AG Fox Fights Sales Tax, Defends Montana Businesses and Consumers Before U.S. Supreme Court
HELENA – Attorney General Tim Fox took action Wednesday to fight sales tax expansion efforts harmful to non-sales tax states like Montana. In a brief filed with the Supreme Court of the United States in the case of South Dakota v. Wayfair, Fox highlighted Montana’s long history of opposing sales taxes, and noted the impact online sales taxes levied by other states could have on Montana business and consumers.
“Montana businesses shouldn’t bear the burden of serving as deputized tax collectors for states and municipalities with an online sales tax,” Attorney General Fox said. “For many businesses, getting by is already hard enough without the additional challenge of deciphering a complex web of taxing jurisdiction spread across the country. I’m standing up for Montana businesses and pushing back against efforts to force an online sales tax on Montana consumers.”
At issue is a law passed by the State of South Dakota requiring any business engaging in online sales exceeding 200 transactions or $100,000 to collect South Dakota’s online sales tax. The tax collection obligations exist regardless of the state in which the business operates. Montana businesses exceeding the threshold established by South Dakota would be required to collect and distribute the sales tax revenue for South Dakota.
In the brief, Attorney General Fox demonstrated how Montana businesses could be affected by South Dakota’s law, even with a small amount of sales.
As an example, a person in South Dakota may, after searching for “huckleberry products” online, order a huckleberry lollipop for $1 from The Huckleberry Patch, a small business located in Hungry Horse, Montana. If this process is repeated 200 times the threshold would be met for $200 in sales. The Huckleberry Patch would then be required to collect and distribute the sales tax revenue generated by their South Dakota sales.
Forty states filed an amicus brief before the Supreme Court, backing South Dakota. These states indicated, if South Dakota prevails, they will follow suit with similar online sales tax schemes. An estimated 10,000 state and local taxing jurisdictions exist across the United States. If South Dakota’s challenge is successful, Montana businesses would be responsible for determining how much revenue from their online sales go to the correct taxing jurisdiction.
Current remote sales tax law is governed by the cases of National Bellas Hess v. Department of Revenue and North Dakota v. Quill. For almost 50 years, these cases prohibited states from requiring out-of-state businesses to remotely collect sales tax revenue, unless that business has a “physical presence” in the taxing state. The physical presence could be as clear as a brick-and-mortar store front, or less apparent like a team of door-to-door sales people.
In his brief, Attorney General Fox asks the court to reaffirm the Court’s interpretation of the law in Quill and Bellas Hess, as well as recognize the substantial practical challenges that abrogating the “physical presence” rule would have on businesses and consumers across the country.