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States Urge Reversal of Physical Presence Rule That Bars Collecting Sales Tax From Online Retailers

November 16, 2017

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Thirty-six state attorneys general, most recently joined by California and Hawaii, have filed an amici curiae brief urging the U.S. Supreme Court to reconsider the “physical presence test”.  The test requires that a retailer have a physical presence within a state before being subject to the collection of sales and use tax by such a state.

The test was established by the 25-year-old case of Quill v. North Dakota, long before the existence of online retailers and e-commerce, as we know, today.  The crux of the argument against the physical presence test is that out-of-state online retailers that sell goods to in-state residents receive an unfair pricing advantage over in-state retailers because the out-of-state online retailers are not required to collect sales or use tax from the customer.

The attorneys general filed the brief in support of a petition submitted by the state of South Dakota asking

Cook County Retailers Cheer Repeal of Soda Tax That Spurred Class-Action Lawsuits

October 16, 2017

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Cook County, Illinois has repealed its sweetened beverage tax, just two months after the unpopular ordinance was implemented. As we previously reported, Cook County was among a number of localities across the country to pass sugary drink tax laws, including the following:

  • Berkeley in December 2015;
  • Albany, California in December 2016;
  • Philadelphia in January 2017;
  • and Oakland, California; Boulder, Colorado; and Cook County, Illinois in July 2017.

Cook County consumers objected, however, to paying an additional 68 cents for a two-liter soft drink or an extra 72 cents for a six-pack. Retailers complained the tax was driving consumers to neighboring jurisdictions to avoid the tax.

The sweetened beverage tax also triggered numerous lawsuits, some of which are still playing out in court.  The Illinois Retail Merchants Association sued the county to get the tax thrown out days before it was to take effect.  The court granted a

Retail Distributors Face Compliance With Sugary Drink Taxes Around the Country

September 15, 2017

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Retail distributors of sugary drinks are facing compliance with a number of taxes enacted by cities around the country.  San Francisco’s sweetened beverage tax takes effect on January 1, 2018, and follows a national trend.

Similar taxes have recently taken effect in numerous other localities, including:

  • Berkeley in December 2015;
  • Albany, California in December 2016;
  • Philadelphia in January 2017;
  • and Oakland, California; Boulder, Colorado; and Cook County, Illinois in July 2017.

This past June, voters in Seattle, Washington approved a sugary drink tax, while such a tax was rejected by voters in Santa Fe, Mexico.

Typically, the taxes take the form of an excise tax on the first distribution of sugar-sweetened beverages and the powders or syrups used in making these beverages. The term “sugar-sweetened beverage” can be defined differently in each locality.  In Albany and Berkeley, for example, a sweetened beverage is defined broadly as any beverage

Congress Considers Legislative Solutions to Internet Sales Tax War

As we reported on September 15,  several states have enacted or proposed laws related to the collection of sales tax from online retailers without a physical presence in those states, as required by United States Supreme Court case Quill v. North Dakota.  South Dakota’s current lawsuit against several internet retailers was specifically brought by the state to force reconsideration of Supreme Court precedent.

However, there is a small change that Congress may decide the issue before it reaches the Supreme Court, with three bills having been introduced and a fourth pending.

One of the three bills, cited as the “No Regulation Without Representation Act of 2016“, is more or less a proposal to codify the decision in Quill.  Needless to say, the states who have challenged Quill are highly opposed to this bill.

The other two bills, the “Marketplace Fairness Act of 2015” and the “Remote

States Battle E-Retailers and Federal Precedent Over Digital Sales Tax

September 15, 2016

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South Dakota and several online retailers are currently engaged in a battle over the state’s new internet sales tax law (SB 106) aimed at online businesses who sell products to South Dakota residents but which are not obligated to pay sales tax to the state.

Decades ago, during the internet’s infancy, the U.S. Supreme Court concluded in Quill v. N. Dakota that states are prohibited from requiring companies without a physical presence in those states to collect sales tax from its residents. Among the four internet retailers sued by South Dakota are the popular Overstock.com and Newegg.com.

The state acknowledges in its complaint that SB 106 is a violation of Supreme Court precedent. However, it has stated that the purpose of the suit is to facilitate Supreme Court review, because Quill is outdated in the internet age.

Several outcomes to the case are possible, including a grant

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