Local governments in 38 states rely on sales tax revenue to help fund essential services and ICMA has advocated that taxes owed should be collected by retailers, whether those retailers are on Main Street or selling over the Internet: ICMA, State and Local Groups Applaud Wayfair Decision.
State Actions and Local Rates
After the Supreme Court's decision in South Dakota v. Wayfair (June 2018), 30 states have taken some action to enforce collection of taxes from remote (out-of-state) sellers. Last week, for example, the Texas Senate unanimously passed two measures that could collect $850 million in online taxes owed: Texas Senate On-Line Sales Tax Bills. Some Texas local governments may see their sales tax rates drop, however, as one bill allows the Texas comptroller to identify a single tax rate to apply to remote sellers. Texas local governments currently have varying sales tax rates (6.25 to 8.25 percent).
Currently 35 states participate in the Streamlined Sales and Use Tax Agreement (SSUTA). Simplifying the process and reducing the burden on retailers to collect the taxes has been a goal of this project. The Supreme Court’s majority noted that South Dakota’s law was not retroactive and provided a safe harbor for smaller remote vendors. The court also noted that South Dakota has signed on to the Streamlined Sales and Use Tax Agreement, which standardizes taxes across states to lower compliance costs, requires state-level tax administration, and provides Internet vendors with access to sales tax administration software paid for by the state. Sellers who use the software are immune from audit liability.
The National Conference of State Legislatures (NCSL) has a webpage highlighting state remote sales tax collection. It contains detailed information on the Streamlined Sales and Use Tax Agreement, state action on remote sales tax collection, revenue matters, and federal legislation.
Following the Wayfair decision, there have been several proposals at the federal level to roll back its impact and/or to preempt state law. ICMA, National Association of Counties, National League of Cities, U.S. Conference of Mayors, and Government Finance Officers Association have expressed their support for the Supreme Court’s decision and the need for a central point of administration in each state so that businesses do not have to work with every local government in a state. ICMA has opposed any federal effort that would limit or delay the ability of states to collect sales taxes from remote sellers: ICMA letter opposing efforts to undermine South Dakota v Wayfair.