Americans for Tax Reform files Amicus Brief in South Dakota v. Wayfair

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Posted by Katie McAuliffe on Wednesday, April 4th, 2018, 12:59 PM PERMALINK

WASHINGTON, D.C., April 4, 2018 – Today, Americans for Tax Reform submitted its brief to the Supreme Court in South Dakota v. Wayfair.

In the brief, ATR argues against the South Dakota law that would drastically expand state taxing authority, saying that “if this Court overturns Quill, retailers with no presence in a taxing state will face complex and costly collection obligations, the threat of expensive and intrusive audits from thousands of taxing jurisdictions, and potential retroactive tax assessments,” placing heavy burdens on interstate commerce.

ATR also maintains that the Supreme Court must rule against South Dakota unless they want to set a dangerous precedent that would encourage other states to pass unconstitutional laws that would force reconsideration of other constitutional issues thereby bypassing the legislative authority of Congress.

On April 3, Grover Norquist, President of ATR, said in an interview on CNBC: "There has been a debate as whether one state can force businesses in another state to collect sales taxes over catalog or internet sales. Without a physical presence, the business can’t be taxed by a foreign state without physical presence. You don’t want states to reach into each other’s borders and tax without recourse at the ballot box.”

Ironically, this case is being argued on Tax Day, which falls on April 17 this year.

Below are some quotes from ATR's Amicus Curiae brief:

South Dakota’s economic nexus thresholds are not sufficient to prevent the imposition of undue burdens on multistate and international sellers of property and services.

South Dakota’s portrayal of comprehensive, multistate use tax collection for remote retailers is far too simplistic and vastly understates the actual burdens that compliance will place on retailers. [pg. 6]

If this Court overturns Quill, retailers with no presence in a taxing State will face complex and costly collection obligations, the threat of expensive and intrusive audits from thousands of taxing jurisdictions, and potential retroactive tax assessments. [pg. 6]

Detailed classification problems are rampant in the American sales and use tax system, and retailers must solve these problems to stay in full compliance. [pg. 8]

The “at no charge” software solutions touted by South Dakota are estimated to cost between $80,000–$290,000 in initial setup and integration, and approximately $57,500–$260,000 per year to maintain. [pg. 10]

A Ruling for South Dakota would subject taxpayers to substantial retroactive state tax liability.

In addition to the prospective burdens that taxpayers would face if the Court were to reverse Quill, online retailers would face an additional burden: a real risk of retroactive tax assessments. [pg. 14]

States have demonstrated a voracious appetite for retroactive tax laws. For example, after an unfavorable court decision against its Department of Revenue, the Washington State Legislature enacted legislation with 23 years of retroactive application. [pg. 15]

The impact of the Court’s holding in Quill was retroactive, and any adjustment to Quill’s physical presence rule will apply retroactively as well. [pg. 16]

Congress, rather than the South Dakota legislature, is the appropriate and best party to legislate the proper nexus standards for balancing the interests of States, businesses, individuals, and taxpayers.

South Dakota asks this Court to play the role of a legislature—by eliminating the physical- presence standard on which businesses have relied for half a century and replacing it with a specific new economic threshold suggested and approved by the legislature of a single state. [pg. 17-18]

In 1992, this Court stated that Congress was the right party to determine a new standard for sales and use tax collection nexus, if any. Now in 2018, South Dakota asks this Court to decide that the South Dakota legislature is the right party to establish that new standard. [pg. 18]

The Court should affirm its own “wisdom and valor” from 1992 when it held that Congress is the branch of government best suited to resolve this issue. [pg. 22]

Rewarding South Dakota for passing an unconstitutional law to challenge a Supreme Court precedent could have dangerous consequences for our constitutional order.

A reversal of Quill would require the Court not only to undermine its own statements regarding the force of stare decisis but also to legislate from the bench and decide whether the new South Dakota economic nexus thresholds are sufficient to prevent the imposition of undue burdens on businesses. [pg. 22-23]

To rule for South Dakota… would create a dangerous precedent with the potential to yield awful complications outside of the staid world of state tax, with consequences that could affect life and liberty instead of merely dollars and cents. [pg. 23]

To reward South Dakota by reversing Quill … would encourage and embolden other states to pass unconstitutional laws to force reconsideration of numerous other issues, potentially causing cracks in the rule of law and leading to constant efforts at the state level to upset long-settled constitutional issues. [pg. 24]

Photo Credit: Joe Ravi

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