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The underlying complexities beneath an ostensible no-brainer: internet sales tax
Legal Corner
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-commerce sales as a percentage of total retail sales kota that states could not mandate have nearly tripled over the past decade (jumping that retailers without an in-state from 3.1 percent in 2006 to 8.3 percent in 2016), physical presence collect and remit so it is no surprise that states and local governments sales taxes. Why, then, are so many are looking to get their fair share of that tax revenue. That is states passing laws that are clearly LINDSEY BAILEY nearly one-tenth of retail sales that are not being collected in contradictory to existing Supreme General Counsel most states, including Arkansas. Some argue that the effect on Court case law, and therefore, unthe local economy is actually further amplified, because people constitutional? The goals are twoare shopping with out-of-state online retailers instead of going fold: first, to get companies to voluntarily collect sales taxes, to their local store down the road where they have to pay sales like Amazon began collecting in Arkansas earlier this year; taxes, effectively taking money from local businesses. and second, to get another case back before the U.S. Supreme Others argue this position is a stretch, but consider middle- Court for its review and potential overruling of Quill. class young adult, Jane Doe, who bought a TV from an online Quill may in fact be ripe for reversal by the nation’s highest Black Friday sale. With free court. In a 2015 concurring shipping and no sales tax, opinion in Direct Marketing Jane saved over $50 buying Association v. Brohl, Justice ost of the election issues legislators that set online rather than Anthony Kennedy wrote, going down to the local “It is unwise to delay any brought before the General Assembly brick-and-mortar store. The longer a reconsideration purchase was a risk — had of the court’s holding in were not new or unique, but rather revisited there been an issue with the Quill,” due to both “the draTV, returning it would have matic technological and socommon, recurring issues of past sessions. been much more complicatcial changes ... in our intered than if Jane had bought connected economy” as well it locally. However, to Jane, as a “startling revenue shortthe savings was worth it. Jane saved another $15 on sales tax fall in many states.” Additionally, the Court’s newest justice, by buying the accompanying sound system online as well. Neil Gorsuch, a former clerk for Justice Kennedy, wrote in a Rugs, furniture, artwork — you name it — Jane has bought it concurring opinion while seated on the Tenth Circuit Court online to avoid hundreds of dollars in sales tax. of Appeals that while the Tenth Circuit was “duty bound to Recognizing the potential missed sales tax revenues, states follow” Quill’s physical presence rule, Quill itself may have across the country have passed legislation to collect sales tax “attached a sort of expiration date” and “encourage[ed] states on out-of-state e-commerce sales, particularly from businesses over time to find ways of achieving comparable results [(sales that perform enough transactions within the state to create and use tax collection of e-commerce vendors)] through difan “economic nexus” that would make taxation appropri- ferent means.” ate. Most states’ “economic nexus” bills involve out-of-state South Dakota, Alabama, and Tennessee are at least three states e-commerce vendors who either receive a certain amount of with lawsuits pending intended to solicit U.S. Supreme Court revenues from within the state (anywhere from $100,000 to review. Absent this review, and at least some distinction or de$250,000) or carry out a certain number of transactions with parture from Quill, the states will have to rely on the U.S. Concustomers within the state, usually around 200. gress, which has a long, complex history of defeating similar legMultiple bills were presented in the Arkansas General As- islation, to act. The Senate passed a version of the Marketplace sembly’s 2017 session, but none were successful.* These initia- Fairness Act in 2013, but the bill stalled in the House. Similar tives were defeated, in part, due to the opposition’s assertions bills were introduced in 2015 but also were unsuccessful. that these “economic nexus” bills are unconstitutional. In fact, Anticipating Supreme Court review, a group of 19 states in 1992 the U.S. Supreme Court ruled in Quill v. North Da- are participating in the Multistate Tax Commission’s National
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