May 26 marked the 25th anniversary of the Supreme Court's decision in Quill Corp v. North Dakota. This pre-Internet ruling prevents states and localities from collecting the sales tax revenues they are owed from today’s online retailers. In 2015 alone, states lost nearly $26 billion due to uncollected sales tax revenue.
“Twenty-five years after Quill, we remain under an outdated tax system that burdens local governments, making it more and more difficult to fund public services like education and first responders,” said Jennifer Platt, ICSC’s Vice President of Federal Operations. “The need to close the online sales tax loophole has never been greater.”
A bipartisan group of legislators - 23 U.S. Senators and 10 U.S. Representatives - have sponsored S. 976, the Marketplace Fairness Act (MFA), and H.R. 2193, the Remote Transactions Parity Act (RTPA) respectively. The previous Marketplace Fairness Act passed in the Senate in 2013 by a vote of 69 to 27, with strong bipartisan support. Both bills are designed to close the federal online sales tax loophole while protecting smaller online sellers.
While Congress considers the current legislation, states are taking matters into their own hands. In 2017 several more states enacted laws or created tax rules that also address the lack of tax on remote sales. Other states have set the stage for the Supreme Court to re-visit Quill. A 2016 South Dakota law requires remote retailers to collect and remit sales tax in the state has been challenged in court and the case has now been appealed to the state’s highest court, with an appeal to the Supreme Court.