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June 21, 2018

SCOTUS Wayfair Decision Threatens e-Commerce, Economic Growth

IPI President Tom Giovanetti Calls on Congress to Act
  Institute for Policy Innovation
DALLAS - Institute for Policy Innovation President Tom Giovanetti released the following statement in response to today’s South Dakota v. Wayfair  Supreme Court decision. IPI, along with several other policy groups, filed an amicus curiae brief urging the Court to strike down South Dakota’s law and uphold the physical presence standard.

“In today’s Wayfair decision, the Supreme Court overturned 25 years of its own precedent and decided that states will be able to assess sales taxes on internet transactions, siding with the state of South Dakota against Wayfair and other online sellers.

We’re keenly disappointed that the Court ignored the arguments in our brief but more importantly that it ignored the basis of the physical presence test that points all the way back to the failure of the Articles of Confederation and the need for a federal Constitution. The decision leaves e-commerce and especially small sellers extremely vulnerable to states gluttonous for tax revenue, particularly from consumers and businesses with no representation in their state. If that sounds to you like taxation without representation, you’re right.

Thankfully, the Court did recognize the vulnerability of small business to such state gluttony. It falls to Congress now to reinforce this recognition by crafting legislation with a significant small business exemption, a substantial, defensible nexus standard, and a safe harbor for small sellers complying in good faith with the requirements of the law. Inaction by Congress in this and several other critical areas will threaten the economic recovery and our long-term economic dynamism.

Small businesses are now extremely vulnerable, as this new taxing power is much greater than simply insisting on the payment of sales taxes. As former Supreme Court Chief Justice John Marshall said, ‘The power to tax involves the power to destroy; that the power to destroy may defeat and render useless the power to create.’ Under today’s SCOTUS decision, over 10,000 tax jurisdictions now have the power to audit every small mom-and-pop business that sell over the internet, including through such platforms as eBay and Etsy. As such, the Court has swung the door wide open for revenue-gluttonous states to aggressively harvest tax revenue from individuals and businesses who have neither voice nor political representation in that state, and now would have no exit other than bowing out of e-commerce altogether.

Congress must act promptly to protect the economy, online sellers and consumers from the harmful consequences."

 

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