Landmark U.S. Supreme Court decision regarding internet sales and use taxes
The United States Supreme Court in a 5-4 decision last week overruled previous decisions of that Court and opened the door for states to collect their sales or use taxes on interstate sales by internet vendors.
The Court did NOT require a state to be a part of the Streamlined Sales and Use Tax Agreement (SSUTA) to collect taxes from internet vendors. This is important because Associated Industries of Missouri fought efforts to adopt the SSTP in Missouri in 400+ page bills in the recently completed legislative session, primarily because of unintended consequences and mistakes contained in the language of the bills. The Court based at least part of its decision on protections in the South Dakota law against placing an undue burden on smaller retailers.
In 2013, SB 23 removed some words from Missouri’s statute that would have provided such an exemption by requiring gross receipts to exceed $500,000 in Missouri or $12.5 million nationwide, a place of business in Missouri or selling agents in Missouri. This language, or something similar, may need to be restored in Missouri law before the Missouri Department of Revenue strongly enforces the decision.
In a meeting earlier this week, Director of Revenue Joel Walters indicated the Department would look to the legislature to clearly define the path forward. That said, it now appears the Supreme Court has opened the door for state tax administrators to aggressively pursue internet retailers for collection of the states’ sales and/or use taxes.
AIM president and CEO Ray McCarty cautioned interested parties to not rely on estimates of the amount of revenue that may be produced by this ruling.
“In my opinion, there have never been accurate estimates of the amount of sales/use tax this could provide to states because the sales that would be taxed are generally not reported by the retailer or the consumer,” said McCarty. “Although the tax is technically due on many of these sales, the lack of reporting and remitting by retailers and consumers leaves states without data upon which to base accurate estimates of how much applying state and local sales or use taxes could produce. We believe the amount will be substantial as the rise of internet sales continues to put our main street retailers out of business and more and more sales shift to internet retailers,” said McCarty.