The other day we provided a recap of our Wayfair webinar, “South Dakota vs. Wayfair and What it Means for eCommerce,” with regulatory analysis expert Chuck Maniace. The following are questions from our attendees, some of which we had to take offline due to time constraints. Please find those additional questions, answered below, and be sure to subscribe to the blog for future updates and upcoming webinars on this and other related topics.
Q: Is there any way for SCOTUS to force the hand of Congress to act, and we’ll be in limbo for another 2 … 4… 20… 100 …years?
Chuck Maniace: The Court cannot technically tell Congress to do something. In other words, they could not opt to uphold Quill and require Congress to pass a law that creates a new standard that compels certain types of remote sellers to collect. There was a lot of discussion about how Congress (right now) may be disinclined to act based on the political reality that overturning Quill will be viewed by many as a tax increase. However, if the Court overturns Quill then any action by Congress that (later) creates a standard that would set some minimum requirements before imposing tax will be viewed as protecting small business. So, while the Court can’t force Congress, they can definitely exert some strong influence.
In my mind – I have been thinking of this concept as effectively advocating for “government by emergency.” Maybe the term “emergency” is too strong – perhaps the argument is best viewed as adjusting incentives.
Q: The reality for small sellers is that while the SOFTWARE is affordable, the management of all the data and getting it into the software CORRECTLY is extremely complex. Plus, you need to have a tremendous amount of knowledge and time in order to correctly configure this across your selling platforms. Is there any channel for a REAL small seller to communicate the reality of how complex this is? Meaning, communicate this to the legislators? And other factors like a SMLLC (Single Member LLC) also gets income tax nexus (and needs to pay $20k in fees to file their personal tax returns) because they have inventory in Amazon FBA? So how do we make our voice heard?
CM: At this point, the opportunity to influence the Supreme Court has passed. In fact, it’s extremely likely they have already made their decision, but we won’t hear about it until June after they have written an official opinion they are ready to publish. But, assuming the Court does overturn Quill, states will need to consider when (practically) they will start expecting remote taxpayers to comply. While some states have rules already on the books that would technically kick in the minute the Court makes their decision, a few short days ago, I sat in a meeting of the Streamlined Sales Tax Governing Board where a panel of tax software providers and other regulatory experts strongly encouraged states to think about giving companies (who may still not even know that all this is happening) time to get their house in order before imposing this requirement on them.
Q: Could the overturn of Quill not only affect eCommerce, but also businesses making sales to other states that they are currently not registered in because have no Nexus in the other state?
CM: Yes – if the Court were to overturn Quill it seems likely they would do so in a way that impacts both ecommerce sellers and other sellers equally. In the written brief filed by the Solicitor General of the United States, the suggestion was made that the Court could rule in a way that treats ecommerce differently from other types of commerce. However, neither party to the case made this argument and it certainly was not discussed during oral argument.
Q: Will foreign companies be impacted as well? For example, EU-based businesses with no FEIN or establishment in US?
CM: Yes – if the Court eliminated the physical presence requirement, sellers outside the United States could be obligated to collect and remit sales tax in the same way as sellers located within the United States. Of course, there are practical issues that would make auditing a foreign seller very challenging for a state government. What is interesting to note is that a large part of the rest of the world is already there. For example, sellers located within the United States providing electronic services to private individuals located within the European Union have a VAT collection obligation today – with the EU providing a simplified process to make it manageable.
Q: What do you think the Court will decide?
CM: Prognostication based on oral arguments is a very difficult thing. When the Supreme Court decided to take this case, that means at least four Justices had to be interested in hearing this argument. One would have thought (I certainly thought) if the Justices simply wanted to keep Quill they would have denied the option to hear this case – referred to as “denying certiorari” in legalese. But they took the case. When they did, almost everybody (including me) thought this was a clear path to overturning Quill. In reality, once oral arguments happened a lot of commentators said, “Wait a second, the Justices have a lot of critical questions – maybe they are not ready to overturn their own precedent.” I would urge caution…
Often Justices will ask the most challenging questions to the parties they may agree with because they want to get the arguments framed correctly in their head, and be able to articulate the legal rationale to support their decision. Based on the arguments I tried to place Justices in varying camps – for and against. On my scorecard, there were 3 justices that seemed against and 3 Justices in favor. As is his modus operandi, Justice Thomas did not say a word so he is hard to read, but most commentators suggest his past writings infer he would overturn Quill. Justice Roberts (the chief justice) asked probing questions on both sides of the argument and he may indeed be the swing vote here….we’ll know soon enough.
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