Today, catalogs, websites, and retail stores all play by the same rules when it comes to sales taxes: they all collect and pay sales tax for every state where they have a business location.
For decades, state tax authorities have tried to force out-of-state businesses to pay collect sales tax, too. But the US Supreme Court found that state tax systems are far too complex, with thousands of rates and differing rules and definitions. The Quill decision, as it’s known, holds that states can impose sales tax only on businesses with a physical presence in the state.
In saying No to the states, the Supreme Court cited Constitutional protections for interstate commerce laid down 225 years ago by the founders, who saw the Colonies use taxes to advantage their own businesses.
But now Congress is considering legislation to remove the protections in Quill and force all businesses to file and remit sales tax to states where these businesses have no operations or representation. For America’s catalog and online retailers, this would create new taxes, since states hold the retailer liable for the tax—whether or not it’s collected from customers at the time of sale.
The legislation would require all e-commerce websites and catalogs to:
• calculate tax rates for over 9,600 tax jurisdictions, each with its own rates and sales tax holidays;
• file returns for each of the 46 taxing states;
• endure potential tax audits from 46 state tax authorities; and
• invest in computer systems changes and additional accounting resources.
Our coalition is working to convince Congress to uphold its Constitutional duty to protect interstate commerce and competition. And if Congress is seriously considering removing the Quill protections, we are advocating a set of true simplification rules and fair procedures to hold states accountable. (see Our Principles)
More Resources on this:
Federal legislation: HR 3179, S 1452, and S 1832
New estimate of uncollected taxes from e-commerce
Wall St. Journal Article on “Should States Require Online Retailers To Collect Sales Tax?”
