By Mark Rhoads –
A befuddled collection of both conservative and liberal U.S. Supreme Court justices thinks that they can help greedy state revenue directors collect more sales tax on internet shoppers. They are wrong on several levels, both on principle and technical applications in their attempt to overturn Quill Corp. v. North Dakota 504 U.S.298 (1992) that held companies must have a physical presence in a state to be subject to sales tax for mail order and later internet sales.
The odd group of liberal and conservative justices in the 5 to 4 majority were Justices Anthony Kennedy, Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito and Neil Gorsuch.
Chief Justice John Roberts led four other justices in dissent. The minority wanted Congress to act.
But in an odd way, both the majority and minority have shown how ignorant they are about how online sales work and how they defy geography.
It is true there were no internet sales in 1992 and the Quill decision mostly applied to mail order catalog sales. The collection of sales tax from small online retailers is not an easy goal to accomplish even for very greedy state revenue departments that falsely claim they are losing a lot of money to internet sales.
In order to inflate their claims of revenue loss the states rely on fake projections of revenue loss that assume that every purchase online would dollar for dollar otherwise happen in the brick and mortal world. Normally a taxing body cannot tax any transaction just because they want to. They usually need to show they have provided some real service to the seller who is being taxed.
Often states do not provide any real service to an online seller just because a bit of data happens to transit a server located in a state. The justices do not even address the sale of products by online sellers overseas direct to U.S. customers which is very common.
Do they think state revenue directors can impose special international taxes or tariffs for the direct sale of specialty items on the web overseas? Do they think they can track all sales even when people do not use an American credit card and use digital cash or stored international credit to pay instead?
The court majority is trying hard to please the National Conference of State Legislatures, the National Governors' Association, state revenue directors, and large retailers who bet wrong in the 1970s when they bet so big on on massive brick and mortar shopping malls and were caught flat footed in the 1990s when online sales became so popular.
