Will the US Supreme Court Require Online Sellers to Collect Sales Tax without Nexus?

SOUTH DAKOTA V. WAYFAIR – WILL THE SUPREME COURT BE FAIR TO SMALL BUSINESS?

Our firm and many of our clients are closely watching the US Supreme Court as it hears oral arguments on tomorrow, April 17, 2018 (the day after tax day) and considers the  South Dakota v. WayfairConsidering it was determined years ago that a business has to be, in layman’s terms, present in a jurisdiction before it was obligated to collect sales tax, it is not surprising that sellers on Amazon.com, Wayfair.com, Ebay.com, Jet.com, Walmart.com and the like have not considered collecting sales tax in those jurisdictions where they had no physical presence. Major retailers have always shipped into states in which they had no stores and charged no sales tax.

The Dilemma: revenue lost by states due to online selling

The states have a problem. About 50% of Holiday sales in 2017 were made online. Sales tax revenue is one of the ways state and local governments survive. States are facing a deficit due to the decline in sales collected as a result of online sales.

The Dilemma: the burden on smaller enterprises

The real dilemma is both one of competition and one of of desperate impact on small online sellers. Today, few international sellers collect sales tax. US-based online sellers are then at a pricing disadvantage if they collect sales tax when their competition does not.

Sellers do not have accurate or complete information from the marketplaces to be able to timely and correctly file in each state and local jurisdiction. Amazon and other marketplaces move inventory as they deem necessary to meet customer needs and sales data and customer names and detail data are not comprehensively and consistently provided to the online sellers. The inventory is sold anywhere that the market place, such as Amazon, chooses to let consumers purchase.  The burden of reporting to all of the states and local jurisdictions is onerous. The cost of compliance and the risk of failure to comply with states and all of the local jurisdictions within those states may cause many online retailers to close their doors.

Conclusion

At the Walk Law Firm, we represent many online e-tailers particularly in buying or selling brands or in funding their companies. Our clients are very entrepreneurial and look at this issue as a way in which governments make it harder for small business to succeed. It adds confusion and complexity to already heavily negotiated disclosure in merger and acquisition transactions.

CNN reported on April 15, 2018, their view of the upcoming oral arguments. I agree with the concerns raised and am hopeful that our Supreme Court does not put the onus on small business and online retailers. If it deems it is necessary or appropriate to permit state and local governments to require online sellers to collect, report and pay sales tax in jurisdictions in which they have nexus only as a result of selling in a market place, then it is our view that the various market places should be responsible for collecting, reporting and paying the tax to the states and local jurisdictions.

Let’s hope our Supreme Court appreciates the need to continue to grow small business in the US.

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About Rochelle Friedman Walk, Esq.

Rochelle Friedman Walk, Esq. is an experienced, thoughtful and strategic attorney, business executive and neutral mediator. She has been court-appointed as a receiver and mediator, and is a member of the FINRA arbitration panel. She is known for her negotiating skills and the ability to bring parties together in win-win, creative solutions. She offers a practical and business-oriented approach to the practice of law. Her background in business enables her to relate well to clients and to quickly define the work and potential solutions. In her more than twenty-five years of business and legal experience, she has served as the chief restructuring officer, chief administrative officer, chief legal officer and Business Unit Manager to several national and multi-national business organizations. As an attorney, she has represented clients in a wide range of legal transactions and disputes including complex commercial, insurance coverage, real estate, construction, financial restructuring and employment matters. She has served as an ombudsman in employment, elder care, NAACP, creditor and shareholder matters and has worked with a number of different international unions to resolve concerns. Ms. Walk is a Martindale-Hubbell Preeminient (AV)-rated lawyer, has been named by Tampa Bay Magazine as one of the Top Lawyers in Tampa Bay (July 2010) and is included in Martindale-Hubbell's inaugural and subsequent editions of its Bar Register of Preeminient Women Lawyers (2011, 2012). A graduate of Case Western Reserve University School of Law and Colgate University, she is a Florida Supreme Court Circuit Civil and Appellate certified mediator, licensed to practice law in the States of Florida and Ohio, and is a member of the America Bar Association, Section for Dispute Resolution, the Hillsborough County Bar Association and the Florida Academy of Professional Mediators. She has been recognized by the YWCA as a Woman of Professional Excellence and the Tampa Jewish Community Federation as a Woman of Distinction.She volunteers for SCORE as a presenter on various business topics and serves on the Boards of a number of not-for-profit community agencies in the Tampa Bay area, including a community foundation and assisted living facility. Previously, she served on the Board of a Crisis Nursery.