PITTSFIELD — As state treasuries reap the benefits of a 2018 Supreme Court decision that paved the way for the taxation of online purchases, U.S. Sen. Maggie Hassan is calling on her Congressional colleagues to pump the breaks.
During a visit to NobleSpirit, a Pittsfield business that sells rare stamps, coins and other antiques via eBay, Hassan, D-NH, met with a group of Granite State web merchants to discuss how the court’s decision in South Dakota v. Wayfair Inc. has impacted their businesses.
“What is fundamental here is that the way the Wayfair decision was decided, and the way folks are moving to implement that decision, will really have a negative impact on small businesses who are part of the new economy,” Hassan said.
In a 5-4 ruling decided by justices Clarence Thomas, Samuel Alito, Ruth Bader Ginsburg, Neil Gorsuch and former Justice Anthony Kennedy, the court opened the door for state governments to require out-of-state sellers to collect sales taxes for online purchases.
In the year that’s passed since the ruling was handed down by the high court, 31 states have moved to begin taxing online transactions. These taxes, proponents claim, are needed to address plummeting revenue caused by the increasingly dominant place that online shopping holds over brick and mortar stores.
But opponents like Hassan say Wayfair has placed an undue burden on small businesses in non-sales-tax states like New Hampshire, whose entrepreneurs may lack the know-how or resources to collect taxes on behalf of other states.
“In terms of just sheer fairness for people and businesses that do business in states that don’t have sales taxes, they are being asked to take on enormous administrative burden without getting any of the new revenue,” Hassan said.
Pauline Cortese, who runs NobleSpirit with her husband, Joe Cortese, says their business has often absorbed the cost of the tax in order to appease buyers, but went on to say that the couple has already lost repeat customers as a direct result of Wayfair.
“We’ve definitely seen a softening of prices very distinctly since the introduction,” added Joe Cortese. “And we can tell that conclusively from the messages that we get.”
Shelly Parish, an eBay seller who markets both vintage clothing and lightly used clothing that her young children have grown out of, says the narrow profit margins of individual sellers adds further complication to the need to collect income taxes.
Noting that many of her used children’s clothing ends up being purchased at-cost in small towns across the country, Parish says she fears the reduced revenues she’s already seeing will cause sellers like her to quit the business.
“And then what do the buyers do?” asked Parish. “I appreciate that these states feel that this is a big bucket of money that they end up with, but if half or three quarters of the eBay sellers go away, then I think that’s a quarter of the revenue that they’re going to end up with.”
While Hassan says the ideal scenario would be to introduce legislation to overturn the court’s decision in Wayfair, she admits such a move would likely face bipartisan pushback from her colleagues who represent states with sales taxes.
Instead, the junior senator hopes to come to a compromise along the lines of the Online Sales Simplicity and Small Business Relief Act, a bill introduced by Hassan as well as Sens. Jeanne Shaheen, D-NH; Ron Wyden D-Ore.; and Jeff Merkley, D-Ore., that would eliminate the tax collecting burden for small businesses with less than $10 million per year in total sales.
Stating that everyone should be “cognizant” of how technology is reshaping the marketplace, Hassan challenged her colleagues to reconsider whether internet sales taxes were the best course of action for states looking to shore up their budgets in the face of an increasingly digital economy.
“There are other options that I think states could have that are worried about a loss in sales revenue,” said Hassan. “Maybe the model of tax that you have in your state is no longer a good model for an internet economy. Those are the things I’d like some of my colleagues in states that don’t have sales taxes to think about.”
“At the end of the day, it is not fair to ask businesses in states that will see no benefit from collecting other states’ sales taxes to take on what’s an extraordinary administrative burden.”