Proposal to Allow States to Tax Internet Sales Passes Senate

By:  Bob Adelmann
Proposal to Allow States to Tax Internet Sales Passes Senate

Twenty-six Republicans sided with Democrats on March 22 when the Senate voted 75-24 in favor of a non-binding but instructive resolution allowing states to collect sales taxes from internet companies doing business outside the states, overriding an important Supreme Court case along the way.

On March 22, a proposal to allow states to tax internet sales passed the Senate overwhelmingly, 75-24. Twenty-six Republicans joined Democrats in passing the non-binding resolution. The proposal was designed to measure the sense of the Senate regarding the Marketplace Fairness Act of 2013 sponsored by Senators Michael Enzi (R-Wy.) and Dick Durbin (D-Ill.) which they, along with Senator Lamar Alexander (R-Tenn.) presented back in February. Enzi and Durbin were behind the proposal which now gives traction and momentum to allowing states to tax internet sales taking place outside their borders.

This has been a sticking point for the last 20 years. In 1992, North Dakota sued Quill Corporation to force them to pay use taxes on products shipped into North Dakota from Quill, whose headquarters were in Delaware and who otherwise had no physical presence in North Dakota. The North Dakota Supreme Court upheld the lower court, which ruled in favor of the state. Quill appealed, and the case went to the Supreme Court.

Associate Justice John Paul Stevens rendered the opinion for the court’s unanimous decision to reverse North Dakota’s Supreme Court decision, holding that under the Commerce Clause collecting such sales and use taxes put an excessive and unconstitutional burden on commerce between the states. But then Justice Stevens added,

Our decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions.

On November 9, 2011, Congress finally got around to disagreeing with the court’s decision when Senator Enzi, along with 16 Democrats and four Republicans, offered the Marketplace Fairness Act. Despite promises to bring the bill to the floor before the end of the year, the bill died when the 112th Congressional session ended.

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