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In order for the sales tax to survive South Dakota v. Wayfair, it must be minimally restrictive on an out-of-state vendor. While the outcome you describe might
by nkurz 8y ago
In order for the sales tax to survive South Dakota v. Wayfair, it must be minimally restrictive on an out-of-state vendor.
While the outcome you describe might be a good one, I think you are greatly overstating when you read into this decision a new standard of "minimally restrictive". Major vendors already charge local sales taxes to the best of their abilities, and almost certainly will continue to do so.
This decision merely says that there is nothing inherently unconstitutional about a particular South Dakota law requiring a retailer without a physical presence to collect sales tax on behalf of the state. This does mean that a law in another state with similarly restricted characteristics is likely to survive review as well. But it doesn't (yet) create any line that says all of same characteristics must be met.
If New York City were to attempt to enforce the same law, it might find enforcement difficult, but it likely would not have constitutional impediments. If another state were to choose some wider scope, it too might well be judged constitutional. At the least, we wouldn't know until more cases have been decided: it's not yet clear how much 'stare decisis' has been thrown out here.
Instead, this case sets a standard for what is clearly constitutionally allowed, saying that there no longer a requirement of physical presence, but doesn't say much about what else would be required. It gives Congress an opening to pass a clearer national law about what the standards need to be, but doesn't create such a standard itself.
- gamblor956 8y agoStill reading the case in detail, but these quotes address your comments head on and indicate that SCOTUS likely would not support a state scheme allowing for a multitude of local sales taxes (a la California). EDIT: While it is true that the dissenting opinions wanted Congress to solve this problem for them, the physical nexus rule was (and generally always has been) a construct of the Courts, and should have been struck down by the courts. Having a legislative counterpart is no excuse for letting bad decisions live. EDIT2: Also, SCOTUS did not strike down the nexus requirement, only the specific physical nexus requirement of Quill. The dicta quoted below strongly suggests that complex sales tax system would require stronger nexus than the South Dakota regime. "Complex state tax systems could have the effect of discriminating against interstate commerce." "That said, South Dakota’s tax system includes several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce. First, the Act applies a safe harbor to those who transact only limited business in South Dakota. Second, the Act ensures that no obligation to remit the sales tax may be applied retroactively. S. B. 106, §5. Third, South Dakota is one of more than 20 States that have adopted the Streamlined Sales and Use Tax Agreement. This system standardizes taxes to reduce administrative and compliance costs: It requires a single, state level tax administration, uniform definitions of products and services, simplified tax rate structures, and other uniform rules."
- nkurz 8y agoAlso, SCOTUS did not strike down the nexus requirement, only the specific physical nexus requirement of Quill. Yes, this is important to note. Still, much of logic involved in the decision makes it sound like in the future nexus may be defined quite loosely, based largely on the states' desire to collect the tax and the practical difficulties involved, rather than just being a redefinition of "substantial nexus". Consider this part: Under this Court’s decisions in Bellas Hess and Quill, South Dakota may not require a business to collect its sales tax if the business lacks a physical presence in the State. Without that physical presence, South Dakota instead must rely on its residents to pay the use tax owed on their purchases from out-of-state sellers. "[T]he impracticability of [this] collection from the multitude of individual purchasers is obvious." [[cite]] And consumer compliance rates are notoriously low. This might be good change socially, but it feels more like the court is pushing a policy change rather than offering a reinterpretation of the constitutional requirements. In this part of the logic, there's no change of the interpretation of nexus (since it's based on only the customer's failure to obey other existing laws), and yet it's used as justification for why the state has a right to demand action from an otherwise out-of-jurisidiction company. Same nexus (or lack thereof), but different constitutionality. While one would hope for a balance between burden and benefit, I think it points to a much more inclusive concept of nexus. In the absence of a clear national law, until there is a case showing the limits in the other direction, I'd guess that states will pass more and more inclusive laws on who is required to collect on their behalf. We'll likely end up in a situation where a multitude of state laws technically require most retailers to collect, but selective enforcement means that only the large (or unpopular) players are pursued. I didn't like this previous approach of on-the-books but unenforced use taxes, but I'm uneasy about this outcome too.
- pishpash 8y agoExactly. If the goal is parity with B&M stores, then little vendors will be required to match all the locale taxes as well.