“I think Georgia can fully expect a lawsuit before the law takes effect in January,” particularly if the Supreme Court upholds the physical presence rule and finds South Dakota’s law unconstitutional, said Steve DelBianco, president and CEO of NetChoice, an industry association for e-commerce.
NetChoice has sued Indiana, Tennessee, and Wyoming over similar sales tax collection laws.
Georgia also could face a legal challenge on the reporting requirements, DelBianco told Bloomberg Tax May 7, in addition to public opposition when residents of the state become aware of the privacy concerns of their online purchases being reported to the state.
The reporting requirements in Georgia’s law are modeled after a Colorado law that faced six years of court challenges before the Supreme Court declined to review the U.S. Court of Appeals for the Tenth Circuit’s decision to uphold Colorado’s law. No other federal circuit has ruled on such a reporting law, DelBianco said.
“Georgia is not in the Tenth Circuit. You can bet that it’s a ripe target,” he said.
The trade group NetChoice, a ubiquitous leader in the effort to quash sales tax collection rules on internet retailers, issued a widely published statement that ecommercebytes.com included in its article about the lawsuit:
If the high court takes this case, we will be ready to show that the perspective of a few large online retail defendants is only a small part of the story. In fact, many thousands of smaller businesses would bear disproportionate burdens and costs if they are forced to become tax collectors for 12,000 jurisdictions across 46 states.
Even so, in a different statement, NetChoice highlighted its stance that “Congress is best suited to weigh the benefits and burdens of empowering state tax auditors to go after every business in America.”
Steve DelBianco of NetChoice, which strongly opposes S.B. 106 and similar laws in other states, said he thinks the perspective of small businesses has been lost in the current fight.
“This ruling gives the state what it wanted all along — a case they could appeal to the U.S. Supreme Court,” DelBianco said. “If the high court takes this case, we will be ready to show that the perspective of a few large online retail defendants is only a small part of the story. In fact, many thousands of smaller businesses would bear disproportionate burdens and costs if they are forced to become tax collectors for 12,000 jurisdictions across 46 states.”
NetChoice has sued South Dakota to stop the law, but that suit is on hold as the current matter makes its way through the courts.
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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.
“States should not be allowed to regulate businesses beyond their borders, whether it is imposing sales tax obligations, labeling, or other regulatory restrictions and mandates on business that are not located within their borders,” Steve DelBianco, executive director of NetChoice, said in a statement. “Congress must step in to stop this madness.”
“We urge the full House to quickly take up this measure to provide small and mid-sized retailers protection from unlawful state policies that threaten to harm consumers, businesses and our national economy,” he added.
“Consumers and online retailers around the country are under assault by more than a dozen states seeking to adopt onerous and unworkable sales tax collection regimes, but Rep. Sensenbrenner’s commonsense bill would put a stop to the chaos,” DelBianco said. “Whether it’s invading consumer privacy through tattletale reporting laws or establishing dubious ‘economic nexus’ policies that flout established Supreme Court precedent, this state sales tax feeding frenzy must be stopped in order to preserve consumer choice and competition.”
NetChoice and ACMA are challenging Directive 17-1 as “unconstitutional on its face.” Among other things, the plaintiffs allege that the regulation “imposes an obligation on certain Internet vendors to collect and remit sales or use tax on electronic commerce that are not imposed on other vendors who do or might make sales of similar goods and services through some other means.” Those other means may include catalog, mail order, television infomercial, and toll-free telephone call.
NetChoice Executive Director Steve DelBianco said, about the lawsuit, “The Massachusetts regulation blatantly violates Supreme Court precedent and the Internet Tax Freedom Act, a law Congress enacted specifically to stop states from imposing taxes that discriminate against the internet.”
DelBianco says, however, that “Massachusetts is taking the position that an out-of-state business is effectively setting up shop in the computers and smartphones of residents who enter the website address of that business. One wonders why the state didn’t say the same thing about businesses with telephone numbers that were dialed by Massachusetts consumers over the last 75 years.”
IT’S A LAWSUIT: NetChoice, one of the more active groups in opposing giving states broader powers to tax out-of-state online retailers, filed suit Friday to stop a new rule that would do just that in Massachusetts, as your Morning Tax author noted. The Massachusetts regulation seeks to pass the physical presence test currently required by the Supreme Court’s 1992 Quill ruling by maintaining that smartphone apps or web browser cookies are a physical presence. That’s laughable, NetChoice argues, in addition to running afoul of the Internet Tax Freedom Act.
Couple other things to note here: Other states that have pushed the envelope on online sales tax collection, notably Alabama and South Dakota, have basically agreed that their laws run counter to the current Supreme Court precedent — in order to hopefully allow the high court to reexamine that current precedent more quickly. Massachusetts didn’t do that, according to Steve DelBianco, NetChoice’s executive director. On top of that, retail advocates were pretty loud cheerleaders for the Alabama and South Dakota laws, but have been noticeably quiet on this Massachusetts directive.
“State tax collectors must have been working in a dark basement in Boston, since they developed and adopted this regulation without public comment or even a single public hearing,” NetChoice executive director Steve DelBianco said in a prepared statement. “Our lawsuit brings all this into the open, and we believe a little sunshine will expose the legal flaws and unintended consequences on Massachusetts businesses.”
NetChoice also argues that the directive violates a 1992 US Supreme Court decision known as “Quill” that requires an out-of-state seller to have a physical presence in a state to be responsible for collecting sales taxes.
The American Catalog Mailers Association and NetChoice, a coalition of consumers and online retailers, sued the Massachusetts revenue commissioner in state court over a directive compelling large, out-of-state internet retailers to collect and remit sales and use taxes from Massachusetts