During the first week of April, 2018, a number of organizations filed amicus briefs with the Supreme Court with respect to the case of South Dakota v. Wayfair, Inc., Overstock.com, Inc., and NewEgg, Inc.  The petitioner in the case seeks to overturn the physical nexus requirement specified by the Supreme Court in 1992, when it ruled on Quill Corp. v. North Dakota.

The court determined in Quill that a company must have a physical presence or “nexus” within a state’s boundaries before being required to collect sales taxes on behalf of the state.  Should the court overturn Quill, online and remote sellers would be subject to collect sales taxes for more than 10,000 separate jurisdictions.  One can imagine state and local governments eyeing these taxes like a kid in a candy store, just waiting for the “ok” to drag more money into their coffers.  While South Dakota v. Wayfair, et. al. is the first case of this type to be considered by the Supreme Court in recent years, similar cases can be expected to follow.

On April 4, 2018, the Oklahoma House of Representatives passed legislation that would allow for the collection of online sales taxes, and direct those specific sales tax collections towards education programs in the state.  Treating sales taxes that are collected through online sales differently than those collected by “brick-and-mortar” sales is extraordinary, and a blanket excuse to draw public support for the proposal, potentially leading to another court challenge.

Among the various amicus briefs that have been filed, the National Taxpayer Union Foundation (NTUF) notes that as early as 1962 in National Bellas Hess, Inc. v. Department of Revenue of Illinois, the Court ruled that “states may not conscript out-of-state retailers into collecting and remitting state sales and use taxes on pain of penalty.”  Americans for Tax Reform (ATR) also opposes overturning Quill, noting that if Quill is overturned, “retailers with no presence in a taxing State will face complex and costly collection obligations, the threat of expensive and intrusive audits from thousands of taxing jurisdictions, and potential retroactive tax assessments.” 

Because of the sheer number of taxing jurisdictions across the country, both the American Catalog Mailers Association and America’s Collectibles Network, Inc. filed separate amicus briefs highlighting the difficulties their industries would have in collecting these sales taxes.  It is clear from reading through these briefs that the issue of collecting online sales taxes, or even catalogue sales taxes is a difficult and complex matter. 

Should Bellas Hess and Quill be overturned, one can expect more bills like that currently moving through the Oklahoma statehouse to continue to gain traction, adding to a complex set of state sales tax laws that business will be required to comply with leading to increased costs and potentially less options for consumers as businesses try to navigate the quagmire of an increasing number of sales tax laws.