Oregon Sens. Jeff Merkley and Ron Wyden, both Democrats, are trying to give businesses a needed break.
They want to pass legislation to protect temporarily businesses from a whole new set of laws that would force them to collect retroactive sales taxes.
The trigger for the legislation goes back to 2018 and the U.S. Supreme Court’s decision in South Dakota v. Wayfair. That decision made it possible for a state to export its sales tax requirements to other states.
It’s probably easiest to understand in an example. When you buy something online, you may have noticed that sometimes the retailer charges a sales tax for another state. That’s essentially what South Dakota v. Wayfair decision made legal on a broad scale.
It enables states, counties, cities and other taxing jurisdictions to compel sellers on the internet to figure out where you live, collect the appropriate taxes and send them off. If businesses don’t comply, out-of-state taxing entities can come after them legally and hold them accountable. The requirements for many states begin at $100,000 in sales in their state or 200 transactions.
Figuring out those taxes may be an easy lift for the Amazon’s of the world. It’s not for smaller brick and mortar stores that are trying to compete.
And is it fair at all to allow these taxes to be collected retroactively? No. Imagine being an Oregon business or one in New Hampshire. Neither state has sales taxes. “(I)ntegrating sales tax collection will require significant time and labor intensive start-up costs for small businesses,” Merkley and Wyden have pointed out. Small businesses at least deserve time to get up to speed.
The proposed bill from Merkley and Wyden would forbid retroactive taxation and puts all these sorts of taxes on hold until 2021. There’s extra protection for smaller businesses — defined as having gross receipts of less than $10 million — until Congress figures out a way to simplify how this all works. Pass it.