Online sales tax awaits Supreme Court decision

The United States Supreme Court has heard arguments and is considering its decision in an online sales tax case in which the AVMA has urged it to level the playing field between online retailers and brick-and-mortar businesses such as veterinary practices.

The AVMA filed an amicus brief last November in the case, known as South Dakota v. Wayfair, and the Supreme Court heard arguments on April 17.

Online retailers without a physical presence don’t have to collect sales tax because of a 1992 Supreme Court decision, Quill v. North Dakota, which predated the explosion of online retail that we see today. Consumers are expected to remit sales tax to state and local governments on their own. The system doesn’t work, though. The end result is that Main Street businesses are put at an unfair disadvantage economically. This includes veterinarians, who sell a variety of pet products and supplies, along with many other small businesses across the country.

While some of the Supreme Court justices seemed sympathetic to the concerns of Main Street businesses, it is impossible to predict how the court will rule on this issue. Throughout the arguments, justices expressed concern that overturning the previous ruling would create many unanswered questions, likely resulting in numerous lawsuits. There also was concern that some states might seek retroactive collection of taxes, although the specific South Dakota law in question prohibits this.

Several justices pondered whether the issue should be left for Congress to address. South Dakota Attorney General Marty Jackley and Deputy U.S. Solicitor General Malcolm Stewart countered that Congress has had 26 years to act and has not done so. They also said Congress could play an important role in taking action after the Court rules – for example, in helping to address some of the unanswered questions, retroactivity, or setting a national standard or landscape for collection

The AVMA already is working with congressional leaders to pursue a legislative solution to the current situation, even while the matter is still pending with the court. We support the Remote Transactions Parity Act (H.R. 2193) and the Marketplace Fairness Act (S. 976), both of which would require online sellers with annual sales over $1 million to collect and remit sales tax. However, congressional action is unlikely before the Supreme Court issues an opinion, which is expected before it adjourns at the end of June.