States aren’t giving up their fight to collect sales tax from out-of-state Internet retailers, and some don’t plan on waiting any longer for Congress to write rules that would let them do so.
More than a dozen states, South Dakota and Utah included, are looking to impose their own regulations allowing them to collect sales tax on e-commerce buys made within their borders, according to The Wall Street Journal. The hope, it seems, is that taking matters into their own hands might incite action from Congress.
A 1992 Supreme Court ruling stipulated that states can only collect sales tax from e-commerce companies with a physical presence in the state, but state leaders are arguing that these remote sales are costing them heavily in revenue.
So to get that so-deemed outdated legislation updated, Alabama started enforcing an old law that would allow it to collect sales tax as of Feb. 20, and the state’s revenue department told the Journal it’s ready and up for a challenge from Congress, which still has authority to regulate interstate commerce, because of it.
Republican state senator for South Dakota Deb Peters sent a bill through the Senate last week that would apply sales tax to out-of-state purchases and it went without opposition, according to the Journal.
Utah seems to be taking a different approach, trying to redefine what a physical location actually entails. The state’s senate recently introduced a bill that says a seller would have to pay sales tax—even if it didn’t have a physical location in state—if it regularly delivers products to consumers, like some third-party delivery companies.
To tax or not to tax Internet purchases has been a contentious topic, with brick-and-mortar retailers believing it gives online-based competitors an unfair advantage because they don’t have to pay the tax, and members of Congress divided on whether the ruling best serves all retailers.
The now-pending customs enforcement bill, recently passed by the Senate and on its way to President Obama for a signature, even got held up over Internet tax issues. The bill extends a ban that prevents states from taxing Internet access. Sen. Dick Durbin (D-Ill.) tried to block the bill in the past over this clause but backed off in the latest go-around after making a deal with Senate Majority Leader Mitch McConnell (R-Kentucky) to talk about a separate rule that would let states collect sales tax from e-tailers.
So far, no bills aimed at implementing the e-tax have seemed to stick with Congress. The Marketplace Fairness Act went up to the governing body in 2013, and would have afforded states more power to collect sales tax from businesses that don’t have a physical location in that state.
The bill made it through the Senate but didn’t get by the House and little has happened since, separate from stirring controversy.
States’ new combative approach may or may not prove positive, but conversations about the Internet tax will likely ramp up regardless.