This week, lawmakers from across the country convene in Los Angeles for the National Conference of State Legislatures, where they will hopefully attend to threats to America’s small businesses and consumers from an onslaught of new internet sales tax obligations.
Newly emboldened state tax collectors are aggressively imposing sales tax obligations on businesses with no physical presence within their borders. Online sellers must now absorb the costs of new systems and compliance—including liability for taxes on past purchases where no tax was due at the time of the sale.
Judge Brett Kavanaugh’s consideration for the bench could pull Supreme Court’s conservatives back from their recent lurch into judicial activism. Nowhere else was this judicial activism by Conservative judges more apparent than in last month’s 5-4 Supreme Court decision in South Dakota v. Wayfair.
This decision exposed countless small businesses to tax collectors from 46 states. In doing so, the court struck down a key Supreme Court precedent that required a business to be physically present in a state before it can be forced to collect tax there.
Unfortunately, the bad news doesn’t stop there.
Any business that goes online to find customers is finding themselves under siege by regulators and tax collectors from multiple states, despite Supreme Court rulings that limit states’ cross-border taxing powers.
Online retailers have become a convenient scapegoat for brick-and-mortar stores looking to cast blame for the rapid contraction in retail jobs in recent months.
It’s become a such a common refrain in reports about job losses in the retail industry that it has almost become gospel.
But upon closer inspection, it’s clear that retailers have only themselves to blame for the bubble they created—a bubble that is finally bursting.
Steve DelBianco is on the shameless side. He leads NetChoice, a national trade association representing e-commerce and online businesses.
“Massachusetts has this unique theory of electronic presence,” DelBianco said. “But under that theory, your business is subject to the taxation [and] regulation in any state where a user simply enters your website address. That can’t hold up to legal scrutiny, ’cause it certainly doesn’t hold up to common sense.”
For DelBianco, the only option left is a legal challenge to fight the idea that a cookie on your computer is the same thing as a storefront on Newbury Street. He said his group has sued a number of other states for online sales tax laws and he’s looking at a legal fight in Massachusetts too.
“We’re researching the legal arguments and raising the funds to pursue a lawsuit right now,” DelBianco said. He said it’s “too soon to say when we’ll be ready.”