April 16, 2018
MnRA president Bruce Nustad and lobbyist Tom Freeman (Faegre Baker Daniels) discuss retail issues at the Legislature before retailers head to the State Capitol March 27.
U.S. Supreme Court Begins To Hear E-Fairness Case This Week
This week the U.S. Supreme Court begins hearing arguments in South Dakota v. Wayfair--a challenge to a decades old case (Quill) that has stood in the way of a modern sales tax collection system relating to online purchases.

The Minnesota Retailers Association welcomes the Supreme Court taking up the case brought to the high court by to our peers at the South Dakota Retailers Association. In 2016, the State of South Dakota passed a law that was challenged, thus allowing the case to make it to the Supreme Court.

Minnesota has done what it can to-date in pursuing sales tax fairness. With the leadership of MnRA and our members, our state passed a 2013 bill requiring online businesses with a physical presence in the state to collect sales tax. In 2017, Minnesota followed that up with a law extending that collection requirement to online marketplaces facilitating sales in Minnesota (taking effecting July 1, 2019 or when the Supreme Court overturns Quill).

In addition, MnRA has recently worked with Minnesota State Attorney General Lori Swanson to encourage the State to support the U.S. Supreme Court taking up South Dakota v. Wayfair. Attorney General Swanson listened to the importance of e-fairness to retailers across the state and joined 40 other state in submitting a supporting amicus brief.

MnRA is appreciative of the bi-partisan support of e-fairness by the Minnesota Legislature, the Governor, and the State Attorney General, as well as our friends at the South Dakota Retailers Association.

Read more on this issue before the Court below and contact MnRA at info@mnretail.org or (651) 227-6631 for more information.
What Is The Actual E-Fairness Question Before The U.S. Supreme Court?
The question before the U.S. Supreme Court is:

"Should this Court abrogate the physical-presence rule of Quill Corp. v. North Dakota, 504 U.S. 298 (1992), and National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1976)?"

Abrogate: to abolish by formal or official means; or repeal.

Why MnRA And Retailers Across The State Support E-Fairness And Overturning Quill
On behalf of its members in every corner of the state, MnRA supports sales tax fairness. Here is why MnRA feels the Quill decision should be overturned by the South Dakota v. Wayfair case:

  • The 1992 Quill decision was made at a different time. Technology is completely different today. In 1992 out-of-state retailers were primarily catalog companies, not e-commerce companies as we have today.

  • Because today's technological environment didn't exist two decades ago, our sales tax system needs to be modernized and evolved to level the playing field for community retailers in Minnesota.

  • While Minnesota has done it's job in passing sales tax fairness, a national solution is still needed. The U.S. Congress has stopped and started repeatedly over the years, and retailers need a fair playing field that doesn't offer an advantage to one retailer over another.

  • It's critical for Minnesota's retailers to have a level playing field NOW where everyone fairly competes for customers.
Millions In Minnesota Sales Tax On The Line As Supreme Court Hears Case
From the Star Tribune, Jim Spencer, April 16, 2018

Minnesotans who’ve avoided paying state sales taxes on online and other kinds of remote purchases could soon see those taxes added to their bills, depending on how the U.S. Supreme Court rules in a widely watched case that will be argued this week.

On Tuesday, the justices will hear South Dakota v. Wayfair Inc., a dispute over a law that expands states’ ability to compel sellers without a physical presence to collect and forward taxes on purchases made by state residents.

Hundreds of millions of dollars in Minnesota sales tax payments hang in the balance as the nation’s highest court wades into the digital economy and state tax collections for the first time in 26 years.

While the case will have national implications, Minnesota’s interest is heightened because the state is home to two of America’s biggest retailers: Target and Best Buy.

Both companies have long complained that online and other remote sellers enjoy an unfair pricing advantage because they often do not charge customers sales tax. Target and Best Buy have growing online stores, but they must pay state taxes on those sales because they have stores across the country.

Minnesota’s public sector is also invested in the case. A November 2017 report by the Government Accountability Office (GAO) said the current taxing system collects roughly 80 percent of what is owed. But the 20 percent that is not collected collectively costs states an estimated $8.5 billion to $13.4 billion a year in taxes. GAO placed Minnesota’s loss between $132 million and $206 million annually.

“What’s at stake is the ability of states to require more vendors to collect sales tax,” said University of Nebraska law Prof. Adam Thimmesch, whose research focuses on state taxes and collection issues. “The court’s doctrine has not kept pace with technology.”

The prevailing precedent dates to 1992 and says companies must have some sort of physical presence in a state before they are obliged to collect and forward sales taxes from customers who are residents of that state. The court implemented the standard before internet commerce exploded, Thimmesch noted, and has not updated it since.

Minnesota is among the nation’s leaders in trying to expand sales tax collections from remote purchases. Last year, the state passed a law that will in some cases make operators of virtual marketplaces such as Amazon, Etsy and eBay collect and forward sales taxes from sellers who use their internet platforms. The law takes effect in 2019, but collections could begin sooner based on what the Supreme Court decides in the South Dakota-Wayfair case.

In Minnesota, supporters of online sales tax collection extend across party lines. State Sen. Roger Chamberlain and state Rep. Greg Davids, Republicans who chair the money committees in St. Paul, backed the new internet sales tax collection law.

Both men stress their anti-tax credentials, but both say the Minnesota law and the upcoming Supreme Court case are not about new taxes. Instead, Chamberlain and Davids say, it is about money already owed but not being paid. They want to establish equity between Minnesota Main Street businesses and internet sellers who are not charging buyers taxes they are legally obliged to collect.

For much the same reason, Minnesota Attorney General Lori Swanson, a Democrat, joined two friend of the court briefs in support of South Dakota.

Minnesota Commissioner of Revenue Cynthia Bauerly, a Democrat, said her department “supports efforts to ensure that businesses pay the sales tax owed under current law, regardless of whether that purchase is made online or in a brick and mortar store.”
States Want To Force Online Retailers To Collect
From Bloomberg Politics, Greg Stohr, April 16, 2018

Overstock.com has a small but unmistakable advantage for anyone looking to buy a 3-cup Cuisinart Mini Prep Plus Food Processor for shipment to Germantown, Maryland: Purchasers don’t have to pay the 6 percent sales tax they’d owe at a local store.

That sort of discrepancy is at the heart of a multibillion-dollar U.S. Supreme Court case set for argument Tuesday. States and traditional retailers are asking the court to overturn a 26-year-old ruling that exempts many internet merchants from collecting billions of dollars in sales taxes. The 1992 decision says retailers can be forced to collect the tax only if they have a physical presence in a state, such as a store or warehouse.

"That rule doesn’t make sense anymore in today’s world of e-commerce," said Deborah White, general counsel of the Retail Litigation Center, which represents the country’s largest merchants. "A retailer today can transact a significant amount of business in a state without ever being physically present in the state."

A ruling for the states would put new pressure on internet retailers and marketplaces that don’t always collect taxes -- including Overstock.com Inc., Wayfair Inc., Newegg Inc., EBay Inc., Etsy Inc. and thousands of smaller merchants.

The case will also affect e-commerce behemoth Amazon.com Inc., though less directly. The company now charges consumers in every state that imposes a sales tax, but only when selling products that come from its own inventory. About half of Amazon’s sales involve goods owned by third-party merchants, many of which don’t collect tax.

Broader taxing power would let state and local governments collect an extra $8 billion to $23 billion a year, according to various estimates. Forty-five states have a statewide sales tax.
Clicking ‘Checkout’ Could Cost More After Supreme Court Case
From the Associated Press, Jessica Gresko, April 15, 2018

Online shoppers have gotten used to seeing that line on checkout screens before they click “purchase.” But a case before the Supreme Court could change that.

At issue is a rule stemming from two, decades-old Supreme Court cases: If a business is shipping to a state where it doesn’t have an office, warehouse or other physical presence, it doesn’t have to collect the state’s sales tax.

That means large retailers such as Apple, Macy’s, Target and Walmart, which have brick-and-mortar stores nationwide, generally collect sales tax from customers who buy from them online. But other online sellers, from 1-800 Contacts to home goods site Wayfair, can often sidestep charging the tax.

More than 40 states are asking the Supreme Court to reconsider that rule in a case being argued Tuesday. They say they’re losing out on “billions of dollars in tax revenue each year, requiring cuts to critical government programs” and that their losses compound as online shopping grows. But small businesses that sell online say the complexity and expense of collecting taxes nationwide could drive them out of business.

Large retailers want all businesses to “be playing by the same set of rules,” said Deborah White, the president of the litigation arm of the Retail Industry Leaders Association, which represents more than 70 of America’s largest retailers.

For years, the issue of whether out-of-state sellers should collect sales tax had to do mostly with one company: Amazon.com. The online giant is said to account for more than 40 percent of U.S. online retail sales. But as Amazon has grown, dotting the country with warehouses, it has had to charge sales tax in more and more places.

The case now before the Supreme Court could affect those third-party Amazon sellers and many other sellers that don’t collect taxes in all states — sellers such as jewelry website Blue Nile, pet products site Chewy.com, clothing retailer L.L. Bean, electronics retailer Newegg and internet retailer Overstock.com. Sellers on eBay and Etsy, which provide platforms for smaller sellers, also don’t collect sales tax nationwide.

States generally require consumers who weren’t charged sales tax on a purchase to pay it themselves, often through self-reporting on their income tax returns. But states have found that only about 1 percent to 2 percent actually pay.

States would capture more of that tax if out-of-state sellers had to collect it, and states say software has made sales tax collection simple.