Sales Tax Fairness

Nareit, along with numerous state and national businesses and organizations, believes that there should be a level playing field for sales and use tax collection – whether the sale occurs at a physical location or online.

Sales tax fairness ensures that main street businesses are not unfairly burdened with a government-sanctioned price disadvantage compared to their online competitors. With the rapid growth in e-commerce, marketplace fairness only makes sense: U.S. tax policy should reflect today’s marketplace.

The Supreme Court held over 20 years ago in Quill Corp. v. North Dakota, 504 U.S. 298 (1992) that a state only could require a remote retailer to collect use tax from in-state customers to the extent that the retailer had a physical presence in the state. Because of the many different state sales and use tax laws, the Court reasoned that imposing such sales and use tax collection responsibility would unconstitutionally burden interstate commerce. However, the Court held that ultimately it was Congress’ to responsibility to determine the extent to which states could require remote sellers to collect sales and use tax on in-state purchases.

Since this decision, internet sales have increased exponentially and, according to recent estimates, over $26 billion in state sales taxes went uncollected in 2015. The pressure on state budgets, the technological advancement over the last two decades, and the growing bipartisan support for a legislative solution suggest that the time has come for marketplace fairness. Nareit along with numerous state and national businesses and organizations, has long supported efforts to achieve a marketplace fairness solution. 

On April 27, 2017, Senators Lamar Alexander (R-TN), Mike Enzi (R-WY), Dick Durbin (D-IL), and Heidi Heitkamp (D-ND) re-introduced S. 976, The Marketplace Fairness Act (MFA), and Representatives Kristi Noem (R-SD-AL), Steve Womack (R-AR-3), Jason Chaffetz (R-UT-3), Steve Stivers (R-OH-15), Lou Barletta (R-PA-11), John Conyers (D-MI-13), Jackie Speier (D-CA-14), Peter Welch (D-VT-AL), Suzan DelBene (D-WA-1), and David Cicilline (D-RI-1) introduced H.R. 2193, The Remote Transactions Parity Act (RTPA). Nareit strongly supported these proposals.

On Jan. 12, 2018, the U.S. Supreme Court agreed to hear the case South Dakota v. Wayfair, regarding the constitutionality of a 2016 South Dakota law requiring online retailers with sales above a certain threshold to collect use taxes notwithstanding having no physical presence in-state. In 2017, Nareit joined a coalition of industry groups in filing an amici curiae brief as interested parties asking the Supreme Court to hear the Wayfair case, as well as a merits brief, asking the court to uphold the South Dakota law. On June 21, 2018, the U.S. Supreme Court issued a 5-4 decision in South Dakota v. Wayfair, upholding South Dakota’s law. This decision levels the retail playing field so that states now can require online retailers to collect use taxes from customers under substantially the same rules as main street businesses.

STATUS: On June 21, 2018, the U.S. Supreme Court issued a 5-4 decision in South Dakota v. Wayfair, upholding South Dakota’s 2016 law. This decision levels the retail playing field so that states now can require online retailers to collect use taxes from customers under substantially the same rules as main street businesses. As in Quill, the court left open the possibility for Congress to address the issue more comprehensively. Nareit will continue to remain engaged as appropriate for a level playing field for sales tax collection.

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