Trump Administration, 35 States Oppose Online Tax Exemption

The Trump administration has joined numerous state officials entreating the Supreme Court to overrule a 1992 case that exempts online sellers from adding taxes to their prices. Arguments on the 1992 case, Quill Corp. v. North Dakota, begin next month. South Dakota is leading the group asking the court to overrule the precedent-deciding case; it is joined by 35 states, the District of Columbia, organizations representing retailers, and, now, the Trump administration. Opposing are catalog mailers and online sellers.

The Wall Street Journal reports that, in an amicus brief, Solicitor General Noel Francisco wrote, “In light of internet retailers’ pervasive and continuous virtual presence in the states where their websites are accessible, the states have ample authority to require those retailers to collect state sales taxes owed by their customers.”

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Those opposing the overrule say that, “it is too burdensome for many businesses to comply with 50 or more separate state taxing regimes.”

The 1992 case found that states couldn’t require out-of-state retailers to collect sales taxes without approval by Congress, and that sellers whose “only connection with customers in the [taxing] state is by common carrier or the United States mail” were “too far removed to fall under the state’s authority.” Consumers are obliged to pay the tax, but “few know of this duty and fewer still voluntarily comply, robbing state treasuries of billions of dollars.”

Retailers say they cannot compete with online sellers not required to charge taxes.

In 2016, South Dakota “adopted legislation intended to test the Quill holding, and filed a state court action to require several online retailers based elsewhere,” including Overstock.com (based in Salt Lake City), Wayfair (Boston) and Newegg (City of Industry, California). Amazon already collects taxes for every state that charges it.

Online retailers counter that, “if Quill is overruled, the burdens will fall primarily on small and medium-size companies whose access to a national market will be stifled.”

TechCrunch reports that, according to French economy minister Bruno Le Maire, “Europe’s new tax model for tech giants … will be unveiled in the next few weeks,” with taxes between 2 percent and 6 percent. Up until now, “Google, Amazon, Apple and Facebook have … been routing their revenue through Ireland, Luxembourg, the Netherlands and other countries with a low corporate tax,” with the money sometimes ending up in Bermuda or the island of Jersey.

Because these tech behemoths “generate over a billion dollars in revenue in Europe but pay close to nothing in taxes,” the system has been under scrutiny there.

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