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The underlying complexities beneath an ostensible no-brainer: internet sales tax

are looking to get their fair share of that tax revenue. Tat is nearly one-tenth of retail sales that are not being collected in most states, including Arkansas. Some argue that the effect on the local economy is actually further amplified, because people are shopping with out-of-state online retailers instead of going to their local store down the road where they have to pay sales taxes, effectively taking money from local businesses. Others argue this position is a stretch, but consider middle-


class young adult, Jane Doe, who bought a TV from an online Black Friday sale. With free shipping and no sales tax, Jane saved over $50 buying that set online rather than going down to the local brick-and-mortar store. Te purchase was a risk — had there been an issue with the TV, returning it would have been much more complicat- ed than if Jane had bought it locally. However, to Jane, the savings was worth it. Jane saved another $15 on sales tax by buying the accompanying sound system online as well. Rugs, furniture, artwork — you name it — Jane has bought it online to avoid hundreds of dollars in sales tax. Recognizing the potential missed sales tax revenues, states


across the country have passed legislation to collect sales tax on out-of-state e-commerce sales, particularly from businesses that perform enough transactions within the state to create an “economic nexus” that would make taxation appropri- ate. Most states’ “economic nexus” bills involve out-of-state e-commerce vendors who either receive a certain amount of revenues from within the state (anywhere from $100,000 to $250,000) or carry out a certain number of transactions with customers within the state, usually around 200. Multiple bills were presented in the Arkansas General As-

sembly’s 2017 session, but none were successful.* Tese initia- tives were defeated, in part, due to the opposition’s assertions that these “economic nexus” bills are unconstitutional. In fact, in 1992 the U.S. Supreme Court ruled in Quill v. North Da-


-commerce sales as a percentage of total retail sales have nearly tripled over the past decade (jumping from 3.1 percent in 2006 to 8.3 percent in 2016), so it is no surprise that states and local governments

Legal Corner

ost of the election issues legislators brought before the General Assembly

were not new or unique, but rather revisited common, recurring issues of past sessions.

kota that states could not mandate that retailers without an in-state physical presence collect and remit sales taxes. Why, then, are so many states passing laws that are clearly contradictory to existing Supreme Court case law, and therefore, un- constitutional? Te goals are two- fold: first, to get companies to voluntarily collect sales taxes, like Amazon began collecting in Arkansas earlier this year; and second, to get another case back before the U.S. Supreme Court for its review and potential overruling of Quill. Quill may in fact be ripe for reversal by the nation’s highest court. In a 2015 concurring opinion in Direct Marketing Association v. Brohl, Justice Anthony Kennedy wrote, “It is unwise to delay any longer a reconsideration of the court’s holding in Quill,” due to both “the dra- matic technological and so- cial changes ... in our inter- connected economy” as well as a “startling revenue short-

LINDSEY BAILEY General Counsel

fall in many states.” Additionally, the Court’s newest justice, Neil Gorsuch, a former clerk for Justice Kennedy, wrote in a concurring opinion while seated on the Tenth Circuit Court of Appeals that while the Tenth Circuit was “duty bound to follow” Quill’s physical presence rule, Quill itself may have “attached a sort of expiration date” and “encourage[ed] states over time to find ways of achieving comparable results [(sales and use tax collection of e-commerce vendors)] through dif- ferent means.” South Dakota, Alabama, and Tennessee are at least three states with lawsuits pending intended to solicit U.S. Supreme Court review. Absent this review, and at least some distinction or de- parture from Quill, the states will have to rely on the U.S. Con- gress, which has a long, complex history of defeating similar leg- islation, to act. Te Senate passed a version of the Marketplace Fairness Act in 2013, but the bill stalled in the House. Similar bills were introduced in 2015 but also were unsuccessful. Anticipating Supreme Court review, a group of 19 states are participating in the Multistate Tax Commission’s National


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