous decision in Quill v. North Dakota (1992) that reaffirmed states and local governments cannot require businesses to collect sales taxes, unless that business has a physical location in that state. The Supreme Court is expected to issue an opinion in South Dakota v. Wayfair by the end of June.
During oral arguments, justices had the opportunity to question each side about the case. Often, justices use this as an opportunity to play devil’s advocate to probe each side’s reasoning. Therefore, it remains difficult to surmise any individual justice’s opinion on the case based on their comments during oral arguments.
Regarding the South Dakota case, Justice Stephen Breyer indicated he found arguments on both sides of the case compelling and questioned several issues, including the difficulty small sellers may face when collecting remote sales taxes, the possibility of retroactive collection of taxes and how much money goes uncollected each year. Other justices, including Justice Antony Kennedy and newly-appointed Justice Neil Gorsuch, asked Wayfair’s attorney a series of difficult questions, and Justice Ruth Bader Ginsburg spoke forcefully about the Court’s need to act to overturn Quill, given that – in her view – it was the Court who set the sales tax landscape through the Quill decision.
Multiple justices asked about Congress’ role in this issue, noting Congress has had the power to overrule the Court on Quill since 1992. One justice even went as far as asking what kind of ruling the Court should issue if it hopes to spur action from Congress. In March, lawmakers considered legislation that would have allowed states and local governments to begin collecting these existing remote sales taxes, but ultimately chose not to attach it to the final spending bill given the impending Supreme Court decision.
The issue of collecting remote sales taxes has taken on greater significance in recent years due to the Internet’s growth as a retail marketplace. As a result, state and local governments have lost increasing amounts of revenue in uncollected sales taxes, while brick and mortar businesses continue collecting sales tax revenues that often support the local infrastructure and services on which online retailers rely, creating an unfair playing field between online and local retailers.
NACo supports legislation to permit the collection of existing sales and use taxes from remote sellers and will continue to work with lawmakers to encourage giving counties more authority to enforce the collection of already existing sales and use taxes from remote sellers.
More resources:
Click here to view NACo’s Remote Sales Tax Report
Click here to view NACo’s County Explorer Map on Uncollected Revenue
Click here to view NACo’s Policy Brief on the Collection of Sales Tax on Out-of-State Catalog and Online Sales
