The consequences of congressional inaction on e-fairness

In 1992, the Supreme Court’s Quill v. North Dakota decision said that states cannot compel out-of-state sellers – including online retailers, catalog stores, and the like — to collect and remit the taxes due in 46 states on purchases if that retailer does not have a physical presence in the state.

But that was 26 years ago, and this “statement of constitutional law… has now, especially in light of the cyber age, proven incorrect,” as Justice Anthony Kennedy said during last week’s oral arguments in South Dakota v. Wayfair, Inc.

{mosads}In these 26 years, the virtual impossibility for states to collect the taxes they are lawfully owed has ballooned into a nearly $34 billion annual – and growing – problem. In the next ten years if left unchanged, it is estimated that $100 billion in due sales and use taxes will go uncollected.

In my home state of Arkansas, the hole is $323 million this year alone. But make no mistake – these are not new taxes; they are lawfully owed. And what has not changed in 26 years is that Congress has always had the ability to act and is better suited to do so.

In my first year in Congress, I introduced the Marketplace Equity Act of 2011. Since then, we’ve refined, revised, and retried this commonsense legislation. Now known as the Remote Transactions Parity Act, this bill if enacted into law would simply grant states the ability to enforce their own code while ensuring that proper protections and necessary guidance are in place for the small businesses who may have to comply.

Unfortunately, as South Dakota’s attorney general stated in last week’s arguments, Congress hasn’t had “an incentive in this instance to take action.” But that inaction has not been without consequence. It’s precisely why the Supreme Court took up the challenge to this “obsolete precedence.”

As it deliberates, the Court must consider many unanswered questions regarding retroactivity and compliance burden. Even the attorney arguing on behalf of Wayfair, Inc. conceded that “all of the players that are involved in this issue are in favor of federal legislation.” Had Congress chosen to proactively and thoughtfully lead on this simple issue of fairness, these questions would be answered.

So now, as we all too often do, Congress will have to react; this time to a Supreme Court ruling to be handed down in June. And while it remains unclear exactly what we will have to respond to until that time, one thing is certain: the government should not be in the business of picking winners and losers. As Justice Ruth Bader Ginsburg said, it should be “far from discriminating,” but rather in the business of “equalizing sellers,” and ensuring that “anyone who wants to sell in-state, whether an in-state shop, an out-of-state shop, everybody is treated to the same tax collection obligation.”

Womack represents Arkansas’ 3^rd District and is chairman of the Budget Committee.