April 17 the U.S. Supreme Couret (SCOTUS) will hear arguments in a case that can have a major impact on local government revenues. A decision in South Dakota v. Wayfair, Inc. could boost sales tax revenue from online transactions in some states.
As for background, a 1992 SCOTUS decision in Quill v. North Dakota, 504 U.S. 298 (1992) held that Congress has the authority to regulate interstate commerce under the Commerce Clause, and that the current patchwork of state and local sales tax rules is too complicated to require remote sellers to collect sales taxes. The result was that states and local governments were prohibited from enforcing existing sales and use tax laws on the growing number of out-of-state sales.
In the intervening years, Congress took no action to create a taxation method for these transactions. The advent of the Internet and online storefront exacerbated the tax revenue challenge, disadvantaging brick and mortar businesses while also reducing the number of sales transactions subject to sales tax (though notably they were subject to use tax by the acquiring party if reported). Effectively, the Quill decision created a loophole that gave Internet-only retailers a price advantage over brick and mortar stores, and the current case challenges that.
In terms of local government revenue, this is the most important case to reach SCOTUS in the last several years. It’s important enough that Avenu will have an expert at the court for the oral arguments and will work with the parties on both sides of the issue for administrative implementation of the ultimate decision expected in June.
To help your agency stay informed on this issue, Avenu’s Government Relations team published a Policy Update on this matter in February 2018. You will find that here.
For more detail on how this can affect your specific city, contact Vice President of Government Relations at Fran.Mancia@avenuinsights.com or 559.288.7296.