Conservative groups are asking Congress to place limits on Internet sales taxes following the Supreme Court’s June ruling that states can require out-of-state online sellers to collect sales taxes.
“This Pandora’s Box that’s been opened up has one hope, I guess, and that’s that you guys get together and put lines around the damage that can flow from this,” anti-tax activist Grover Norquist testified Tuesday at a House Judiciary Committee hearing examining the fallout from the decision.
Norquist’s group, Americans for Tax Reform, and other conservative nonprofits warned the committee that the ruling could allow state and local jurisdictions to engage in revenue grabs, using the new authority granted by the Supreme Court to tax businesses and individuals outside their own borders.
The committee’s chairman, Republican Bob Goodlatte of Virginia, appeared sensitive to their concerns.
“The Court’s close and incomplete decision in Wayfair has the potential to unleash chaos for consumers and remote sellers, particularly small business sellers,” Goodlatte said.
The decision, South Dakota v. Wayfair, Inc., did set some guidelines for governments. The Court signed off on a checklist of features of the specific South Dakota law under question that made it constitutional, including a “safe harbor” that allows businesses with only a small number of sales in the state to avoid taxation.
A big question in the court’s deliberations was whether collecting state and local sales taxes all over the country would present a logistical headache for small businesses, providing an advantage for big retailers and online retail platforms.
Congress could regulate limits meant to keep burdens off small retailers.
For his part, though, President Trump has supported very broad local government authority to tax online sales. On Monday, he took a victory lap over the Supreme Court decision, casting it as a victory in his vendetta against Amazon. Amazon, though, already collected sales tax in states in which it was due and didn’t oppose the court ruling.
The Amazon Washington Post has gone crazy against me ever since they lost the Internet Tax Case in the U.S. Supreme Court two months ago. Next up is the U.S. Post Office which they use, at a fraction of real cost, as their “delivery boy” for a BIG percentage of their packages….
— Donald J. Trump (@realDonaldTrump) July 23, 2018
Another obstacle to legislation is that big retailers are happy with the post-Wayfair status quo, and are likely to oppose Congress pushing any conservative reforms. At Tuesday’s hearing, representatives of Walmart and other retailers urged lawmakers not to interfere with state governments’ reckoning with the decision.
For years before June’s decision, brick and mortar retailers lobbied against online sellers and conservatives over the online sales tax issue, producing gridlock. Following the ruling, the bar is likely again high for Congress to legislation.
“So many of the folks who for years argued against Congress acting are now asking Congress to act,” said Joseph Crosby, CEO of MultiState Associates Incorporated, speaking at Tuesday’s hearing. “And I do find myself in the odd position of saying: Perhaps, but there’s no urgency now because the Court’s done the work.”
