On April 17, the U.S. Supreme Court will hear the internet sales tax case South Dakota v. Wayfair, Inc., which could have a huge impact on people who sell and buy things online. The Competitive Enterprise Institute today filed an amicus brief with the court, contending that without congressional action, a state cannot constitutionally force a business to calculate, collect, and remit sales taxes if there is no physical presence in that state.
The 1992 Supreme Court decision in Quill Corp. v. North Dakota set a standard of physical presence when it comes to state taxes. That standard should be upheld for reasons of sound public policy and, more specifically, because it follows from constitutional principles of federalism. If Quill’s physical presence standard is to be changed, it should be done by Congress and not by individual states.
“Quill’s precedent protects home-based online entrepreneurs from being forced to pass on taxes like these to their customers,” said CEI Associate Director of the Center for Technology and Innovation Jessica Melugin. “Quill’s physical presence rule is not some pointless anachronism. Rather, it preserves fundamental principles of federalism.”
CEI’s brief argues that instituting an internet sales tax would defy federalism and threaten small businesses.
“This isn’t a job for the states,” continued Melugin. “The Constitution protects individuals from overreaching states and states from each other. If an Internet sales tax really is in the public interest, then the Constitution requires congressional approval or legislation before it can be implemented.”
The lead counsel on the brief is Erik S. Jaffe of Washington, D.C.