Internet Sales Tax
By Erin Stackley, Evan Liddiard, Jamie Gregory
On Thursday, June 21, 2018, the Supreme Court announced its holding in South Dakota v. Wayfair, Inc., a case on internet sales tax fairness, in favor of NAR's position that states should be able to require online sellers to collect/remit sales tax on purchases. The Court held that the South Dakota law, requiring some on line retailers to charge and remit sales tax on purchases, may stand, and that the "physical presence" requirement which previously controlled is out of date in an e-commerce era. This overturns a 1992 holding that a physical presence is required. (That holding also directed Congress to resolve the issue; though many e-fairness bills have been introduced since then, none have been passed into law).
NAR has been advocating for this position for many years in Congress, and joined two amicus briefs with a coalition of other real estate groups in support of the South Dakota law being challenged. NAR is also a member of the Marketplace Fairness Coalition, which advocates for e-fairness.
NAR's position on this issue is that online retailers have an advantage over brick-andmortar stores which must charge sales tax on purchases, causing consumers to shop online instead of in-store to save money (technically they are supposed to remit state sales tax on their taxes each year, but most do not). This harms those traditional retailers - who are the clients/customers of many commercial real estate practitioners. In addition, the states are losing billions of dollars in uncollected sales tax, which they sorely need.
A few notable quotes from today's holding, which you can read in full here:
• "In effect, Quill has come to serve as a judicially created tax shelter for businesses that decide to limit their physical presence and still sell their goods and services to the State's consumers ... "
• "Helping respondents' customers evade a lawful tax unfairly shifts to those consumers who buy from their competitors with a physical presence that satisfies Quill...an increased share of the taxes."
• "The Complete Auto test simply asks whether the tax applies to an activity with a substantial nexus with the taxing State ... Here, the nexus is clearly sufficient based on both the economic and virtual contacts ... "
The South Dakota law does not give the state carte blanche to charge sales taxes from every online retailer - it applies only to sellers that deliver more than $100K of goods or services into South Dakota, or engage in 200 or more separate transactions for the delivery of goods/services into the state per year. Following the Court's decision, many other states are expected to pass similar e-fairness laws.
WSCAR Government Affairs Director