Enzi pushes Supreme Court to allow online sales tax

April 20, 2018 GMT

Awaiting a decision from the Supreme Court, which is expected any day now, Sen. Mike Enzi, R-Wyo., came out in support of legislation that would allow states to tax online and mail-order sales.

The state Legislature passed a bill during the 2017 general session to levy a 5 percent sales tax on remote sellers that make $400,000 in gross sales or over 200 separate transactions in Wyoming.

A 2009 study conducted by the University of Tennessee estimated the total loss of revenue from e-commerce transactions in Wyoming would amount to $28.6 million between 2009 and 2012. The Wyoming Department of Revenue estimates the state will collect between $23 million and $46 million in taxes annually should all online retailers comply.

Though the tax could help chip away at the state’s $900 million structural tax deficit, its legality is being examined by the U.S. Supreme Court in the South Dakota v. Wayfair Inc. case.

The case sprung up when South Dakota passed a similar tax to Wyoming’s, levying a 4.5 percent sales tax for retailers that made $100,000 in annual sales or more than 200 individual transactions in the state. When Wayfair Inc., Overstock.com and Newegg refused to pay, state officials sued the three large online retailers.

Wayfair Inc. argued that the Supreme Court’s 1992 decision in the Quill Corporation v. North Dakota case, which ruled that the Constitution bars states from collecting sales taxes from companies that do not have a substantial connection to them, should remain in place to protect the electronic marketplace.

Lower courts upheld that decision, but Enzi and Sens. Heidi Heitkamp, D-N.D.; Dick Durbin, D-Ill.; and Lamar Alexander, R-Tenn., requested that the Supreme Court overturn what they see as an outdated law.

South Dakota is arguing that it is missing out on millions of dollars of sales taxes and that the 1992 decision provides an unfair advantage for online retailers over small, brick-and-mortar businesses. Marty J. Jackley, South Dakota’s attorney general, argued that modern technology could solve the problem of making online retailers determine tax rates for thousands of state and local jurisdictions.

With Wyoming struggling to pay its bills, Enzi is a strong supporter of South Dakota’s arguments.

“This issue is about fairness for states and local businesses,” Enzi said in a statement Tuesday, after the Supreme Court heard another round of arguments.

“Because of the court’s decision 26 years ago, states are unable to enforce their own laws and brick-and-mortar businesses are being punished through no fault of their own,” he said. “It’s time for the court to modernize our tax law for the 21st century by allowing states to collect the taxes they are owed and letting businesses compete on a level playing field. Sales tax is used by particularly small towns to fix their infrastructure so they have streets that work and toilets that flush.”

As of Tuesday, the court’s nine justices appeared split, making a unanimous decision to overturn the 1992 decision unlikely. Justice Sonia Sotomayor, however, suggested it may be better for Congress to decide the matter, which could give the issue new life.