Washington—Today in a 5-4 decision, the Supreme Court overturned long-standing precedent preventing states from forcing out-of-state businesses to collect and remit their state sales tax. Reaffirmed in 1992 in Quill v. North Dakota, the physical presence standard limited state taxing authority to businesses with a physical presence within the state. This has kept state politicians accountable for the taxes and regulatory costs they approve in their state legislatures.
The physical presence standard principle of “no taxation without representation” has protected small businesses from being subject to every taxing authority where they have a customer—potentially up to 12,000 state and local taxing jurisdictions. In fact, the majority opinion acknowledges that “these burdens may pose legitimate concerns” for “small businesses.” Heritage Action released the following statement from Executive Director Tim Chapman:
Today’s dangerous Supreme Court decision opens the door for unprecedented state overreach at the expense of small online businesses and consumers across the country. Fortunately, Congress does have the power to fix this problem by codifying the physical presence standard. Heritage Action stands ready to work with Congress to fix this issue without enacting a federal internet sales tax regime.
Related:
The Heritage Foundation: Do Borders Matter? The Supreme Court Reviews Internet Sales Taxes
The Heritage Foundation: South Dakota Republicans Push for Higher Taxes
The Heritage Foundation: When It Comes to Taxation, Borders Matter—Europe and the U.S. Should Act Accordingly