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Supreme Court divided on taxing internet sales

New Hampshire Union Leader

April 17. 2018 10:27PM

New Hampshire opponents to letting states tack sales tax onto internet purchases made here and across the country heard a divided U.S. Supreme Court consider Tuesday whether to make the change.

Three of the nine jurists are already on record in favor of changing the policy. A fourth, Justice Ruth Bader Ginsburg, said during the debate that she too would rule in favor of allowing South Dakota to levy these taxes. (Related Story, B1.)

During the one-hour hearing, other members of the Supreme Court pushed back on making the move.

Chief Justice John Roberts bristled at the notion the Supreme Court should advise that Congress must settle the matter and pass a federal policy.

“They’ve made a decision or at least majorities have made a decision that this is something they’re going to leave the way it has been for, whatever it is, 25 years,” Roberts said from the bench according to the transcript.

“I think it would be very strange for us to tell Congress it ought to do something in any particular area. Just a thought.”

Wayfair, the national online furniture and home furnishings business, triggered the lawsuit after the firm and two other high-profile online retailers refused to collect taxes for South Dakota after lawmakers there had passed an internet sales tax law in 2016.

The issue centers on the so-called dormant commerce clause, a judge-created doctrine that bars states from unduly burdening interstate commerce without congressional authorization. Congress could overturn whatever the court decides, but legislative proposals have stalled in the years since the court last dealt with this issue in 1992.

New Hampshire response

Gov. Chris Sununu, a first-term Republican, and the all-Democratic congressional delegation have been united in their opposition to forcing New Hampshire businesses to collect a tax on internet sales.

Attorney General Gordon J. MacDonald submitted his own brief on behalf of the state while U.S. Sens. Jeanne Shaheen and Maggie Hassan signed onto a legal argument from a bipartisan group of senators opposed to the tax.

“I will keep fighting to support our innovative small businesses and to stand up against imposing sales tax collection requirements that would only hinder economy growth and hold New Hampshire back,” Hassan said in a statement Tuesday.

Shaheen said there are 12,000 different jurisdictions nationwide that levy sales or service taxes, and this mandate could cripple a small business.

“On #TaxDay, the last thing our businesses need is more red tape,” Shaheen tweeted.

“Hope SCOTUS will consider impact on NH small biz who sell online of dangerous effort to impose sales tax collection requirements.”

Rep. Annie Kuster, D-N.H., also signed onto a legal brief from House members opposed to the tax.

“The Supreme Court should preserve the precedent that would prohibit states from collecting sales tax on companies that do not have a physical presence within that state,” Kuster said. “Companies in the Granite State should not be in the business of collecting sales tax for South Dakota or any other state.”

The only states that do not levy a sales tax along with New Hampshire are Alaska, Delaware, Montana and Oregon.

Starting in 1967, justices ruled states could only charge sales taxes if there was a “nexus” for that business in their state.

They reaffirmed that decision in the so-called Quill case of 1992, creating an internet tax-free zone in the U.S. unless the online purchase came through an office or warehouse in the affected state.

South Dakota Attorney General Marty Jackley said states are losing up to $23 billion in annual taxes and this revenue loss will only accelerate as more and more Americans buy products online rather than in retail stores.

Ginsburg called the Quill decision “obsolete” given how much business is done online.

“Anyone who wants to sell in-state, whether an in-state shop, an out-of-state shop, everybody is treated to the same tax collection obligation,” Ginsburg said.

George Issacson, a Portland, Maine lawyer, argued the case for Mayfair and said letting South Dakota charge these taxes would accelerate domination on internet sales by large multinational firms such as

“If you increase the cost of admission, if you have barriers to entry, one of the inevitable effects is going to be that those small and medium-sized companies are going to be deterred and there will be even greater concentration by the largest retailers,” Issacson said.

The Washington Post contributed this report.

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