In late June, the U.S. Supreme Court ruled in South Dakota v. Wayfair, Inc.,that states could force internet vendors to collect sales tax, even in states where they have no physical presence.
It had been the standard previously, following the 1992 court ruling in Quill Corporation v. North Dakota that a company that did not reside within a state did not have to collect sales tax. Some argued that such a decision would level the playing field for businesses with physical storefronts in-state, which had to collect the tax while internet stores did not, putting the in-state business at a disadvantage.
However, some others argue that out-of-state taxing is a mess, considering jurisdictional issues.
This debate has been waged in Arkansas for some time. In 2017, a bill was filed in the state Senate focused on collecting sales taxes from internet vendors selling to Arkansans. The bill failed to garner enough votes.
Rep. Dan Douglas, who was a major proponent of SB 140, has said that this recent court ruling may revive the bill. He said that the change in attitude toward internet sales comes from the steep increase in internet revenue now compared to 1992 when the original decision was made. “It’s a different world,” he said.
Douglas said that, at the heart of the subject, it was an issue of fairness. “Here’s the biggest problem I have or have had and why I’ve been a proponent of internet sales tax is the fact that our local retailers who hire local people, own local property, pays property taxes to support our schools are at a 10 percent disadvantage, basically,” Douglas said.
Douglas said that this Supreme Court decision would not change anything for average Arkansans unless the Arkansas legislature chose to create a new bill. A bill which he said, should it be like SB 140, he would support.
There are different viewpoints than Douglas’s though, like that of Rep. Stephen Meeks, who opposed SB 140.
“My general take is basically the same as it’s always been, that sales tax stuff is a federal issue and I believe it needs to be resolved on the federal level,” Meeks said. Meeks feels that collecting a state sales tax from a business outside of that state presents some jurisdictional issues.
“It becomes a jurisdictional question of whether that state has any authority to collect the state sales tax from another state,” he said.
Meeks said trying to force companies in other states to pay a sales tax could potentially end in lawsuits, which he said is a drain on state resources.
“I think this is something that Congress needs to handle on the federal level,” Meeks said.