In 2017, because they lacked the authority to require the collection of sales taxes on remote sales, states and local governments lost up to $13 billion. With one Midwestern state leading the way, this legal and fiscal landscape could change soon, depending on how the U.S. Supreme Court rules in South Dakota v. Wayfair.
For now, a 1992 decision, Quill Corp. v. North Dakota, is the law of the land. It says that, minus congressional action, a state can only require businesses with a substantial presence, or nexus, to collect and remit the sales tax. That ruling has affected not only state tax bases, but the competitiveness of Main Street businesses as well — particularly with the rise of electronic commerce (see line graph).
Four years ago, The Council of State Governments, in partnership with the State and Local Legal Center and members of the Big Seven organizations representing state and local governments, filed an amicus brief critiquing Quill, which prompted Justice Anthony Kennedy to ask for a case to overturn the ruling.