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South Dakota e-commerce sale tax fight reaches U.S. Supreme Court

South Dakota e-commerce sale tax fight reaches U.S. Supreme Court

Postby smix » Sun Apr 15, 2018 4:09 pm

South Dakota e-commerce sale tax fight reaches U.S. Supreme Court
Reuters

URL: https://www.reuters.com/article/us-usa- ... SKBN1HM0G1
Category: Legal
Published: April 15, 2018

Description: WASHINGTON (Reuters) - A high-stakes showdown at the U.S. Supreme Court on Tuesday will determine whether states can force out-of-state online retailers to collect sales taxes in a fight between South Dakota and e-commerce businesses. South Dakota is asking the nine justices to overturn a 1992 Supreme Court precedent that states cannot require retailers to collect state sales taxes on purchases unless the businesses have a “physical presence” in the state. The state, appealing a lower court decision that favored Wayfair Inc, Overstock.com Inc and Newegg Inc, is being supported by President Donald Trump’s administration. A ruling favoring South Dakota could help small brick-and-mortar retailers compete with online rivals while funneling up to $18 billion into the coffers of the affected states, according to a 2017 federal report. The justices will hear arguments in the case on Tuesday against a backdrop of Trump’s harsh criticism of Amazon.com Inc, the dominant player in online retail, on the issue of taxes and other matters. Trump has assailed Amazon CEO Jeff Bezos, who owns the Washington Post, a newspaper that the Republican president also has disparaged. Amazon, which is not involved in the Supreme Court case, collects sales taxes on direct purchases on its site but does not collect taxes for items sold on its platform by third-party venders, constituting around half of total sales. South Dakota depends more than most states on sales taxes because it is one of nine that do not have a state income tax. South Dakota projects its revenue losses because of online sales that do not collect state taxes at around $50 million annually, while its opponents in the case estimate it as less than half that figure. Major retailers that have brick-and-mortar stores, and therefore already collect taxes, are represented by industry groups that back South Dakota. The National Retail Federation, which supports the state, has a membership list that includes Walmart Inc and Target Corp, as well as Amazon. Stephanie Martz, the federation’s general counsel, said in an interview the case gives the Supreme Court a chance to adapt the law to new circumstances prompted by the rise of internet shopping. “Things have changed a lot since 1992. The entire nature of interstate commerce has changed,” Martz said. E-commerce companies supporting Wayfair, Overstock and Newegg include two that provide online platforms for individuals to sell online: eBay Inc and Etsy Inc. “Win or lose at the Supreme Court, we will continue to advocate for a legislative solution and a level playing field where all retailers collect and remit sales tax on the same basis,” Wayfair spokeswoman Jane Carpenter said in a statement. Brian Bieron, eBay’s senior director of government relations, said in an interview the 1992 precedent “provides the many small businesses that use the internet with a very clear and simple and stable legal environment in which to grow their business.” Overturning the ruling while not replacing it with a new national framework “is really going to be a negative move in terms of e-commerce,” Bieron added. A 2016 South Dakota law requires out-of-state online retailers to collect sales tax if they clear $100,000 in sales or 200 separate transactions. State legislators knew the measure was unlawful under the 1992 precedent. The state sued a group of online retailers after the law was enacted to force them to collect the state sale taxes, with the aim of overturning the precedent.
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George Will: South Dakota's impertinent tax law goes to the court

Postby smix » Sun Apr 15, 2018 4:24 pm

George Will: South Dakota's impertinent tax law goes to the court
Albany democrat-Herald

URL: http://democratherald.com/opinion/colum ... c40fe.html
Category: Politics
Published: April 15, 2018

Description: WASHINGTON — South Dakota has become what South Carolina once was — stubborn, pugnacious and wrong. In 1860, South Carolina became the first state to vote to secede. In 2016, South Dakota's Legislature picked a fight in the hope that the U.S. Supreme Court would reverse a prior decision, thereby handing the state a policy victory it failed to win in Congress. South Dakota has enacted a law contradicting a 26-year-old court decision concerning interstate commerce, and a law Congress passed and extended 10 times. The state wants to tax purchases that are made online from vendors that have no physical presence in the state. South Dakota wants to increase its revenue and mollify its Main Street merchants. On Tuesday, the court will hear oral arguments for and against South Dakota's response to the greatest disruption of retailing since the Sears, Roebuck catalog, more about which anon. In 1992, in the internet's infancy, the court held that retailers are required to collect a state's sales taxes only when the retailers have a "substantial nexus" — basically, a physical, brick-and-mortar presence — in the state where the item sold is purchased. Such a nexus would mean that the retailer benefits from, and should pay for, local government services. Absent such a nexus, however, states' taxation of sales would violate the Constitution, which vests in Congress alone the power to impose such burdens on interstate commerce. Furthermore, Richard A. Epstein of the University of Chicago and New York University law school, says the 14th Amendment's due process clause ("no state shall ... deprive any person of life, liberty or property, without due process of law") is a guarantee of fundamental fairness "powerful enough to shield any party from taxation by a jurisdiction with which it does not interact." Internet commerce has burgeoned partly because many online retailers, by not collecting sales taxes, enjoy price advantages. This, however, is less valuable to them than their other advantages of convenience (no need to drive somewhere to shop) and choices (almost everything saleable is sold online). Such commerce could not have flourished if vendors bore the burden of deciphering and complying with the tax policies of 12,000 state and local taxing jurisdictions, with different goods exempted from taxation. So, in 1998 Congress enacted the Internet Tax Freedom Act (it was made permanent in 2016). This expresses Congress' policy choice to prohibit state and local governments from imposing unique tax rules for internet transactions. The Internet Tax Freedom Act, an exercise of Congress' enumerated power to regulate interstate commerce, is intended to shield small internet sellers from discriminatory taxes and compliance burdens. (Amazon pays sales taxes in all the 45 states that have them.) In 1998, the act passed the House by unanimous consent and the Senate 96-2. For revenue reasons, only four governors endorsed it. Now South Dakota is seeking the court's permission for its extraterritorial grasping. It wants the court to overrule this congressional policy calculation: The social benefits of dynamic internet commerce, with small companies enabled to compete with large ones, exceed the costs to traditional retailers, such as Sears, which once upon a time was a problem for then-traditional retailers. Late in the 19th century, the Sears, Roebuck catalog was a retailing response to what government had directly (the Homestead Act) and indirectly (government-subsidized railroads) created — vast, thinly populated swaths of rural America where farm families had few if any shopping opportunities. By 1898, the catalog had 583 pages. In 1907, when the nation's population was 87 million, Sears mailed out 3 million catalogs. In 1927, the nation of 119 million received 75 million Sears catalogs and other mailings, helped by another government program — rural free delivery. Some traditional downtown retailers were annoyed, not for the last time: Walmart and other "big box" stores were coming to the edge of town. South Dakota's impertinent law reflects this fact: Governments often are reflexively reactionary when new technologies discomfort established interests with which the political class has comfortable relations of mutual support. The state's sales tax revenues have grown faster than the state's economy even as internet retailing has grown. Its brick-and-mortar retailing survived Sears, Roebuck, and then survived Walmart (often better than Sears, Roebuck has). Indeed, many brick-and-mortar retailers are now bricks-and-clicks enterprises, offering online shopping. Traditional retailing will, like Walmart (which is now being challenged by Amazon), prosper or not depending on market forces, meaning Americans' preferences. State governments should not try to prevent this wholesome churning from going where it will.
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