July 2018 Vol 72, Number 7
Also Inside Drafting Error in New Law Hurts Retailers, page 3 MRA Names Michigan House and Senate Friends of Retail, page 5 What Happened at the June Golf Outing? pages 6-7 Register Now for Grocers Fall Event, page 12
Supreme Court Delivers Major Retail Victory! By MRA Vice President of Government Affairs Amy Drumm On June 21, the U.S. Supreme Court ruled that states can require online, out-of-state sellers to collect sales tax like local stores do. The ruling is a huge win for retailers. It puts all retailers on a level playing field and brings commerce into the 21st century. In its 5-4 decision, the Supreme Court upheld South Dakota’s law requiring out-of-state sellers to collect South Dakota’s sales tax. The court said that the physical presence test (a requirement that businesses with a substantial physical presence in a state collect taxes) is not necessary and that a virtual presence is enough. The court also found that previous court rulings created, rather than resolved, market distortions.
What’s Next? Michigan’s current sales and use tax acts require the collection of sales taxes by sellers that have a physical presence, or nexus, in Michigan. We now need clarification on whether or not all states will be able to require online sellers to collect and remit sales taxes without first updating state laws. While MRA successfully expanded what types of activities gave a business physical presence (“affiliate/click-through nexus”), a physical presence standard is still the law. Unlike South Dakota’s law that the Supreme Court upheld, Michigan has not adopted an economic nexus standard. With the court’s favorable ruling, the state will need to determine whether legislative action is required to force all out-of-state businesses to collect sales taxes. We suspect a legislative change will be necessary to update the reference to physical presence; and we have begun to discuss this with lawmakers. 4.
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