Online Sales Tax Fairness

Overview

In 2018, the U.S. Supreme Court overturned its longstanding Quill decision, changing the retail industry landscape. For the first time since the age of the internet, it became legal to collect and remit sales tax on online sales. Since then, RILA has been actively working to lead and support our members and state retail partners in passing comprehensive legislation at the state level to collect and remit sales tax on online purchases and those made through marketplaces. 

The Issue:  

For over two decades, a loophole in the law had allowed online-only retailers to avoid collecting state sales taxes, giving them a government-sanctioned price advantage over local brick-and-mortar businesses. As digital commerce grew, this disparity amounts to a 5-10% advantage that distorts free market competition. All retailers, no matter their physical presence, should have a level playing field in today's marketplace. As Americans increasingly "shop anywhere," it is vital that sales tax laws reflect 21st-century commerce.   

In that light, RILA made it a top priority to ensure that states passed sound laws that upheld the principles outlined in South Dakota’s law and were blessed by the Court. Companies that do not have a physical location should play by the same sales tax rules as companies that sell through brick-and-mortar stores or brick-and-click platforms.   

Our Engagement:  

Since the case was granted Cert, RILA began preparations by engaging our members on the priorities and tactics needed if the Court overturned Quill. Together, we agreed to build consensus on model legislation that could be used by the industry and our state retail partners to expedite state action heading into 2019, and we succeeded. We focused on two key components: implementing an economic nexus that complies with South Dakota's guidelines to avoid undue burden, and ensuring that Marketplace sales are included in each sales tax state. 

This model has been utilized nationwide, and the retail industry has successfully positioned itself as a leader on this issue.