Merkley, Wyden urge action in wake of sales tax ruling

Sens. Jeff Merkley and Ron Wyden, D-Ore., said Wednesday they have written a letter calling on Senate leaders to take action before the end of the year to protect small businesses from red tape resulting from a recent U.S. Supreme Court decision regarding sales taxes charged across state lines.

In the wake of the ruling in South Dakota v. Wayfair, Inc., many states have passed laws requiring out-of-state small businesses to start collecting sales taxes as soon as Jan. 1.

In the June 5-4 ruling, the court said states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state.

The letter, cosigned by Senator Jeanne Shaheen (D-NH) and Maggie Hassan (D-NH), requests a delay to allow more time for Congress to enact protections for small businesses and urges a ban on retroactive collection requirements.

“While we disagree with the decision and believe it should be overturned, we hope to work with you to, at a minimum, enact robust protections for small businesses,” the senators wrote.

“Some states have established implementation dates as soon as January 1, 2019. As the Government Accountability Office has noted, integrating sales tax collection will require significant time and ‘labor intensive’ start-up costs for small businesses. We do not believe it is realistic to ask small businesses to have these new systems set up shortly after the holiday season, which is the busiest time of year for retailers. This is especially true in states where firms have no experience collecting sales taxes.”

Under South Dakota v. Wayfair, Inc., and without action from Congress, some small businesses in Oregon, New Hampshire and other states without sales taxes will be forced to collect sales tax for other states.

In their letter, the senators also urge Senate leadership to enact a moratorium on collection requirements and a prohibition on retroactive authority to provide necessary time for small businesses to adjust and comply with new regulations and requirements.

“A moratorium would provide much-needed time for small businesses. Previous Congressional consideration of remote sales tax legislation shows that there is bipartisan support for a runway, or phase-in period, for small businesses to comply with any new collection requirements,” the senators continued.

“We must also ensure that small businesses are not subject to retroactive sales tax collection requirements. While the court’s decision pointed to the South Dakota’s lack of retroactivity, there is no guarantee that states will not take action against defenseless out-of-state small businesses. We believe a statutory ban on retroactive state sales tax collection is necessary to ensure that small businesses are not punished by cash-strapped states they have no relation to.”

The letter can be read in full here.