After a Congressional hearing this week about ecommerce taxation in the wake of the U.S. Supreme Court’s Wayfair decision shed more heat than light, merchant associations and a state taxing authority group are hoping to find common ground and solutions.
Representatives from the American Catalog Mailers Association (ACMA), NetChoice – representing ecommerce sellers – and the Multistate Tax Commission (MTC) met in Boston on July 25 at MTC’s annual meeting to begin a dialog about a way forward that ensures an equitable, fair and efficient process for out-of-state tax imposition and collection.
Next steps include the formation in August of working groups on different taxation issues, made up of representatives from all parties, to work out solutions. Hamilton Davison, president and executive director of the ACMA, said those at the meeting felt a sense of urgency and the need to seize the moment quickly.
“We want to get an understanding of the states’ objectives and concerns and (ecommerce trade groups) objectives and concerns,” said Davison. “We can have that dialog hopefully get to a good place.”
Davison said if the states start “going crazy” now in enacting new tax legislation based on the Wayfair decision it would create “an impetus for Congress to step in and get involved.”
“The feeling in the meeting was, let’s see if we can sort it out before bringing in any external parties,” he said. “We’re the experts, so we should be able to figure out a way through this without getting more politicized and more complicated with a much larger circle of people participating.”
Asked what constituted states “going crazy,” Davison referred to Hawaii, which had said shortly after the ruling it would pursue out-of-state sales tax collection retroactive to Oct. 1, 2017, an idea it later walked back. Similarly, he said, Massachusetts’ “cookie nexus” law – which says placing a tracking cookie on an in-state computer creates transaction taxability – was to go back to last Oct. 1 as well, and Vermont originally said it would start collecting tax from out-of-state sellers on July 1.
Some states have set Oct. 1 as their deadline for out-of-state tax collection, with many basing their legislation on South Dakota’s threshold of $100,000 in annual sales or 200 annual transactions, while others have set Jan. 1, 2019 as the effective date.
Richard Cram, director of the National Nexus Program for the MTC, said there is an active outreach to other state organizations to solicit involvement in the working groups, including the National Governors Association, the National Conference of State Legislatures, the Streamlined Sales Tax Governing Board and the Federation of Tax Administrators.
By its nature, Cram said, this effort to find workable solutions needs to be “a state-driven one.” His organization represents primarily tax commissioners from 24 states, with the other 26 states being associate members.
“Some items the industry groups want require legislation by the states,” Cram said. “That’s why these types of organizations need to be involved. If they (industry groups) try to run the show, I think they’ll probably see pushback from the states. We want to try to facilitate, but you certainly can’t try to dictate to the states what they should or shouldn’t do.”
The hearing on Tuesday before the House Judiciary Committee involved testimony from a number of parties in support of and opposed to the Wayfair decision, who also differed in whether or to what extent Congress should play a role in mediating the issue. Two major bills on the issue have passed the Senate but got stalled in the House prior to the high court’s ruling.
Davison said an executive of a member firm told him Friday they were getting out of ecommerce because of the onerous nature of the new taxation landscape.
“We don’t want to be in a position of noncompliance,” Davison said. “Our members are upstanding companies that want to do the right thing. They just want a reasonable implementation lead time once all the final details are known. Ideally with a decision of this size and scope, we’re talking quarters or years. We realize states are hungry to get the windfall sooner.”
Another caveat in all this is the fact that the Wayfair decision has yet to be remanded back to the South Dakota courts for adjudication in light of the ruling, which may lead to “additional stipulations,” Davidson said. The defendants in the case – Wayfair, Newegg and Overstock.com – have expressed a willingness to settle the case and move on.
In the Wednesday meeting, Davison said, the MTC sought assurances from the trade groups that they would stop lobbying Congress for a legislative solution, while the other side asked that states be reasonable in setting up and enforcing taxation.
“From our perspective we’d like to solve it directly,” he said. “But if we can’t get what we need to survive as (ecommerce businesses), or if in the meantime the states don’t participate in discussions and start going crazy, our only redress is to go to the courts or to Congress or both.”
“There’s certainly a fear out there that Congress will jump in and try to solve this for them,” Cram said. “That’s not what they want for sure.”