By Jake Lestock
“I’m here today to ask Congress, and you Mr. Chair to continue doing what this committee and Congress has done thus far … and that is, nothing—to not act.”
—Utah Senator Curt Bramble
Senator Curt Bramble (R-Utah), NCSL past president, testified before the U.S. House Judiciary Committee Tuesday on behalf of NCSL and state sovereignty. The hearing, Examining the Wayfair Decision and its Ramifications for Consumers and Small Businesses, was called by Judiciary Chair Bob Goodlatte (R-Va.) a month after the U.S. Supreme Court ruled in South Dakota v. Wayfair that states can require businesses without a physical presence in the state to collect and remit sales taxes on in-state transactions. Goodlatte has long opposed federal remote sales tax collection legislation that would allow states to collect the taxes that are owed by stalling congressional action in his committee for years.
This issue is by no means new to NCSL and state advocacy groups. For decades, states petitioned Congress to close the remote sales tax loophole that allowed online sellers an unfair tax advantage to their brick-and-mortar counterparts. In 1999, elected policymakers, tax administrators, and retailers from over 40 states met to develop a sales tax system that addressed the concerns outlined in Quill, and thus the Streamlined Sales and Use Tax Agreement was born.
For over a decade NCSL, the National Governors Association, and the Streamlined states continued to petition Congress for the authority to require out-of-state sellers to collect and remit sales taxes. In 2013, the U.S. Senate overwhelming passed the NCSL supported Marketplace Fairness Act (MFA) and in 2015, the Remote Transactions Parity Act (RTPA) was introduced in the House. States reluctantly supported this legislation given they would be ceding tax authority to achieve sales tax parity. Both pieces of legislations were states’ best options to level the playing field for main street sellers at the time and yet Goodlatte refused to have a hearing in his committee on either bill.
After continued inaction by Congress, states took it upon themselves to come to the aid of their brick-and-mortar businesses and do what Congress was unable to achieve. Legislators from across the country enacted laws to address remote sales tax collection and NCSL’s President, Senator Deb Peters (R-S.D.) carried the 2016 legislation that spurred the legal challenge in the U.S. Supreme Court and a victory for states. Justice Anthony Kennedy emphasized the struggle states have been dealing with in the majority opinion when he stated, “In the name of federalism and free markets, Quill does harm to both. The physical presence rule it defines has limited States’ ability to seek long-term prosperity and has prevented market participants from competing on an even playing field.”
In Tuesday’s hearing, opponents of the Wayfair ruling used fear mongering tactics and spoke of chaos and uncertainty on the state level in regard to sales tax, when nothing could be further from the truth. States have, and will continue to work collaboratively to ensure that remote sales tax implementation is done properly. Opponents that once stalled all congressional action, now called for federal legislation to either impose a moratorium or action that would pre-empt state tax sovereignty. Bramble stood strong and rightfully argued that any and all action by Congress on this issue is unneeded and unwanted.
Jake Lestock is a policy specialist with NCSL's State-Federal Division in Washington, D.C.