Allow states to require remote sellers to collect legally owed taxes

In a recent opinion piece in this publication, Rep. Jim Sensenbrenner (R-Wis.) asserted that requiring online retailers to collect legally due and payable sales taxes is “taxation without representation.” He has the issue exactly backward. In South Dakota and other states, sales taxes are only imposed on sales into our state. Clearly, South Dakota residents have representation in their state—through me and their other elected lawmakers.

The inability to effectively collect legally owed sales taxes from remote sellers is significantly eroding the sales tax base of the State, causing revenue losses and imminent harm to the State through the loss of critical funding for state and local services. Those revenues must be made up by law abiding taxpayers through higher tax rates.

{mosads}Remote sellers, who make a substantial number of deliveries into or have large gross revenues from South Dakota benefit extensively from the state’s market, including the economy generally, as well as state’s infrastructure. They should collect our sales taxes.

Congressman Sensenbrenner puts great stock in a widely criticized U.S. Supreme Court opinion (Quill Corp v. North Dakota) that dates to 1992, before the Internet was even legally available for commercial use.

Justice Anthony Kennedy last year invited the judicial system to present to the Court a case to allow reconsideration of its decision in Quill, which prevents South Dakota from requiring remote (Internet) sellers to collect South Dakota sales taxes. In DMA v. Brohl, Justice Kennedy pointedly said: “…it is unwise to delay any longer a reconsideration of the Court’s holding in Quill. A case questionable even when decided, Quill now harms States to a degree far greater than could have been anticipated earlier.” Further, Justice Kennedy said the argument made by South Dakota “…has grown stronger, and the cause more urgent, with time.”

States have worked with Congress, directly and through the National Conference of State Legislatures and the National Governors Association, for more than 15 years, dating back to Congressman Sensenbrenner’s tenure as Chairman of the committee of jurisdiction over this issue. Congress has not acted over that long time despite the States’ good faith efforts, and thus South Dakota is well advised to appeal to the Supreme Court at Justice Kennedy’s invitation.

Congressman Sensenbrenner’s legislation simply codifies the status quo and is not a solution to the problem facing the states. Rather, it is a blatant example of picking winners and losers in the marketplace and further evidence of congressional disregard for the important role of states in our Constitutional framework. The legislation does not deserve consideration. Instead, Congress should work expeditiously to adopt sensible legislation to allow states to require remote sellers to collect legally owed taxes.

Dennis Daugaard is governor of South Dakota.

The views expressed by authors are their own and not the views of The Hill.