Net Literacy has published a whitepaper entitled “A Discourse on the Discordant State of Collecting Domestic Digital Duties.” The study explains that a growing number of states are collecting Internet sales tax are doing so as the constitutionality of this tax remains in the courts and unresolved.
Topics covered in the whitepaper include:
• A history of sales tax and the legal doctrines concerning the matter of affiliate nexus and entity isolation
• As an example, an examination of the State of New York’s application of the tax
• Statues such as New York’s are examined with respect to Federal legislation and The Internet Tax Freedom Act
• A discussion of these “Amazon Tax” statues together with a history of proposals and enactments of similar legislation across the nation
• The public policy ramifications of these statues and the concept of prospective retroactivity
• Potential remedies for taxpayers harmed through the use of class action suits
If you would like to download a copy of the whitepaper, please click on this link.
We believe that current statutes taxing inter-state e-commerce are facially unconstitutional because they violate the Commerce Clause and Federal legislation. Should the current litigation be found in favor of the e-commerce merchants such as Amazon, taxpayer refunds of these will adversely impact state budgets.
Since 2007, reductions in states’ tax collections have accelerated their efforts to identify new sources of revenue. States are redefining the definition of “substantial nexus” or the physical presence of out-of-state e-commerce to avoid running afoul of constitutional challenges. Because technology has been moving faster than legislation has been enacted, ambiguities have been created.
Many states require their citizens to pay use taxes on e-commerce purchases made out of state. Also, Streamlined Sales Tax Executive Director Scott Peterson said that more than 1,500 companies registered on the central registration system have collected $700 million in sales taxes for the Streamlined states. With the recent legislation passed in California, Illinois, and other states, the amount of taxes collected on inter-state e-commerce sales will dramatically increase in the future together with states’ potential liabilities.
The principal of prospective retroactivity has been raised by some state officials discussing their state’s liability should the inter-state e-commerce litigation be decided against them. We believe that class action suits will also be filed by taxpayers seeking redress for payment of unconstitutional state taxes or by businesses seeking to recover administrative costs of collecting the taxes and for the associated loss of sales and profits.
All of our whitepapers and FCC filings are available at www.netliteracy.org/whitepapers-fcc-filings. For further information, please email [email protected] or call at (317) 324-8880.