Internet Sales Tax Case at the US Supreme Court

[prairiedruid]

Oral arguments were this morning and the transcript is at: transcript
A quick armchair quarterback take on this is nothing will change. It appears, in my opinion, the justices believe it is up to Congress to settle this issue. A lot of concern about overturning the Quill decision opening the flood gates on retroactive collecting of taxes; also with the issue of errors in software that South Dakota is promoting as a solution to collect sales tax and at what number of sales reaches the point of collection requirement.
The Court also mentioned Colorado's current requirement of out state businesses to report sales to Colorado residents; the Court seems okay with this.
In a nutshell the Court wants Congress to settle this and doesn't want to create chaos by overturning their Quill decision from 1992. Sometimes things change when they discuss this among themselves but this is my take on the oral arguments.

 

[cosmicfolklore]

The Court also mentioned Colorado's current requirement of out state businesses to report sales to Colorado residents; the Court seems okay with this.

This is what gets me... it would have to be completely voluntary, because what power would Colorado, pr Pennsylvania have over me or my business. Another state cannot take me to court. What would they do? There are actually Constitutional laws protecting my business from prosecution from another state. Now, if I happen to be driving through one of these states... that would be another matter. But, the idea that they could enforce who does businesses in their state via the internet is stupid. I could maybe see million dollar sales of oil, or steel, but people buying and selling stuff under a thousand dollars? No. Any business that would comply with this is a sucker.

 

[catyrpelius]

Cosmic, not every business agrees with you. Once about a year or so ago I got a tax bill from the state of New Jersey for an out of state tobacco purchase that was reported to them by the business. On the same hand most of my tobacco was purchased out of state with no tax collected... So while its a drop in the bucket it still does happen.

 

[cosmicfolklore]

Oh, I am not saying that no businesses do it. I am saying that it is completely voluntary by these kiss ass businesses. What influences does Colorado think it will have against me to coerce me into complying with releasing my customer's information to them? Nothing. What can Colorado do to me? Block me from their state's internet feed? Come down here and take me to jail? Drag me to court across state lines?

 

[prairiedruid]

The Court seems okay with a state asking for that sales information but doesn't say anything about enforcement of it. Since it is across state lines it would be a federal case I believe. The Court didn't say anything about enforcement because they would have to see a case to be able to rule on it. I just thought it was interesting that the Court seemed okay in an off hand way with what Colorado is doing.

 

[prairiedruid]

What can Colorado do to me? Block me from their state's internet feed? Come down here and take me to jail? Drag me to court across state lines?

There is some question about that but the state of Washington has been successful in stopping some internet tobacco sales. Where there is a government in need of tax dollars they usually find a way......

 

[warren]

cosmic: How about the irate ex who reports her ex to the state revenue office. They then use her affidavit to subpoena records from the out of state company. Revenue then checks, admittedly a fishing trip, all the available records and ... a lot of tax bills are sent out. It could happen!

 

[cosmicfolklore]

They then use her affidavit to subpoena records from the out of state company.

Then the feds would be involved, and there are already Constitutional protections for commerce across state lines. Another state cannot come at me for breaking their state's laws. The only way is if Congress makes complying with outside state laws a Federal law, and they would never do that. Imagine the insanity of keeping track of all of that.

 

[ron123]

I'm totally fine with forcing companies like Amazon to tax their internet sales. It puts them at a huge advantage over B&M's, as we can see with all the mall and strip mall vacancies. Hey, I like a deal as much as anyone, but not taxing online sales is real bad for local businesses.

 

[prairiedruid]

At this point Amazon basically has warehouses everywhere so they have to pay the internet tax anyway. Part of the Quill decision was if businesses had a physical presence in the state they had to pay that area's tax on sales there.
The issue is do small sellers who have no physical presence in other states have to charge sales tax. Places like McCranie's or even a pipe carver.

 

[9mmpuffer]

The amount of work and admin to collect taxes is mind boggling. The better solution is less gov't involvement and elimination of most taxes.

 

[cosmicfolklore]

Looking at the problem with Amazon is one thing, but with very small online businesses, it will kill off a whole other segment of small business.

 

[prairiedruid]

South Dakota tried to maintain that wouldn't happen as the software would be cheap, the defense disagreed and pointed out a dozen errors in the software that South Dakota proposed to use.

 

[cosmicfolklore]

Hmmm, so a required software purchase... doesn't sound cheap, especially with the way I have to keep purchasing the next year's version every year. But, I am over it, and I am starting to sound like a ranter, ha ha. I think that soon it will just be monitored by online merchant services like Paypal, credit cards and such.

 

[peckinpahhombre]

The case to which prairiedruid refers deals with states that have economic nexus sales & use tax legislation that seek to require out of state sellers to collect and remit sales taxes on sales made within that state even though those sellers do not have a physical nexus with that state. In effect, by enacting that legislation those states are seeking to overtun the Quill decision which requires a physical nexus with the state before sales tax collection obligations can be imposed on a seller. It will be interesting to see how that turns out, but frankly I would be surprised if Quill was overturned, particularly in light of the current composition of the Supreme Court.
However, to be clear, the above is quite different than a law whereby a state simply impose a reporting obligation on out of state sellers, but doesn't actually require those sellers to collect the tax. In the Brohl case this type of statute (in Colorado) was distinguished from Quill and was upheld by the 10th U.S. Circuit Court of Appeal, a decision which SCOTUS declined to review on appeal. The consensus in the wake of Brohl is that states like Colorado that do impose a mere reporting obligation on out of state vendors can enforce their reporting law against those out of state vendors. Precisely how those states would enforce that law is something I have seen very little commentary on, and is certainly an interesting question to an outsider like myself, but presumably they would subpoena sales information from out of state vendors and would lauch actions to impose penalties for non-compliance. I am sure businesses would have legal arguments that would be open to them in the wake of any such enforcement action, but how many business have the resources available to field a team of lawyers to contest any such action and, even if they did, they may very well lose at the end of the day and be exposed to very substantial penalties. Most are just going to comply, and well, who can blame them.

 

[perdurabo]

What we'll began to see is companies refusing to ship or sale to residents from certain states. Those states will be crushed. Internet sales are the wave of the future. I think the court made the right decision, although I have no faith that those fools in DC will do the right thing. I'm with Cosmic on this.

 

[perdurabo]

Additional note, if you want to fight this, it's got to be at the State level. This Feds haven't a need to step in, if a states people will put a collar on their own Government. What we have is greeeeeeeed pure and simple.

 

[oldgeezersmoker]

@peckinpahhombre, the enforcement mechanism could be, and apparently has been, provided by interstate compact. There was a thread here some months ago that touched on this with regard to Illinois requiring Iwan Ries to report sales made from Ries' Chicago store to a resident of another Midwestern State. Illinois then provided the information to the other state. Apparently Illinois and several other states in the Midwest have entered into such an arrangement.

 

[prairiedruid]

I think the court made the right decision, although I have no faith that those fools in DC will do the right thing. I'm with Cosmic on this.

Today was oral arguments; a decision won't come out until June or so.

 

[perdurabo]

Gotcha, I read your opinion and ran away with it. :rofl: