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Supreme Court online sales tax ruling unlikely to change Idaho law, legislator says

photo of supreme court

The Supreme Court will rule in June on a case that could require more retailers to collect sales taxes on online sales. File photo.

A case before the U.S. Supreme Court could change the way online retailers are required to collect sales tax. But it’s unlikely to affect a bill passed by the Idaho Legislature this session, according to the legislator who carried the bill.

The Supreme Court heard arguments on April 17 in South Dakota v. Wayfair, where the state argued that the existing system – requiring a physical nexus for an online vendor to have to collect sales tax, based on the 1992 Quill v. North Dakota decision – is unfair to existing brick-and-mortar businesses, according to the Associated Press. Some justices were concerned about changing that precedent, the AP said.

photo of lance clow

Lance Clow

The Idaho Legislature passed a bill earlier this year, signed into law by Gov. C.L. “Butch” Otter on March 21, requiring out-of-state vendors to collect sales tax on online sales in some additional cases.  The bill was sponsored by Rep. Lance Clow, R-Twin Falls. Cow doesn’t think the Supreme Court’s decision, expected in June, will change much about the bill, scheduled to take effect July 1.

The Supreme Court has three options: Agree with South Dakota that the economic nexus argument is appropriate, agree with the original Quill decision that a physical presence is required, or some combination, Clow said. But he thought the second option was unlikely because the Supreme Court has already broadened the definition of when states have authority over out-of-state online retailers, he said. “I don’t believe they’re just going to say, ‘OK, Quill, you’re fine,’ because the Supreme Court has already been ruling that ‘Quill, we’ve got problems,’” he said.

Congress has missed the opportunity to write laws on the issue, Clow said. “It’s up to the states to make that determination,” he said. “I feel comfortable that the bill we passed this last session is in good standing. If they [the Supreme Court] broaden the ability of states to respond, maybe next year we’ll come back and change our law to a bigger net-out to bring in more retailers.”

About Sharon Fisher

Sharon Fisher is an Idaho Business Review staff writer, covering financial institutions, technology, and business development. She holds a bachelor of science in computer science from Rensselaer Polytechnic Institute, and a masters in public administration and graduate certificates in geographic informational analysis and in community and regional planning from Boise State University. She likes explaining things and going to meetings. Join me on Twitter at @IBR_SLFisher.