Soon after the directive was announced, the e-commerce trade association NetChoice threatened that the administration would face litigation challenging its legality. The group followed through on that threat today in a Suffolk County Superior Court lawsuit that it brought alongside the American Catalog Mailers Association.
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.
“We’ve developed compelling legal arguments and plan to seek an injunction before this law goes into effect,” said Steve DelBianco, executive director of NetChoice, which represents Overstock.com, eBay, PayPal and other e-commerce businesses.
“The state doesn’t have the legal authority to tax businesses that don’t have a physical presence within the state,” he said. “Courts have consistently blocked such attempts.”
DelBianco said the rules would have a “boomerang effect” on Bay State retailers and consumers, who would be obligated to pay sales taxes on out-of-state transactions.
“That means every Massachusetts business that simply creates a website would find itself subject to the taxation and regulation of every other state,” he said.
“It’s a novel approach, but a blatant violation of that act,” DelBianco said.
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Steve DelBianco is on the shameless-tax-grab side. He leads NetChoice, a national trade association representing e-commerce sites. He says under this strange Massachusetts theory, “your business is subject to the taxation [and] regulation in any state where a user simply enters their website address. That can’t hold up to legal scrutiny, because it certainly doesn’t hold up to common sense.”
DelBianco is not convinced a cookie on your computer is the same thing as a storefront in a strip mall. He’s willing to take that argument to court, and says his group is pursuing an injunction to block enforcement of the law before it goes into effect in July.
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.”
Minnesota state legislators’ push to impose unprecedented sales tax obligations on Internet marketplaces has little support from Minnesotans, according to a new poll jointly released by NetChoice and Americans for Tax Reform (ATR).
Only nine percent of Minnesotans think that the current online sales tax collection process needs to change. Yet, leaders of Minnesota’s legislative tax committees continue to promote legislation (HF4 and SF 2225) that would now require out-of-state businesses to collect online sales tax from Minnesotans. Read more
Steve DelBianco, executive director at NetChoice, said there are three scenarios in a “keep Quill” landscape:
- States will claim that Quill doesn’t apply to specific taxes, such as Ohio’s commercial activity tax and Washington’s gross receipts tax. In November 2016, the Ohio Supreme Court declined to extend Quill to the state’s business privilege tax. A petition requesting the high court’s review is expected in April.
- States will continue to enact legislation that aren’t “kill Quill” laws, but are “creative extensions of nexus” to “withstand the physical presence” rule — such as affiliate, click-through and marketplace provider regimes. While those regimes recognize physical presence as the rule, they define physical presence as including a relationship with an in-state entity that has physical presence.
- States will pursue “tattletale reporting tactics,” such as the Colorado and Louisiana laws that mandate non-collecting remote vendors to report consumers’ purchases to the state.
“Goodlatte’s bill confirms the physical presence standard with specificity, and then goes on to open the door to a multistate compact that allows home state enforcement on remote sales,” DelBianco said, adding that “the beauty of the congressional approach, of either Sensenbrenner or Goodlatte, is they in fact would stop the madness of all these state bills.”
DelBianco noted that Amazon’s business model has led to its expansion into more states to provide faster fulfillment. Likewise, competition over customer service and rapid shipping will encourage other retailers to expand their physical footprint, thus triggering collection obligations in more locations.
There is a lot of talk in the state Legislature these days about taxes — from tax hikes on marijuana and new taxes for improved transportation to reduced taxes on business personal property and even eliminating taxes on some personal hygiene products.
However, lawmakers may want to add one more tax-related issue to this robust debate — a re-examination of rules that would make the Department of Revenue privy to the personal online shopping habits of Coloradans.
Six years ago, state lawmakers addressed the internet sales tax issue through legislation. It was a fatally flawed law, aimed at increasing collection of sales and use taxes for purchases made online or through catalogs. Lurking in that bill was a dangerous intrusion into the private lives of Colorado citizens.
The U.S. Constitution and Supreme Court precedent protect Indiana’s businesses from the scourge of Chicago and New York tax collectors.
Today, Indiana businesses, whether selling online, over the phone or via catalog, only must collect sales taxes for purchases to Indiana consumers. The businesses only must file taxes with the Indiana tax collectors and face audits from Indiana auditors.
As a result, Indiana’s main street businesses, such as Burton’s Maple Syrup in Medora, easily can use the Internet to reach customers across the country.
But it appears some lawmakers in Indianapolis are prepared to upend these protections and expose Indiana businesses to tax collectors from across the country.