Opinion

States Have Made Great Strides to Modernize Online Sales Tax Policy

In light of the one-year anniversary of the Supreme Court’s ruling in South Dakota v. Wayfair, many states across the country have begun to reap the benefits of equitable online sales tax policy or “e-fairness.” Legislation introduced and enacted in the wake of Wayfair has leveled the playing field for online sales, generated substantial revenue for states in need and updated state-level taxation policy to account for the 21st-century realities of dynamic, technologically driven American commerce.

A year out from Wayfair, 42 of the 45 states that collect sales tax have enacted some form of e-fairness legislation to collect tax on out-of-state online-only retailers. Many have already seen substantially increased tax revenues. In fact, according to the Pennsylvania Department of Revenue, internet sales taxes after Wayfair raised $151.4 million from remote sellers from July through March – tripling initial predictions with several months left in the fiscal year. 

States across the country are increasingly confronting a mix of high costs, crumbling infrastructure and pressure to fund essential public services. Tax revenue from online sales allows states to provide crucial benefits to all residents – like new, modern roads or rails, or expanded and improved services – without raising taxes elsewhere. 

E-fairness legislation is not just a smart fiscal decision for states across the country. It’s more consistent with the free-market principles of this country. For too long, online-only retailers have exploited outdated and unrealistic tax policy that incentivizes certain types of businesses over others without regard to the consumer’s needs. Many state tax laws – conceived before the internet existed, during the days when mail-order catalogues dominated remote commerce – simply do not account for America’s dynamic and ever-evolving retail sector.

In America, we hold dear that fair and properly regulated markets catalyze entrepreneurialism and innovation – even as states continue to stifle businesses with ill-informed tax policy.

Now is the time for states who have not yet enacted e-fairness legislation to do so. Creating a fair market for online commerce is a win-win for businesses, residents and state budgets alike. And in the wake of Wayfair, states have a simple, court-approved model for successful legislation.

Before Wayfair, the “physical nexus standard” unnecessarily burdened the small businesses that make up the cornerstone of our communities. Now, states have a chance to right this wrong. Many have taken that chance, but a few states are dragging their feet. 

Florida, Kansas and Missouri are the only states who have yet to adopt legislation that would set forth a sensible way to collect legally due taxes. These states continue to allow their in-state businesses to operate at a disadvantage and prevent much-needed tax dollars from flowing to schools, emergency services and the local communities who depend on them to thrive.

There is a simple solution for states like these: Follow the Court’s lead to enact simple, sensible, and fair legislation to update the tax code and join the 42 other states reaping the benefits of modern online tax policy. 

Tom McGee is President and CEO of the International Council of Shopping Centers.

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