Senators Push Online Sales Tax Legislation

In a move that grabbed attention among the technology and retail business communities, three senators–Sen. Mike Enzi (R-WY), Sen. Dick Durbin (D-IL) and Sen. Lamar Alexander (R-TN)–introduced legislation aimed at allowing states to require online-only, out-of-state retailers to collect and remit to states tax on sales made to residents of those states.

In a press release, the three senators touted their legislation as an effort to give states “the option to collect sales and use tax revenues from out-of-state sellers through a new, simplified tax system,” but “only if they adopt certain minimum simplification requirements and provide sellers with additional notices on the collection requirements.” The Enzi-Durbin-Alexander bill also “exempts sellers who make less than $500,000 in total remote sales in the year preceding the sale.” It reportedly has the support of big bricks-and-mortar retailers like Wal-Mart and Home Depot, as well as Amazon.com.

In multiple states around the country over the past year, legislators and officials have been looking to sales made by out-of-state, online-only retailers as a potential revenue stream capable of being tapped in order to help fill budget holes. California has been notably aggressive in pursuing a so-called “Amazon Tax,” which would force retailers like Amazon.com and O.co to collect and remit to the state sales tax on sales made to Californians.

However, such moves are likely unconstitutional as it stands, and fly in the face of Supreme Court jurisprudence, and notably the decision in Quill Corp. v. North Dakota. According to Quill, Congress can, and needs to, act to allow states to require collection and remittance from businesses with no physical presence in the state, which is exactly what the Enzi-Durbin-Alexander bill would do.

The legislation is viewed by some fiscal conservative groups as an improvement over legislation previously pushed, such as the Main Street Fairness Act, introduced earlier in the year by Durbin. The Main Street Fairness Act approach attracted considerable criticism and its ability to be passed had been drawn into question by multiple observers. However, concerns remain for some groups about the potential for the new Enzi-Durbin-Alexander bill, if passed, to facilitate some net, state-level tax increases–concerns that will likely be more warranted with regard to certain especially tax-happy states than others that are more tax-averse.