Tax Analysts Blog

The End of an Era -- And Your Taxes Are Going Up

Posted on Feb 20, 2013

An era is coming to a close. Since the dawn of electronic commerce, the famous Quill case cast a pall over state public finance. We in the business know the story well. If a vendor did not have a physical presence in a state, that vendor could not be forced to collect taxes on sales in the state. Without vendor collection, there is no collection. The pages of State Tax Notes are replete with the history. Brick and mortar stores were at a competitive disadvantage. Many small stores went under. And the big retailers with real stores geared up for battle. State politicians and a lot of liberals predicted the end of civilization. The e-commerce industry warned that the Internet would be destroyed if remote sellers had to collect tax. In the meantime, the folks at the University of Tennessee showed that the states did lose a lot of revenue from their inability to collect sales taxes from Internet purchases.

It was great fun for journalists and editorial writers. It gave us something to do. Once I realized that the Internet was not a fad, I mentioned the problems of e-commerce taxation in over 200 columns. I and a lot of others talked about Quill all the time. We talked about the burdens, real and perceived, that collection presented. We talked about the poor mom and pop book store owner and big bad Wal-Mart. We talked about Amazon laws, and Nexus Bulletin 95-1. We talked about affiliate nexus and click through nexus. We talked a lot. And a lot of people made a living talking about Quill.

The bad news for the raconteurs is that it is all coming to an end. The end is good of course. The sales tax is supposed to fall on all final consumption. Not taxing remote sales only creates market distortions. Moreover, in 2013 it is absurd to think that requiring a remote vendor to collect sales tax is a burden on interstate commerce. I always hoped that the end would come in a dramatic Supreme Court decision overturning Quill in which the court would actually say that sometimes the rules they make up don’t make sense. But the end will come by an act of Congress.

The Marketplace Fairness Act of 2013 will allow the states to require remote vendors to collect sales tax. The measure will pass. Conservatives, particularly those in red states heavily dependent on sales taxes, like the idea. Liberals, well, liberals always liked the idea. The brick and mortar retailers are on board including the big corporations like Best Buy, Target, and Wal-Mart. The NGA, NCSL and other state organizations are on board. There are people in Congress who recognize it is better to let the states collect tax than have to send them federal money. Even Amazon.com supports the measure. I think Amazon sees the writing on the wall. Quill is eventually going down, Amazon might as well be at the table when the next best thing is being decided.

The tide has turned. The coalition to repeal Quill is large and growing. There are a few pockets of resistance like those advocating for small e-tailers. But under the proposed law states cannot make companies with less than $1 million in sales collect tax. Given the support for the proposed law, Quill is doomed. Readers should not be alarmed. There will be plenty of legal work under the new regime. After all, thousands of companies are going to have to start collecting taxes - - and they are going to need tax lawyers to help them figure it all out.

Read Comments (2)

vivian darkbloomFeb 20, 2013

"Me and a lot of others talked about Quill all the time..."

Ouch!

I'm guessing you were attempting a clever bit of anaphora and simply hit the
wrong key and got "Me" rather than "We". (It would be unforgivable if, as a
"journalist and editorial writer", you really meant "I").

Get a cup of coffee and grab your quill...

David BrunoriFeb 20, 2013

Yes, Vivian, I was aiming at some clever anaphora. Of course I meant "I". But
what would be clever about that?

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