WAYFAIR: FORMULATING A FLORIDA RESPONSE

APRIL 2019 This Florida TaxWatch report was written by Robert S. Goldman of Dean, Mead & Dunbar (Tallahassee), in conjunction with Kurt Wenner, Florida TaxWatch Vice President of Tax Research listed isinevitably problematic. provide of guidancetoaffectedbusinessesandthe Department Revenue. Thatis,onlythelastoption developments. Theconclusion reached inthispaperisthatsometypeoflegislation needed to are endless.However, these five options flow mostdirectly from a of review The listof options isnot meant to beexhaustive, legislationcouldbe written asthe possible ways new These optionsare: than theothers. administrators, remote sellers,andlocalbusinesses,lessriskofprotracted constitutionallitigation below options setforth would The firstandfourth provide for themostcertainty Floridatax experience, andoutlinesthereasoning underlyingoptionstheLegislature isencouragedtoconsider. of the use tax collection issue, including The ensuing discussion traces the history Florida’s unique being considered inlegislatures across thecountry. sellers andtaxadministratorsknow whatisexpectedofthem.Asaresult, post- do so. Whatever astate’s decisiononthispolicyquestion,there sothat isaneedforittobearticulated to extend that responsibility beyond prior limitations, but they are not constitutionally required to wishes toextendtheresponsibility forcollectingitstaxes. Asaresult of Sales andusetaxes are imposedunderstatelaw, and eachstatedecideswhatistaxableandhow farit in anystate,oreliminateallconstitutionalguardrails limitingtheimpositionofthatresponsibility. The the wakeof competitors ofremote sellers.This offersstepsforconsideration bythereport FloridaLegislature in and withawaytoaddress aneconomicdisadvantage experiencedby thein-state“brickandmortar” the taxingstate. states from requiring suchasellertocollecttheusetaxunlesshad“physical presence” in customers). Specifically, rule ithadpreviously theCourt repudiated the establishedwhichprohibited collection responsibility on“remote” sellers(thatis,outofstatemakingsalestoin-state 138 S.Ct.2080(2018)removed alongstandingconstitutionalbarriertostateimpositionofusetax 5. 4. 3. 2. 1. i. Wayfair will have todecidehow toapplyobsoletestatutesinapost- Leave current lawunchanged,withtheresult thatremote ofRevenue sellersandtheDepartment constitutes physicalpresence. Enact thephysicalpresence legislationthatpreserves withcleardefinitionsofwhat rule, means ofmitigatingtheimpactonsmallsellersandmaking thelawlessvulnerabletochallenge SSUTA isnotenacted,theadoptionofhigherthresholds thaninSouth Dakota wouldbea Enact legislationwithsomecombinationof the elementsidentifiedinfirsttwooptions. If “marketplace” usetaxcollection,whichwasnotpresented in Enact the same legislation suggested in the first option above, but include provisions to address (SSUTA), and aprohibition onretroactive application. which featured salesthresholds, adoptionoftheStreamlined Sales andUse Tax Agreement Enact legislation patternedaftertheSouth Dakota lawthatwasbefore in theCourt

Introduction The United States Supreme decisionof Court June 21,2018in Wayfair. decision doesnotautomaticallysubjectonlinesellerstoausetaxcollectionresponsibility Wayfair provides flexibilitywith stateswithnew respect tohow theyraise revenue, Wayfair Wayfair Wayfair, environment. . South Dakota v. Wayfair, states have theoption Wayfair Wayfair legislation is and related Wayfair,

1 WAYFAIR: FORMULATING A FLORIDA RESPONSE

History to charge the charge to not 2 , section 212.05, Florida Statutes (taxable (taxable Florida Statutes , section 212.05, See If the seller fails to collect the tax, the purchaser still owes it and still owes seller fails to collect the tax, the purchaser the If 1 section 212.05(1)(a)1.a., Florida Statutes (tax is due on retail sales in this retail (tax is due on Statutes Florida section 212.05(1)(a)1.a.,

See,

Use Tax Collection: Introduction and Relevant and Relevant Introduction Collection: Tax Use The sales tax and use tax are not identical. Although these terms have no universal no universal terms have Although these not identical. are tax and use tax The sales but is used … in this state). but is used … in this Florida statutes describe the sales tax as imposed on the seller for exercising the “taxable privilege” of selling, while the “taxable exercising on the seller for describe the sales tax as imposed Florida statutes of dispute. is a matter tax revenue of the lost measure The requiring it to be charged to the purchaser as a separate line item. line item. as a separate the purchaser to charged be it to requiring (2), Florida section 212.07(1), in this state); of selling tangible personal property business engage in privilege to its from is different its legal incidence Thus stated). and separately customer from be collected (tax must Statutes who has the option tax is imposed on the seller, sales the California In contrast, incidence. economic the tax. for purchaser I. 2 1 responsibility can constitutionally be imposed is “nexus.” That is, if a seller has “nexus” with the “nexus” That is, if a seller has can constitutionally be imposed is “nexus.” responsibility use tax on inbound sales; otherwise, it the state’s the seller to collect taxing state, the state can require Clause of the Commerce one emanating from comes in two constitutional flavors, cannot. Nexus Process Due the from and the other States, United of the of the Constitution 8 ArticleI, Section Amendment. Clause of the Fourteenth no practical way to employ it broadly with individuals, who rarely remit the tax voluntarily. Thus, a Thus, the tax voluntarily. remit who rarely individuals, with it broadly employ way to practical no revenue. generates no tax significant amount of online sales activity use tax has long seller to collect the state’s a remote of a state to require the power this reason, For used to describe the conditions under which the collection The word been a subject of controversy. The use tax is designed to prevent loss of tax revenue and to protect in-state businesses from a in-state businesses from and to protect revenue loss of tax The use tax is designed to prevent a state lacks If state lines. across that would otherwise purchases disadvantage from competitive result the the use tax on sales to in-state purchasers, seller to collect and remit a remote to require the power through tax the enforcing or voluntarily tax the remit to purchasers on relying either with left is state is there with business purchasers, Although the audit function can be effective audits of purchasers. Florida law requires the purchaser to pay the tax directly to the state. This requirement is largely is largely requirement the state. This to to pay the tax directly the purchaser requires law Florida remote including all sellers, to have interest a state’s in obviously is It Floridians. to many unknown a enforcing states from prevented have tax, but constitutional restrictions sellers, collect the state’s This has defined circumstances. narrowly in sellers except against remote collection responsibility to the sales tax. “complement” of the use tax as a undermined the effectiveness state); section 212.05(1)(b) (tax is imposed on item of tangible personal property (tax is imposed on item of state); section 212.05(1)(b) when the same is not sold in have in most states, including Florida, the sales tax and use tax of the distinction, Regardless is while the seller the purchaser, the tax on of paying burden the economic place that they common the tax. to collect and remit required generally correct to view a sales tax as a tax levied on transactions which occur entirely within the within the to view entirely levied on transactions which occur a sales tax as a tax generally correct on imposed is hand, other the tax, on use The activity. out-of-state no involves it is, that state, taxing is a common statutory into the state (“imported” of property within the taxing state brought the “use” is the formulation in Chapter this here, not relevant limited exceptions With elsewhere. term) from Statutes. 212, Florida definitions and are often used interchangeably (even by the United States Supreme Court), it is Supreme States United by the (even used interchangeably often and are definitions

A FLORIDA TAXWATCH REPORT 2 4 3 ruled infavor of The Court Miller Brothers. to this Delaware vendor is to make the vendor liable for a use tax due from the purchaser,” directly from purchasers, the“practical statuteasithasbeenapplied andlegaleffectofthe Maryland transaction itseekstotax,” 347U.S.at344, 345.Andbecauseofthedifficultystatecollection some definitelink,minimumconnection,between or a state andtheperson,property this collector’s liability.” thatunderitspriorcases, observed ThentheCourt “due process requires to thetaxingpower orwhetherithasafforded ofMaryland that State ajurisdictionorpower tocreate First, itdescribedtheissueas“whether thisvendor, by itsactsorcourse ofdealing,hassubjecteditself decidedthecaseonbasisofDueCommerce Clauseobjection,theCourt Process Clause. Although the did not“exploit” theconsumermarket inMaryland. had constitutionalpower todo so. answered AdividedCourt inthe negative, becauseMiller Brothers Miller Brothers usetaxonthesepurchases. tocollecttheMaryland Theissuewas whether Maryland Miller Brothers delivered soughttorequire customersinitsown Maryland others to Maryland trucks. customers tookpossessionattheDelaware store; someitemswere delivered by commoncarrier, and crossedMaryland intoDelaware tomakepurchases tax-free (Delaware hasnosalestax).Some 347 U.S.340(1954).There, customersofa Delaware furniture store withnophysicalpresence in the specificsubjectofusetaxcollection responsibility, we beginwith has The Court over the years considered theconstitutionality ofa variety ofstatetaxmeasures. On the bodyoflawithascreated onthissubjectasa“quagmire.” hascharacterized hotly contestedamongthejustices,andstatedoesnotalwayswin.TheCourt state taxing measurequestion whether aparticular satisfies theCommerce Clauseisoftenunclearand permissiveness afforded the states has increased over time. These generalizations notwithstanding, the not absolute and that interstate commerce must “pay its way.” view, This is the contemporary and the commerce from taxation.Thislatergave waytocasesholdingthattheprotections oftheClause were and forbids.In someoftheearliestcases,Clausewasviewedascreating animmunityofinterstate predictable doctrine that permits an understanding of what the dormant Commerce Clause permits “Dormant” or “Negative” a consistent and Commerce to articulate Clause but has struggled with thegranttoCongress. Relying onthisnegative inference, theSupreme developed the Court a negative inference thatthestatesmaynotregulate interstatecommerce, asthiswouldbeinconsistent I,SectionAlthough Article 8isframedasapositive grantofpower toCongress, ithascarriedwith was deemednecessary. established punitive tariffsagainstgoodscomingfrom otherstates.Astrong centralcommerce power providedConfederation withtheConstitution.TheArticles a weak systemunderwhichthestates Commerce …amongtheseveral States….” Thisprovision wascentralto of replacing Articles I, SectionArticle 8 of the U.S. Constitution provides “The Congress shallhave Power ... To regulate A. The Commerce Clause:Agrant,aprohibition, andcousinoftheDue Process Clause Northwestern States Portland Cement v. Minnesota, interstate commerce andreferences to “commerce” meaninterstate commerce unless otherwisenoted. to Congress alsoappliesto foreign commerce andto commerce “withtheIndianTribes.” The focus ofthispaperis See, CampsNewfound/Owatonna v. Town of Harrison, Miller Bros 3 fact pattern involved interstate activity and the company invoked a 358 U.S. 450, 458 (1959). 520 U.S. 564,571 (1997). The Commerce Clausegrant ofpower 4 Miller Bros. v. Maryland, Id., at 344.

3 WAYFAIR: FORMULATING A FLORIDA RESPONSE the Courtthe discussed 430 U.S. 274 Wayfair, See, South Dakota v. v. South Dakota See, business in a

Complete Auto, Complete Auto, 386 U.S. 753 (1967), where where 386 U.S. 753 (1967), , this would be established by the by , this would be established National Bellas Hess challenged the Hess Bellas National Miller Bros. Miller Complete Auto Transit v. Brady, v. Transit Complete Auto majority’s idea of the purpose and operation of the majority’s Miller Bros., Miller Court’s reasoning is especially noteworthy: reasoning Court’s as having been decided on both grounds. been decided on both grounds. as having National Bellas Hess v. Illinois, Illinois, v. Hess Bellas National Bellas Hess Hess Bellas Bellas Hess Bellas Hess Hess Bellas the Nation with power to impose sales and use taxes. The to impose sales and use taxes. power with the Nation

viewed viewed is that a state only has power to require use tax collection if there is a there tax collection if use to require state only has power is that a Wayfair Miller Bros Miller at 762. As will be seen, the 138 S. Ct. 2080 at 2091. 138 S. Ct. 2080 at indeed, can every municipality, every every school district, and other political indeed, can every municipality, subdivision throughout and and in administrative exemptions, in rates of tax, in allowable many variations interstate could entangle National’s requirements record-keeping virtual jurisdictions with no legitimate of complicated obligations to local welter very The purpose government.’ local of the of the cost share fair ‘a to impose claim such from a national economy free Clause was to ensure of the Commerce Under the Constitution, this is a domain where unjustifiable local entanglements. and control. of regulation alone has the power Congress [I]t is difficult to conceive of commercial transactions more exclusively interstate in exclusively more transactions of commercial [I]t is difficult to conceive of Illinois power And if the involved. here transactions character than the mail order impediments upheld, the resulting were National upon to impose use tax burdens imaginary neither be would business interstate its of conduct free the upon nor and so, so can every other State, burdens, can impose such if Illinois For remote. Id., Id., Because of its stark contrast with what the Court recently said in the Court contrast with what of its stark recently Because 5 The Court clearly relied upon the Commerce Clause for its decision. Its reliance on the Due Process Clause is less Clause is less on the Due Process its decision. Its reliance Clause for upon the Commerce clearly relied Court The Wayfair, explicit, but the Court in but the Court explicit, announced that state taxes would henceforth effect, based on their practical economic be evaluated announced that state taxes 5 Commerce Clause has been abandoned in favor of the dissent’s position. of the dissent’s Clause has been abandoned in favor Commerce The next important case in this historical odyssey is prior as a seminal decision as it overruled (1977). Although not a use tax collection case, it is viewed In commerce. interstate of taxation restricted that severely law case 386 U.S. at 759, 760 (footnotes omitted). Hess engaged in a “large-scale, systematic, Bellas National that remarking justices dissented, Three a “sufficient that created consumer market” continuous solicitation and exploitation of the Illinois nexus,” Hess. this paragraph of the subsequently, the state sought to impose the collection duty on a mail order seller with no property or personnel in order impose the collection duty on a mail the state sought to not otherwise but did catalogs and flyers The seller distributed Illinois. Illinois. The advertise in As in common carrier. made by were deliveries The Clause grounds. Process and Due both Commerce use tax collection on to require attempt state’s of Bellas and held in favor “similar,” clauses were of the two Court observed that the requirements not, for example, expect the Court to sustain a state’s attempt to impose a sales tax on transactions on tax a sales impose to attempt the Courtexpect example, for not, state’s a sustain to taxing the with link a of requirement the is answer Court’s The states. other in entirely occur that to context, according the use tax collection state. In state. in the taxing market exploitation of the consumer seller’s remote again in issue arose The use tax collection The lesson of The lesson is state The reflection. some merits logic The state. taxing the and seller the between link requisite of exercises to such open is door the Once its borders. beyond persons over power exercise to seeking would One and if so, how. is to be limited, it becomes necessary if this power to determine power

A FLORIDA TAXWATCH REPORT 4 8 7 6 law….” forQuill basedonadherenceWhile ruling to had right torequire Quill tocollecttheusetaxonsalesin-statecustomers,arguingthat Hess, itsolicitedbusinessthrough catalogs,flyers Thestateclaimedthe andnationaladvertising. office supplies orpersonnelin bymailandhadno property Dakota. North was major vehicle forthiseffort to state efforts remove the The Court’s changingdoctrinesinCommerce and Due Process Clausecases were thefoundationsfor B. within thestate. residents mayqualifyaspurposefulavailing ofthestate’s market, even absentaphysicalpresence jurisdiction overlatter statetoassert thenonresident. National andmarketing advertising toinstate commercial actor’s efforts “purposefully directed” toward residents ofanotherstatewouldpermitthe Bellas Hess thelawunderDueLike theCommerce Clausejurisprudence, Process Clausealsoevolved after state wouldbesufficientto create nexus. However, rejected theCourt thestate’s contentionthatthe“slightest presence” ofthesellerwithin the statewere unrelated totheremote saleswhichthestatesought tomakesubjectthatresponsibility. within thestatewassufficienttoimposeausetaxcollection responsibility even iftheactivitieswithin Board ofEqualization, Shortly after on theirtaxingpower, andtheydidso. Complete Auto test: and wouldbesustainedagainstInterstate Commerce Clausechallengesiftheysatisfiedafour-prong • • 4. 3. 2. 1. Quill: World-Wide Volkswagen Corp. v. Woodson, occupation taxasappliedto stevedoring asviolations oftheCommerce Clause. 734 (1978), thestate persuadedtheCourt to overturn two priordecisionsthat hadstricken thestate’s business and Quill owned “a few floppy diskettes” withinthe state, whichthe Court viewed asinsignificant. The issue inthesecasesiswhetheranoutof state defendant canberequired to defend alawsuit there. For example, in

Clause conditionforimposingtheusetaxcollectionresponsibility, anddeterminedthatQuill’s Applied thisdistinctiontoeliminateany regulation onthenationaleconomy,” 504U.S.at312; under theCommerce Clauseisaproduct of“structural concernsabouttheeffectsofstate nexus isbasedon“the fundamentalfairness ofgovernment activity,” while“substantial nexus” Created adistinctionbetween Due Process nexusandCommerce Clausenexus.Due Process overruled The tax must be fairly related to the services providedThe taxmustbefairly related totheservices by taxingstate The taxmustnotdiscriminateagainstinterstatecommerce, and The taxmustbefairlyapportioned The activitytaxed musthave “substantial nexus” withthetaxingstate Use taxcollectioninthenextgeneration . In cases determined involvingthat a nonresident long arm jurisdiction, the Court Complete Auto Transit,Complete provided tooltoseekrelaxation stateswillanew ofearlierCommerce Clauserestrictions Bellas Hess 7 Department of Revenue of Washington v. Association of Washington Stevedoring Companies 430 U.S.551(1977).In heldthataphysicalpresence thiscasetheCourt and thatthere hadbeen“wholesale changesinboththeeconomyand Bellas Hess Quill Corporation v. North Dakota, the Court decided theCourt obstacle torequiring remote sellerstocollectastate’s usetax 6 444 U.S. 286(1980)(finding contacts with state insufficient).

requirement forphysicalpresence asaDue Process Bellas Hess, National Geographic Societyv. State California the Court: 504U.S.298(1992).Quill sold 8 LikeNational Bellas Complete Auto See, , 435 U.S. . A 5 WAYFAIR: FORMULATING A FLORIDA RESPONSE , [citations omitted]

: Bellas Hess Bellas rule appears artificial at its edges: Whether ruleartificialappears edges: its at

Bellas Hess Bellas and the mail order industry’s reliance on that decision in the on that reliance industry’s mail order and the See National Bellas Hess, Inc. v. Department of Revenue of Ill. of Department Revenue of v. Inc. Hess, Bellas National See Bellas Hess Bellas the Court reaffirmed the physical presence requirement under the Commerce the Commerce under requirement presence physical the the Court reaffirmed , Bellas Hess. Bellas opinion the Court addressed the strengths and weaknesses of the physical presence of the physical presence and weaknesses the strengths opinion the Court addressed welter of complicated obligations”)… welter Thus, absent the Bellas Hess rule, a publisher who included a subscription card in Hess card rule, a publisher who included a subscription Bellas Thus, absent the in heard whose radio advertisementswere issues of its magazine, a vendor three occasions, and a corporation whose telephone sales force on three Dakota North is What duty. collection the to subject be would all State, the into calls three made 6,000-plus Nation’s the by imposed might be obligations similar significant, more jurisdictions. taxing 505 (1967) (noting that 386 U.S. 753, 759-760, 87 S. Ct. 1389, 1393, 18 L.Ed.2d and in administrative exemptions, in rates of tax, in allowable variations the “many virtuala in house] mail-order [a entangle could requirements record-keeping and something of a “quagmire” and the “application of constitutional principles to principles constitutional of “application the and “quagmire” a of something and confusion and little in room for controversy much specific state statutes leaves of their indispensable power in the exercise guides to the States the way of precise omitted] of taxation.” [citation also encourages settled of sales and use taxes a bright-line rule in the area Moreover, businesses and individuals. by investment expectations and, in doing so, fosters the last over dramatic growth industry’s it is not unlikely that the mail-order Indeed, quartercentury taxation state from partin due is exemption bright-line the to in created Like other bright-line tests, the tests, bright-line other Like to collect a sales or use tax may turn on the may compel a vendor or not a State plant, or office. of a small sales force, in the taxing State presence Such a of a clear by the benefits than offset rule. is more however, This artificiality, rule duty a impose to authority state legitimate of boundaries the establishes firmly This taxes. litigation concerning those and reduces to collect sales and use taxes is noted, our law in this area so frequently benefit is important,we have for as Quill Quill prior decision in prior decision intervening years Clause; and the permitting circumstances the determine to qualified” better be “may ObservedCongress that nexus issue the to address Congress invited and responsibility, collection tax a use of imposition comparable grant of is no there Clause. Although under the Commerce its power exercising by under nexus standard relaxed Clause, the Court’s Process under the Due power congressional link for imposing the use tax collection the minimum constitutional established that provision if anything, more, could decide what Congress power, Clause its Commerce Using responsibility. rule. eliminate the physical presence and could would be required, “widespread solicitation of business” in North Dakota was sufficient for Due Process nexus. Process Due for was sufficient Dakota North in of business” solicitation “widespread if not for its result the same whether it would reach some doubt as to while expressing However, • 504 U. S. at 313. 504 U. S. at 315-316. in reiterated the concerns expressed The Court also In its In requirement:

A FLORIDA TAXWATCH REPORT 6 9 and untilCongress ordained otherwise. Quill not berequired tocollectthestate’s usetax.Althoughtheimpositionofsucharequirement after employees, contractors, or affiliateswithinamarket stateandwhomadenovisitstothecould for mostremote sellersthelocusoflinewassufficientlyclear. Suchasellerwithno property, contractual relationships inthe state could create with parties Commerce Clausenexus.Nevertheless, remote sellerbasedonthepresence ofarelated entity withinthestate; andtheextenttowhich the required physicalpresence; whetherandunderwhatcircumstances nexuscouldbeimputedtoa regardinguncertainty thelocationofline. Although characterized in enacted anyofthelargenumberbillsthathave beenintroduced over the years. circumstances permittingtheimpositionofausetaxcollectionresponsibility, Congress hasnot Despite the Court’s acknowledgment thatCongress “may bebetterqualified” todeterminethe determined by The constitutionalnexuslawgoverning impositionofalegaldutytocollectstate’s usetaxas 504 U.S.at320-321. change theresult: upon the doctrine of concurred intheresult. With respect totheCommerce Clauseissue,theconcurringopinionrelied have overruled thatdecision entirely Only Justice White dissentedfrom adherence tothe • • • • • its text. consistent with thefacts andreasoning ofthat decision,althoughthewords “physical presence” appearnowhere in The characterization of wasconsistentwiththeDue Process Clause,itwasforbidden by theCommerce Clauseunless Congress lackspower tomodify Easier forstatetowin Based on“fundamental fairness” No physicalpresence required sufficient to require collection Purposeful availing ofin-statemarket is what we have done.” decisis doctrine of stare Bellas Hess of the rule Congress hasthefinalsay over regulation ofinterstatecommerce, anditcanchange “bright-line” regime thatitestablishes***isunqualifiedlyinitsfavor. the contrary, whatever elsemaybethesubstantive the pros andconsof therule, presence” establishedin Bellas rule Hess ofthebasicframework ofasizableindustry.” become part Bellas Hess notes, “the Court “at their acme ... where reliance omitted] As the interests are involved.” [citation Due Process ClauseNexus: Quill canbesummarized asfollows: Bellas Hess stare decisis Quill [citations omitted] Moreover, the demandsof the doctrine are asthesource ofthephysical presence requirement for usetaxcollection is by simplysayingso. We have long has “special force” where “Congress has remains free toalter asa“brightlinerule,” thephysicalpresence requirement left (adherence to precedent) coupled with Congressional power to . Justice Scalia, joinedby Justices Kennedy andThomas, rule has engendered rule substantial reliance andhas 9 Unresolved were issuessuchasthetemporalextentof is not“unworkable,” [citation omitted],to • • • • • Bellas Hess Congress haspower tomodify Harder forstatetowin Based onstructure ofnationaleconomy Physical presence required sufficient to require collection Purposeful availing ofmarket aloneisNOT Commerce ClauseNexus: Commerce Clauseholdingandwould *** Finally, the“physical recognized thatthe 7 WAYFAIR: FORMULATING A FLORIDA RESPONSE ,

12 362 SFA SFA 2001 2001 , 129 Cal. Still further, further, Still Orvis Co., Inc. v. Inc. v. Orvis Co., 11 86 N.Y.2d 165, 86 N.Y.2d , 930 So. 2d 979 2d 979 So. , 930 See, e.g., e.g., See, 527 Pa. 347, 591 A.2d 591 347, Pa. 527 116 S. Ct. 518 (1995) 116 S. Ct. 518 (1995) DCA 2000) (30 Bloomingdales by Mail, Bloomingdales by Arizona Department Of Arizona st Scripto, Inc. v. Carson, Inc. v. Scripto, writ denied 913 N.Y.S.2d 129 (NY App. 2010) 2010) 129 (NY App. 913 N.Y.S.2d affirmed, cert. denied, cert. See also, Annox, Inc. v. Kentucky Revenue Revenue Kentucky Inc. v. Annox, See also, , 48 Conn. Supp. 170, 834 A. 2d 812 (CT Super. Super. 834 A. 2d 812 (CT 170, Supp. , 48 Conn. , 799 S.W. 2d 655 (TN 1990) (visits every six to six to every 2d 655 (TN 1990) (visits S.W. , 799 382, 29 Cal.Rptr.2d 407 (CA Ct. App. 1994) Ct. App. (CA 407 382, 29 Cal.Rptr.2d th Case No. 03-CI-1606 (Franklin County Cir. Ct. 2005) Cir. County (Franklin 03-CI-1606 Case No. , 2002 WL 1751434 (TN Ct. App. 2002) (implying that (implying that 2002) (TN Ct. App. WL 1751434 , 2002 , 676 So.2d 1362 (FL 1996) (seminars within state for for within state 1362 (FL 1996) (seminars So.2d , 676 Quill Beyond this, some states attempted to create a attempted to create some states this, Beyond left unresolved prompted states to seek creative states to seek creative prompted left unresolved 10 ffirmed, Borders Online, Inc. v. State Board of Equalization of Board State Inc. v. Online, Borders Quill 315 Ill.App.3d 286, 733 N.E.2d 780 (IL 1 N.E.2d 780 286, 733 315 Ill.App.3d , 24 Cal.App.4 , 24 numerous forces combined to keep use tax collection at use tax collection combined to keep forces numerous Dynamic Information Systems v. Washington Department of Revenue Department of Washington v. Systems Dynamic Information , 922 So. 2d 1257 (LA 1st Cir. Ct. App. 2006), Ct. App. Cir. (LA 1st 2d 1257 So. , 922 Quill, 116 S. Ct. 518 (1995) (41 troubleshooting visits over three years, after the after years, three visits over troubleshooting (41 116 S. Ct. 518 (1995) , 270 Kan. 346, 14 P. 3d 1111 (KS 2000) (11 installation visits in four years did not years visits in four 2000) (11 installation 3d 1111 (KS P. 346, 14 Kan. , 270 DCA 2005) (online book seller had nexus, where policy allowed customer to to customer allowed policy where book seller had nexus, DCA 2005) (online 130 Pa. Comm. 190, 567 A.2d 773 (PA 1989), 1989), (PA A.2d 773 567 190, Comm. 130 Pa. st 197 Ariz. 414, 4 P.3d 469 (AZ Ct. App. 2000) (annual average of one sales visit 2000) (annual average (AZ Ct. App. 469 4 P.3d Ariz. 414, 197 , 86 N.Y.2d 165, 630 N.Y.S.2d 680 (NY 1995), 680 (NY 1995), N.Y.S.2d 165, 630 , 86 N.Y.2d . 217 Conn. 220, 585 A.2d 666 (CT 1991) (rejecting claim that distinct identities of mail distinct claim that 1991) (rejecting 585 A.2d 666 (CT 220, 217 Conn. Pearle Health Services, Inc. v. Taylor Inc. v. Health Services, Pearle America Online, Inc. v. Johnson Inc. v. America Online, cert. denied, cert.

Share International v. Department of Revenue Department of v. International Share See also, Amazon.com LLC v. New York Dept. of Taxation & Finance, & Finance, Taxation of Dept. York New v. LLC Amazon.com See also, State Innovations after Innovations State In the 26 years after after the 26 years In most The local taxation (SALT). world of state and of issues in the the forefront State v. Dell International, Inc. Dell International, v. State Dell Catalog Sales v. Commissioner of Revenue Services Revenue of Commissioner Sales v. Dell Catalog

Town Crier, Inc. v. Department Of Revenue, Inc. v. Crier, Town v. Care Computer Systems, Systems, Computer Care v.

2003 WL 23011589 (KY Bd. Tax App. 2003), a 2003), App. Bd. Tax (KY WL 23011589 2003 1179, 29 Cal. Rptr. 3d 176 (CA 1 (CA 3d 176 29 Cal. Rptr. 1179, th The source of this idea is a Florida case that reached the United States Supreme Court, Court, Supreme States the United reached of this idea is a Florida case that source The Cabinet, reseller of for finding nexus for but rationale not required, presence said physical tax case in which court (property networks company use of local telephone allowing agreements includes interconnection service telecommunications within the state). companies telecommunications of local and other services repair, as installation, as well within state, for remote seller). Some states have enacted laws to challenge the reasoning in judicial decisions. the reasoning challenge to laws enacted have Some states seller). remote for relationship ownership is a requisite the use tax if there collect seller to a remote (requiring 922 Act Laws Arkansas or employees retailer’s under a similar name or the instate which sells similar products retailer with an in-state a that (providing Sec. 139.340 Statute Revised Ky. seller); the remote sales for promote to used are facilities seller creates the out of state sold by merchandise returned or exchanges receives that within the state representative in a within the state a retailer of or by or control (ownership Sec. 12-407 Statute the seller); Conn. duty for a collection duty). use tax collection creates similar line of business (1960). 207 U.S. as a Amazon for of nexus presumption rebuttable creating statute nexus” through NY “click claim that (rejecting of as-applied consideration for but remanding unconstitutional, facially was websites of links on its associates’ result challenge); of service and performance seller, remote from of computers purchasers to contracts of service (sales 2003) calls not of service frequency where seller, remote for nexus did not create contractor by within state contracts established); for lack of nexus Dell had not clearly proved case and holding that the Connecticut (LA 2006) (distinguishing summary judgment purposes); dial-up facilitated that companies telecommunications with instate of leased equipment or relationships presence nexus). might create the state outside servers with AOL connections (visits by sales employees created nexus; burden to show visits were limited or sporadic was on remote seller); on remote was or sporadic limited visits were show to burden nexus; created sales employees (visits by and Finance, Taxation of Dept. State York New Commissioner, Inc. v. Processing, Information Vermont 680 (NY 1995), N.Y.S.2d 630 nexus). created sales occurred, nexus). created inspector a quality control 18 months by 15 to and every representatives product by eight weeks Inc. Intercard, Appeal of In re Compare, nexus); establish outside the state). on sales from collection requiring nexus did not create each year days three Equalization of Board State v. Inc. Current, e.g., See, seller’s parent mail order of out of state within the taxing state presence physical extensive that contention (rejecting seller); the out of state for nexus created corporation App.4 acting as agents of were stores instate state; within stores affiliate at credit card credit books for or return exchange seller’s sales efforts); supporting the remote by engaged in “selling” and were seller, remote Pennsylvania, of Commonwealth v. Ltd. occasions the two on fact that products, nor similarity of affiliate, of instate 1991) (neither close relationship (PA 1047 seller; mail order out of state for nexus established merchandise, of mail order returns accepted stores instate Bannon, Inc. v. Collections, Folio nexus create would retailer of instate presence so that retailer should be disregarded instate seller and affiliated order See, e.g., See, nexus); years created in two installations and five state trucks into in seller’s own deliveries Revenue nexus); created in state of training and 21 days nexus; created years seven over of sales visits days 2000) (95 App. Bd. Tax (WA 2000 WL 33267349 N.Y of State of Appeals Tribunal Tax Physical presence broadly defined broadly presence Physical

II. 12 11 use tax collection responsibility if the remote seller had an affiliate within the taxing state, in some seller had an affiliate within if the remote use tax collection responsibility relation to the online sales. any activities bore affiliate’s of whether the cases irrespective with in-state persons. sellers based on contractual relationships states attributed nexus to remote 10 ways to test the limits of the physical presence requirement, which were often challenged in litigation. often which were requirement, of the physical presence ways to test the limits A. by periodic was satisfied requirement physical presence as to whether the example, issues arose For of limited duration, and delivery in the of products trade shows visits to the state for quality control, trucks common carrier. by rather than own seller’s significant of these was the dramatic growth of remote selling with the emergence of the Internet. of the remote selling with the emergence of was the dramatic growth significant of these impact of the physical presence adverse on line, the virtuallyBecause be acquired anything can the states, market sellers in street” “main For dramatically. grew treasuries state on requirement sellers often touted which the remote competitors with an advantage, remote provided requirement the issues that Moreover, in their marketing.

A FLORIDA TAXWATCH REPORT 8 15 14 13 measures itcontainsandare classifiedas “full member” states.The23fullmemberstates are: Statesparticipation. which fully adopt SSUTA have changed their lawsto incorporate the simplification SSUTA creates categoriesofstate“membership,” dependingonthenature andextentofastate’s 2018. adopted onNovember 12,2002,SSUTA hasbeenamended several times,mostrecently inDecember statesthat bears thetitleStreamlinedparticipating Sales andUse Tax Agreement (SSUTA). Originally model wasdubbedtheStreamlined Sales Tax Project, andultimatelyresulted inanagreement among collaborate andwelcome inputfrom thebusinesscommunity, butbusinesswouldhave novote. This In 1999,thestatesadoptedadifferent approach toaddressing theseissues.Theywouldcontinueto groups. wereTheir initialefforts ofindustry unsuccessful,whichmaybetracedtothe votingparticipation multiple stateandlocaljurisdictions.Thestatesthusbeganexploringwaystomitigatethoseburdens. the Supreme regarding Court thecomplianceburdens facingremote sellerswithcustomersin tonarrowThese efforts thescopeof C. begin collectingthetax. similar laws. total amount each customer paid for Colorado purchases in the prior year. Other states adopted the remote sellerwasrequired toprovide thestateannuallyalistofitsColoradocustomersand Clause nexus)tonotifyinstatecustomersoftheirobligationspaytheColoradousetax.In addition, remote sellerswhodidnotcollectthestate’s usetax(presumably duetotheabsenceofCommerce Another innovation, pioneered by Colorado,wasinformationreporting. TheColoradolaw required B. software onanin-statecustomer’s computer(“cookie nexus).” These efforts reachedthepointofmaintaining thatnexusis created ifa remoteseller downloads Minnesota Michigan Kentucky Kansas Iowa Indiana Georgia Arkansas

Information reporting Streamlined Sales andUse Tax Agreement L. 105–277, whichalsofeatured voting membershipfrom industry andgovernment. created theAdvisory Commission onElectronic Commerce insection1102 ofthe1998Internet Tax Freedom Act, Pub. included voting participation by government, industry, practitioner groups, andacademia.Thereafter, Congress of thephysical presence requirement in As discussed subsequently, litigation over theColorado law setinmotiontheevents that ultimately ledto thedemise MA 830CMR64H.1.7. The first significant effort was the National Tax Association Electronic Commerce Tax Project,launchedin1996,which 15

14 Thecostsofcomplyingwiththeseprovisions provided anincentive forsomesellersto Rhode Island Oklahoma Ohio North Dakota North Carolina New Jersey Nevada Nebraska Wayfair. Bellas Hess and Quill didnotaddress theconcernsexpressed by 13 Wyoming Wisconsin West Virginia Washington Vermont Utah South Dakota 9 WAYFAIR: FORMULATING A FLORIDA RESPONSE inclusive of the Appendices and Compiler’s Notes. Section 102 of 102 Section Notes. and Compiler’s of the Appendices inclusive 17

16 https://www.streamlinedsalestax.org/docs/default-source/agreement/ssuta/ssuta-as- It is the purpose of this Agreement to simplify and modernize sales and use modernize to simplify and is the purpose of this Agreement It the substantially reduce to order in states member the in administration tax sales and focuses on improving compliance. The Agreement of tax burden of commerce… systems for all sellers and for all types use tax administration components). SSUTA creates a standard definition of “bundled transaction” and prescribes the and prescribes definition of “bundled transaction” a standard creates components). SSUTA of such transactions. treatment shipper to accept a states do not permit a drop shipments. Some of drop in treatment Variation to state the in registered is customer that unless customer certificate out-of-state its from resale imposing this restriction. states from prohibits SSUTA which the sale is sourced. returns (state and local within volume of due dates, filing frequency, and remittance return Tax jurisdictions for all a state, by can be required return a single that only provides SSUTA same state). requires a uniform rounding algorithm and prohibits bracket systems. algorithm and prohibits a uniform rounding requires tax a specified sales price amount) and caps (where tax applies only above (where Thresholds sales local for cap sales $5,000 Florida’s as such amount, price sales specified a below only applies and caps (these thresholds generally prohibits vary This can also SSUTA taxes). within a state. the economic nexus associated with should not be confused with the sales thresholds thresholds concept). among and within states (origin vs destination). SSUTA of transactions in sourcing Variations regime. a uniform sourcing provides and nontaxable taxable may have (which transactions “bundled” of in treatment Variations requires centralized state-level tax administration for each state and the local jurisdictions within tax administration for each state and the local jurisdictions state-level centralized requires under addition, a seller registering In and remittances. tax returns, it, including registration, in each member state. is automatically registered SSUTA jurisdictions. local and state among and state a within rates multiple including rates, tax Different generally limits a jurisdiction to a single rate. SSUTA that the tax base for local requires tax bases among and within states. SSUTA Different of treatment tax base, and standardizes to the state’s jurisdictions within a state be identical discounts, and coupons. imposed on the purchaser, taxes financing charges, installation, delivery, SSUTA Florida’s). vs bracket systems like conventions in tax calculations (rounding Variations Separate administration of taxes for a state and each local jurisdiction within the state. SSUTA within the state. SSUTA for a state and each local jurisdiction taxes administration of Separate Available at: at: Available Tennessee is an “associate member” and the only state in this category. An associate member state is in substantial is in substantial member state An associate member” in this category. and the only state is an “associate Tennessee amended-2018-12-14.pdf?sfvrsn=8a83c020_6 compliance with the agreement as a whole but not with specific provisions. Such a state has limited voting rights and voting has limited state Such a as a whole but not with specific provisions. with the agreement compliance the state. tax on sales into collect sellers to remote require does not purport to SSUTA

• • • • • • • • • 16 17 The compliance issues facing remote sellers that SSUTA addresses include the following: addresses remote sellers that SSUTA facing The compliance issues the agreement expresses its “fundamental purpose:” “fundamental its expresses the agreement Florida and other large states (California, Texas, New York, and Illinois) are “advisor” states. An “advisor” are and Illinois) York, New Texas, states (California, and other large Florida participates but in a Agreement, of the provisions the simplification has not enacted advisor state advisorynonvoting, capacity. length, is 255 pages in SSUTA

A FLORIDA TAXWATCH REPORT 10 structures establishedto achieve that goalare farfrom simple.There is a Governing Board, eight Although theagreement simplifiescomplianceformultistate remote sellers, theadministrative The adjectives “streamlined” and “simplified” in reference toSSUTA oftendrawamused reactions. by whichremote sellers arethe machinery calledupontoadminister thetax. SSUTA doesnotdictatestatetaxrates,revenues orsubstantive taxpolicy. ThefocusofSSUTA is A stateisfree totaxorexempt clothing,groceries, manufacturing equipment,oranyotheritem. Notably absentfrom SSUTA isanymandatethat memberstatesmakethesametaxabilitydecisions. • • • • • • • • for certifications by the for certifications Streamlined Governing Board andthestates. due toreliance onaCertified Automated System (CAS).Theagreement provides themechanics alloftheseller’sperform salesandusetaxfunctionsisrelieved ofliabilityforerrors incollection to the requirements in the agreement, a seller who engages a Certified Service Provider (CSP) to the simplificationmeasures listedabove, SSUTA provides technologysolutionsforsellers. Subject Variations insystemrequirements forcomplianceineachindividualjurisdiction.In additionto bad debts. Variations inbaddebttreatment. SSUTA standardizes fordeductionandrecovery therules of withinthesamedefinition. services the useofuniformdefinitionsand requires thatastateeithertaxorexempt allproducts and Variations in basis for exemptions (character of product vs user vs intended use). SSUTA calls for in advance oftheexemption period. Variations intaxholidays.SSUTA provides standards andrequires minimumof60daysnotice exempt. toidentifywhatistaxableor sale ofanitem,buttheymustusethedefinitionsinlibrary Definitions foruseintaxabilitydeterminations. States are free todecidewhetherornottaxthe Variation inproduct definitionsfortaxabilityandexemption. SSUTA of creates aLibrary within thestate. audits tobeconductedatthestatelevel forthestate’s taxandthetaxes oflocaljurisdictions Subjection auditprocedures. tomultiplestateandlocalauditsvarying SSUTA requires faith testforsellerreliance onexemption claims. standardizes themechanismsforclaimingexemption afterasale;andprovides auniformgood standard form for claiming exemption electronically; provides for blanket exemption certificates; the sellerliableforimproper exemption claimsby purchasers. SSUTA requires thestatestousea forms,Exemption conditions, timing requirements,varying certificates: anda practice of holding and requires changesandlocalrates. eachstatetomaintaindatabasesofboundary notice tosellers,requires localchangestobeeffective onlyonthefirst dayofacalendarquarter, This includes changes in tax rate, tax base, and jurisdictional boundaries.SSUTA requires advance Changes instateandlocallawsaffectingcompliance,withnotemporal regularity oruniformity. remittances andallow forpaymentsby ACH Credit andACH Debit. approved by theSSUTA Governing Board; andthatthestatelimitnumberofmonthly the transaction;thateachstatemakeavailable toallsellersasimplifiedelectronic tax return within the state; that returns can be required no earlier than the 20 th day of the month following 11 WAYFAIR: FORMULATING A FLORIDA RESPONSE the additional revenues cannot be estimated with comfortable reliability, they may not be counted in cannot be estimated with comfortable reliability, the additional revenues will impose costs for fiscal purposes. And if SSUTA of scoring the adoption of SSUTA the process fiscal impact may be negative. the calculated that can be measured, imagined. SSUTA’s limits on a state’s sovereignty to make parochial tax decisions are commensurate tax decisions are to make parochial sovereignty limits on a state’s imagined. SSUTA’s actors outside the state. over power of sovereign exercise unprecedented with the state’s evaluates those and the way in which a state the fiscal consequences of adopting SSUTA, are Third that might otherwise consequences. As the underlying purpose is to collect tax revenues be beyond if impact. However, revenue a positive will always have it is tempting to assume that SSUTA reach, the objects of taxation and exemption are defined; whether multiple tax rates are permitted within a defined; whether multiple tax rates are are the objects of taxation and exemption can vary;jurisdiction; whether the tax base at the state and local levels and whether to establish tax that the tax was designed issue it is helpful to remember the sovereignty pondering In base thresholds. need for was no obvious in a primarily intrastate context, when there during the Depression to an extent not previously borders the tax is being asked to operate across however, Now, uniformity. Second, adoption of SSUTA surrenders some of the autonomy that state and local governments some of the autonomy that state and local governments surrenders adoption of SSUTA Second, right to establish its has the sovereign only to federal constitutional limitations, a state Subject enjoy. mundane such from extends right This states. other of systems the for regard without system tax own matters such as the way substantive to more is due, a tax return issues as choosing the date on which been collecting the tax are likely to do so, and the consumer’s out of pocket expense will be increased out of pocket expense will be increased likely to do so, and the consumer’s been collecting the tax are the facts that the only tax argument are increase” the “tax the other side of of a tax. On payment by online sales would from that the tax revenue owes; the consumer will pay is the tax he indisputably or fund reduce other taxes reduce sales/use tax rates, new to state lawmakers (to flexibility provide collecting the tax would no way to avoid have who retailers state or local needs); and that the in-state disadvantage. no longer suffer a competitive Three obstacles to a state’s adoption of SSUTA are considered here. The first is essentially political: if here. considered are SSUTA adoption of obstacles to a state’s Three embrace a to be reluctant lawmakers may sales is viewed as a tax increase, collection of tax on remote remote from purchases such collections. Although the tax on consumer system which promotes consumers the consumer in almost every without adoption of SSUTA), sellers is due from state (even not have sellers who SSUTA, With the seller. not collected by generally do not pay the tax when it is in Part V, Florida’s sales tax law does not confer this degree of local independence, so these particular of local independence, tax law does not confer this degree sales Florida’s V, in Part and caps can be important. some states, tax base thresholds In here). not be required concessions would one-time modifications which entail many requires the transition to standardization Moreover, of any fiscal impacts. considerable drafting and identification Governing Board; certifying and audits; contracting with technology service and Board; providers; Governing Board. rulemaking the Governing by a state in which example, For compromises. requires state under SSUTA a full member Becoming the state sales tax base, or from multiple tax rates, or to deviate to establish free are local jurisdictions (as discussed subsequently that local autonomy must forego and remittances, returns local tax to require committees, and two advisorycommittees, membership for state processes includes agreement councils. The annual agreement; of the with the requirements of state compliance determinations applications; of and sanctioning withdrawal, expulsion, states; and by member compliance of recertification of the decisions issues; appealing interpretive mechanisms for addressing Also included are members.

A FLORIDA TAXWATCH REPORT 12 19 18 The legalsystemobliged. resultwas to reexamine present theissue,heconcludedthat“the legalsystemshouldfindanappropriate caseforthisCourt who do pay taxes at the register,” 135 S. that Ct. the at pendingcase 1135. didnot While observing revenue inmanyStates, shortfall withconcomitantunfairnesstolocalretailers andtheircustomers “continuing injustice” andstatedthattheensuinggrowth inonlinesellinghadresulted ina“startling expressed doubt as to whether Appeals laterdecidedinfavor ofColorado. The Supreme didnotaddress Court themeritsofDMA’s claims,whichthe of Tenth Circuit Court Direct Marketing v. Assn Brohl, whichheldthat the Court, TIA didnotapplyandthelower thesuit. couldentertain federalcourts the federal Tax Injunction Act (TIA). of byissue waswhetherthecaseproperly virtue ratherthan statecourt brought infederalcourt discriminated againstandimposedanundueburden oninterstatecommerce. However, athreshold Association (“DMA”)brought suittochallengetheconstitutionalityoflaw, contendingthatit Shortly after enactment of the Colorado information reporting law in 2010, the Direct Marketing D. prominently inthenew, permissive landscape. it wastoimposingthecollectionresponsibility, andasdiscussedsubsequently, SSUTA figures requirement. However, circumstances have changed:Theconstitutionalissueisnolongerthebarthat not anactofCongress anditdidnoteliminatearemote seller’s righttorely onthephysicalpresence sellers to collecttax in the absence of a physical presence. SSUTA is an agreement amongstates;it is Florida) have not,atleastwithaconstitutionalcloudhovering over anyattempttorequire remote The SSUTA fullmemberstateshave beenabletowork through theseissues. Other states(including pass anSSUTA conformingbill,asubjectdiscussedinPart V. This has been one of the reasons that the Florida Legislature has not been able to reach consensusand

the Colorado law. good law, itshouldbenarrowly construed anddidnotprohibit information reporting requirements suchasthosein Direct Marketing Assn. v. Brohl, restrain theassessment, levy orcollection ofany tax under State law.” 26U.S.C. §1341. The federal law inquestion prohibits thefederal courts from entertaining casesseekingthemto “enjoin, suspendor Direct Marketing v. Association Brohl Quill and Bellas Hess 814 F. 3 135 S.Ct.1124(2015). Quill .” .” rd 1129(Tenth Cir. 2016). The court essentially heldthat while Id. 18

Thisjurisdictionalissue reached the United States Supreme was correctly decided. He referred to Wayfair. 19 : ADoor Opens, andSouth Dakota Walks Through However, inaconcurringopinion,Justice Kennedy Quill Quill as creating a remained 13 WAYFAIR: FORMULATING A FLORIDA RESPONSE 138 but Quill, Justice Kennedy Kennedy Justice , the South Dakota Dakota , the South Quill. and South Dakota v. Wayfair, Inc., Inc., Wayfair, v. South Dakota The Supreme Court of South Dakota, South Court of Supreme The Bellas Hess Hess Bellas ; declared there was an “urgent need for the an “urgent was there ; declared Quill. DMA Direct Marketing Assn v. Brohl Assn v. Marketing Direct (friend of the court) briefs representing other states, the (friend of the court) briefs representing to distinguish it from the Commerce Clause requirement. Clause requirement. the Commerce to distinguish it from affirmed. The stage was set for U.S. Supreme Court review. Court Supreme affirmed. The stage was set for U.S. amicus curiae Quill Quill, Quill,

Wayfair

was wrongly decided and should be overruled. The case proceeded without a trial, The case proceeded and should be overruled. decided was wrongly Quill

in the Supreme Court in the Supreme The collection requirement established is to be applied prospectively only. established is to be applied prospectively requirement The collection The seller’s gross revenue from sales into the state exceed $100,000 in sales, or sales into the state exceed from revenue gross The seller’s into the state. The seller has at least 200 separate sales to bring a declaratoryThe state is authorized to meet the any seller considered suit against to expedite consideration of the suit. directed and the courts are criteria above, • • • • A seller lacking a physical presence in the state must collect tax on sales into South Dakota if in Dakota tax on sales into South in the state must collect A seller lacking a physical presence calendar year: or current the previous Wayfair The South Dakota law. law. Dakota The South economic activity with in-state customers. These two requirements are intended to create “economic nexus,” that is, nexus created by that is, nexus created “economic nexus,” intended to create are requirements These two III. • Court’s having taken pains in Court’s authored the majority opinion, in which Justices Ginsburg, Thomas, Alito, and Gorsuch joined. Its Gorsuch joined. Thomas, Alito, and Ginsburg, the majority opinion, in which Justices authored itself of the substantial exists if the seller “avails Clause nexus holding is that Commerce central by “both the economic is satisfied in the state, and this requirement privilege of carrying on business” 138 S. Ct. at 2099. This with the State,” and the other defendants] have and virtual contacts [Wayfair formulation, despite the Clause Process of the Due back to an approximation appears to revert B. of dozens received The Court industry orally argued was case The academics. and groups, States, United the of Branch Executive its decision, 21 the Court rendered 17, 2018, and on June on April the Court a 5 to 4 vote, overruled S. Ct. 2080 (2018). By Overstock and Newegg). In this action the State acknowledged that the law violated that the law violated acknowledged this action the State In and Newegg). Overstock assertedthat on the basis of against the State with judgement entered considering itself bound by Upon enactment of this law, South Dakota brought a declaratory action against Wayfair (also against a declaratoryWayfair brought Dakota action against South of this law, enactment Upon Supreme Court of the United States to reconsider” the physical presence requirement; and announced requirement; the physical presence to reconsider” States Court United of the Supreme the basis of these On Dakota. in South was necessarythat the enactment an “emergency” to address provisions: operative the law enacted the following recitals, A. Court decided after the Supreme Immediately recited law Laws Ch. 70. This Dakota became 2016 South enacted S. B. 106, which legislature requirement; of the physical presence impact and unfairness about the adverse multiple findings opinion in concurring Kennedy’s to Justice referred

A FLORIDA TAXWATCH REPORT 14 20 exacerbated by theabsenceofanyguidancerelated totherequired proof. by case“balancing” willeven beavailable. If itisavailable, itwillbeexpensive topursue,acondition to the against local interests of advancedthe law. in support The commerce, andinthecourseofitsopinionsuggesteditwas“balancing” theburden oncommerce other thanincratesapproved down by struck Arizona. thelawasaburden The Court oninterstate Pike 138 S.Ct.at2098-2099. concerning tosmallremote sellers: as isevidentfrom thisexplanationofwhyrepudiation ofthe physical presence shouldnotbe rule rule of The brightline to collecttaxes criticalpublicfunctions”) andperform distortion” and“tax evasion,” andis“an impositionby extraordinary theJudiciary onStates’ authority fatallyflawed with no same rule redeeming qualities (“artificial inits entirety,” promotes “marketplace at itsedges” but“more rule”), thanoffset by thebenefitsofaclear in theCourt merits ofthephysical presence asmerely Having in viewed therule rule. imperfect The changeintheCourt’s aboutthe evaluation ofthesamefactsisalsoevidentinits observations interpretation” longbefore theemergenceofonlineeconomy. was “firstformulated” inthedaysof incorrect interpretation oftheCommerce Clause,” 138S.Ct.at2093(emphasisadded).But therule Wayfair removedthe physicalpresence becomesfurther rule from economicreality.” On theotherhand, the opinionrefers repeatedly tothe“dramatic technologicalandsocialchanges,” andhow, “each year the influenceofonlineeconomyorincreased impactonstatetax revenues. On theonehand overlooked something initsearlierdecisions, and thedecisionisatbestinconsistentwithrespect to responded tothemindramaticallydifferent fashion.ThisisnotasituationinwhichtheCourt in The Court summarized asfollows: The Court’s progression regarding thephysicalpresencerule beginningwith Wayfair Quill Bellas Hess

See footnote 5. involved an Arizona attempt to prohibit shipment of cantaloupes from Arizona to California amicus curiae heldthat“the physicalpresence both rule, 137….” analyzed underthebalancingframeworkof example, theUnited States arguesthattax-collectionrequirements shouldbe or otherswhoengageincommerce acrossbusinesses, startups, statelines.For undue burden oninterstatecommerce, takingintoconsiderationthesmall [O]ther aspectsoftheCourt’s Commerce Clausedoctrinecanprotect againstany Quill Neither Commerce ClausenorDue Process Clauserequires physicalpresence Commerce Clauserequires physicalpresence, Due Process Clausedoesnot Commerce ClauseandDue Process Clauserequire physicalpresence and United States, ratherthanembracingitdirectly, leaves unclearwhetherthiscase Bellas Hess Wayfair waspresented withsubstantiallyidenticalfactsandargumentsbut and Quill Miller Bros hasbeenreplaced by avague, caseby caseformulation, and as firstformulated . Pike v. Church, Bruce Inc., Bellas Hess,

Wayfair Court’s attribution of this citation and wastherefore an“incorrect andasappliedtoday, isan Wayfair Bellas Hess 397U.S. Quill 20 deemed the (“artificial canbe 15 WAYFAIR: FORMULATING A FLORIDA RESPONSE

doctrine Quill stare decisis stare including its application of the its application of including majority espoused a different view: a different majority espoused Quill, Quill, Wayfair Wayfair physical presence rule was an obvious barrier to the Act’s validity, validity, rule the Act’s barrier to was an obvious physical presence may be addressed in the first instance on remand. in the first instance on may be addressed Quill On this latter issue the this latter On Bellas Hess Bellas Quill. Quill. choose to use such software are immune from audit liability. *** Any remaining *** Any remaining audit liability. immune from are choose to use such software Clause in the absence of the application of the Commerce claims regarding and them here. That said, South Dakota’s tax system includes several features that appear that features several includes system tax Dakota’s South said, That here. them upon interstate against or undue burdens discrimination designed to prevent only limited transact to those who harbor a safe applies Act the First, commerce. the that no obligation to remit ensures the Act Second, Dakota. business in South Dakota is one of South S.B. 106, § 5. Third, sales tax may be applied retroactively. Agreement. Tax and Use Sales the Streamlined adopted that have than 20 States more It costs: and compliance reduce administrative to taxes This system standardizes and products of definitions uniform administration, tax level state a single, requires It also provides services,uniform and other simplified tax rate structures, rules. who Sellers the State. for by paid software sellers access to sales tax administration It is inconsistent with the Court’s proper role to ask Congress to address a false address to to ask Congress role proper is inconsistent with the Court’s It creation. own of this Court’s constitutional premise the Because litigated or briefed, and so the Court been not yet not resolve need these issues have Court’s prior “erroneous decision *** may well have been an unintended factor contributing to the have decision *** may well prior “erroneous Court’s Court today is compounding its past error,” concern that “the and voiced of e-commerce,” growth 138 S. Ct. at 2104. the case was concluded in the state’s favor without any furtherbeing without any objections Clause favor Commerce state’s in the was concluded the case raised. The Kagan. and Sotomayor, Breyer, Justices by joined dissent, the authored Roberts justice Chief although to precedent, rule based on adherence the physical presence retained dissenters would have that the irony the dissent also noted the its inception. But that the rule from was wrong they agreed 138 S. Ct. at 2099-2100. Clause issue other than one based on the possibility of a Commerce Thus, while not foreclosing the to responsive law Dakota Courtthe South the considers it that doubt little left presence, physical courts, Dakota to the South remand Upon advanced. Clause concerns that were principal Commerce Court’s Commerce Clause doctrine” would invalidate it: would invalidate Clause doctrine” Commerce Court’s 138 S. Ct. at 2097. it However, Dakota law. South The Court the sustain the constitutionality of did not explicitly in the other principle 106 is constitutional unless “some that S. B. indication a strong provided The Court also discarded other aspects of other aspects of The Court also discarded decide whether to best position to is in the Congress and the idea that to precedent, of adhering overturn

A FLORIDA TAXWATCH REPORT 16 any ofthesethree features willbevulnerable.Thisandotherpost- regime toSSUTA islikelytobeupheldagainstconstitutionalchallenge.Conversely, alawlacking does notretroactively seekuncollectedtaxes forpriorperiods,andthat conformsitssalesandusetax state lawthatimposesthecollectiondutybasedonminimum thresholds ofeconomicactivity, that reasonably pointforestablishingitsown looktoS.B.106asastarting “economic nexus” statute.A effect ofthedecision. Given theCourt’s positive commentsaboutthe South Dakota law, astatecould isnowAs themajorityview thelaw, statescontemplatingreliance on leavethe dissenterswouldhave itthere. hadtheCourt Having in 138 S.Ct.2103,2104. side ofthedebate: questioned the majority’s “inexplicablesense of urgency” and suggestedthatitfocusedonly on one Pointing outthehighrateofusetaxcomplianceamonglargestInternet retailers, thedissent of theinterstatemarketplace” includethepossibilitythatmarketplace itself the States thatseekfairenforcement ofthesalestax.” ... competitorswhomustremit thetax;toconsumerswhopayand remitting alawfultaxis“unfair andunjust.” interstate marketplace.” The Court rests itsdecisionto overrule new markets.new surely forcommerce have inabroad theeffectofdampeningopportunities rangeof its capabilitiesandexpenseare subjecttodebate.***TheCourt’s decisiontodaywill sale.***Andthesoftware saidtofacilitatecomplianceisstillinitsinfancy,every and probably notiftheyhavethroughout tofigure thecountry—but outthetaxdueon business sellingtheirembroidered pillowcases decoys orcarved canoffertheir wares The burden onsmall businesses.*** willfalldisproportionately a People starting jurisdiction. *** determining whetheranout-of-statesellerhasasubstantialpresence” inthe definitions,different and different product standards category services, for each with“different taxrates,different rules governing tax-exempt goodsand likely prove bafflingformany retailers. Over 10,000jurisdictionslevysalestaxes, retailers. Correctly calculating andremitting salestaxes onalle-commerce saleswill forexample,breezily disregardsThe Court, thecoststhatitsdecisionwillimposeon public policyconcern. unfairness andinjusticedoesnotappeartoembraceconsiderationofthatcurrent could beaffected by abandoningthephysical-presencerule. TheCourt’s focuson Quill “tossed [theball]intoCongress’s foracceptanceornotasthatbranchelects,” court, *** As the Court putsit,allowing AstheCourt remote sellerstoescape Bellas Hess Ante, at2096.“[U]nfairandunjustto onthe“present realities ofthe *** Wayfair But “the present realities Wayfair issues are discussedbelow. mustunderstandthe 17 WAYFAIR: FORMULATING A FLORIDA RESPONSE

Wayfair Global Hookah Global Hookah

than South Dakota’s. For For Dakota’s. South than Wayfair. higher Case No. 2017-CA-1623. Case No. does suggest that thresholds of $100,000 in $100,000 of thresholds that suggest does Wayfair While commenting favorably on the South on the South While commenting favorably 21 must develop its own way of measuring risk and measuring risk way of its own develop must Wayfair Wayfair Wayfair Wayfair Although the Court mentioned this feature of South Dakota’s Dakota’s of South Although the Court mentioned this feature opinion will inevitably vary in their evaluation of the risk. But opinion will inevitably vary of the risk. But in their evaluation 22 opinion does not expressly say that thresholds are required, or if they required, are say that thresholds opinion does not expressly Wayfair Wayfair. South Dakota and the United States, which appeared as a friend of the court, argued that that argued as a friend of the court, which appeared States, and the United South Dakota Wayfair Wayfair suggests that a state cannot adopt thresholds thresholds adopt cannot state a that suggests Wayfair, Wayfair,

leaves open the possibility that a state law with no thresholds would be upheld, it open the possibility that a state law with no thresholds leaves Unresolved Issues After After Issues Unresolved As a narrowly focused decision which removed an obstacle to imposing the to imposing an obstacle removed decision which focused As a narrowly out minimum requirements, than spelling rather responsibility collection Wayfair Wayfair Wayfair

The Florida Department of Revenue has not attempted to do so, in anticipation that the Legislature will provide will provide the Legislature that in anticipation do so, to has not attempted Florida Department of Revenue The At oral argument in argument oral At Distributors v. Department of Business and Professional Regulation, Regulation, and Professional Business Department of v. Distributors a single sale was sufficient to create nexus. The Court did not accept or reject this contention, but instead focused on but instead contention, reject this or accept Court did not The nexus. create to sufficient a single sale was some have laws, nexus enacting economic states in the Appendix, of the it. As shown before law the South Dakota and the same as South Dakota’s. lower, higher, thresholds established and whether a Department of Business as to Court Circuit County is pending in Leon an issue However, guidance. of application tax is a retroactive excise of tobacco assertion Regulation Professional Retroactivity. Thresholds.

22 Like South Dakota, states for the most part not been attempting to assert Dakota, have economic nexus Like South in the wake of retroactively of uncollected recovery basis for a state to seek retroactive a theoretical it also created law favorably, 21 also does not foreclose the prospect that thresholds only slightly lower than South Dakota’s would be Dakota’s than South only slightly lower that thresholds the prospect also does not foreclose of the Students held invalid. of wake in the options its considering a state its tolerance for it. B. collect the use tax would be vulnerable to constitutional attack. collect the use tax would be vulnerable risk the accept will Dakota’s, South than lower are that thresholds or thresholds, no adopt that States to the extent of the divergence. of the risk linked be stricken, with the magnitude may that their laws Although example, a state could establish an annual dollar threshold of $500,000 and a transaction threshold of $500,000 and a transaction threshold dollar threshold example, a state could establish an annual and number of sales, which are of dollar volume it could make the two thresholds of 1,000 sales. Or (see satisfied be both must that requirements separate Dakota, South in benchmarks nexus alternative requiring to think that thresholds is no reason short, would suggest, there as logic In the Appendix). sellers to remote to requiring as a condition Dakota’s of economic activity than South a higher degree are required, how they should be evaluated. But But evaluated. be should they how required, are the context of large sellers and the likely to be upheld, at least in annual sales or 200 transactions are A conservative application and adoption of SSUTA). law (prospective Dakota other elements of South Dakota’s. least as high as South as for a state would be to adopt thresholds approach in Nothing physical presence. A brief generic discussion of each issue is provided here. Florida specifics are specifics are Florida here. of each issue is provided A brief generic discussion physical presence. V. subsequently in Part addressed A. sales thresholds. Consider a state law that contains no the thresholds, Dakota left considerable uncertainty in its wake. Some of the remaining issues are practical, in the sense that practical, issues are remaining of the uncertaintyconsiderable left wake. Some in its this categoryimperfect states with the they leave their laws. In choices as they consider changing are be established, whether a newshould they law must be level at what importance of thresholds, academic, such more issues are is essential. Other of SSUTA adoption and whether only, prospective of relevance continued Clause nexus differ and the Process Clause and Due Commerce as how IV.

A FLORIDA TAXWATCH REPORT 18 clauses “may not beidenticalorcoterminous,” thattherequirementsCommerce Clause, 138S.Ctat2093.But also observed theCourt ofthetwo physical presence isarequisite foranout-of-stateseller’s liabilitytoremit salestaxes” underthe for rejecting thephysicalpresence fordueprocess purposesapplyaswell rule tothequestionwhether nexus are explained it,“the essentiallyequivalent inthiscontext. AstheCourt reasons given in in The Court D revisions. constitutional challenge,butatthepriceofhavingtoenact significantstatutory options thatare eachlessthanideal.Adoption ofSSUTA provides someprotection against created by required changestoastate’s salestaxlaws,aspreviously described.Thishighlightstheconundrum What makesSSUTA different thanthresholds andprospective applicationisthemagnitudeof ofSSUTAother elements,theimportance intheCourt’s decisionisspeculative. entirely different, atalltosimplifyusetaxcollection.Aswiththe orthestatecouldmakenoeffort ofSSUTA, adoptotherapproaches tosimplificationthatfallshort A statecouldintheory orare did notdeclare thatSSUTA membershipisessentialtoimposingthe usetaxcollectionresponsibility. simplification measures intheagreement. Aswiththresholds andprospective application,theCourt decision isthatthestateafullmemberofSSUTA, whichmeansithasadoptedtheextensive The third salientfeature ofthe notedwithapprovalSouth Dakota lawthattheCourt inthe C. are doingastheyupdatetheirlawsinthewakeof retroactive applicationofalawistomaketheprospective, whichisalmostuniversally whatstates with protections provided by stateconstitutions.Thebestwayforatoavoid litigating over facts specifictothesituation. Beyond this,astateattemptat retroactive applicationcouldalsoconflict of afederaldueprocess violation.But thiscoulddependupon theperiodofretroactivity andother could easilyconcludethattheinequityofretroactively applyingits of retroactive applicationofataxlaw, andthattheperiodofretroactivity isarelevant fact.TheCourt lessonof The primary raise “serious constitutionalquestions,” 512U.S.at38. concurring opinionwhichexpressed thataretroactivity theview periodofmore thanoneyear would characterized theperiodof The Court retroactivity as “modest,” and Justice O’Connorauthored a a retroactivity challenge to a1987“curative” amendmenttoafederalestatetaxlawenactedin1986. based ondueprocess and merits ofsuchaposition.Objections toretroactive applicationofstatetaxprovisions are generally The Supreme hasnottodateprovided Court muchguidancewhichwouldassistinevaluating the bechallenged. such apositionwouldalmostcertainly sellers have interpretation openedthedoortocontentionthatremote oftheCommerce Clause,theCourt taxes from remote sellers.By concludingthatthephysicalpresence was rule . Importance ofSSUTA. Relationship between Due Process andCommerce Clause Nexus. Wayfair. always Wayfair had the obligation to collect, with no protection from Absent betterguidancefrom Congress astatemustchoosefrom ortheCourt, reverted toitspre- Carlton United States v. Carlton, is thatthefactsandcircumstances are relevant totheconstitutionality Quill notionthatDue Process ClauseandCommerce Clause Id. 512U.S.26(1994).In rejected thatcasetheCourt

Wayfair . Wayfair Quill. decision risestothelevel If advanced by a state always anincorrect Wayfair Quill

19 WAYFAIR: FORMULATING A FLORIDA RESPONSE is the latest Wayfair Wayfair the justices appeared appeared the justices The following passage passage The following 23 Wayfair, and seemed to believe that Congress might be Congress that believe and seemed to Quill the Court reversed the burden of getting Congress to act. of getting Congress the burden the Court reversed contacts seek relief from collection systems thought collection systems from contacts seek relief Wayfair Wayfair emphasized the power and capability of Congress to address the use to address and capability of Congress the power emphasized were overruled. were de minimis contacts. opinion is illustrative: Quill Wayfair

and 24 Wayfair de minimis Quill the physical presence rule no longer controls, those systems may well become rule those systems may well no longer controls, the physical presence state taxing or from providers in a short private available period of time, either from these may legislate to address Congress And in all events, agencies themselves. if it deems it necessaryproblems and fit to do so. Respondents argue that “the physical presence rule start-ups has permitted physical presence and argue that “the Respondents their companies and access to grow as a means small businesses to use the Internet without exposing them to the daunting complexity and business- a national market, may burdens These *** collection.” tax sales nationwide of obstacles development particularlypose legitimate concerns in some instances, for small businesses that not only differ, taxes State of sales to customers in many States. make a small volume sometimes, and, taxed are that goods of categories the in also but imposed rate the in at a reasonable that is available software Eventually, date of purchase. the relevant as Indeed, problems. these with cope to small businesses for it easier make may cost answered in part by noting that, as discussed below, there are various plans already plans already various are there part in as discussed below, noting that, by answered the as well, taxes businesses pay the and since in-state simplify collection; in place to And, if some small against out-of-state sellers is avoided. risk of discrimination businesses with only These issues are may still do so under other theories. those entities to be a burden, the Court in the instant case…. not before Concerns that complex state tax systems could be a burden on small business are are on small business be a burden tax systems could that complex state Concerns removes the protection, subject to Congress’ power to reinstate it. reinstate to power to Congress’ subject the protection, removes protected remote sellers while recognizing the power of Congress to modify that protection. to modify that protection. of Congress the power while recognizing sellers remote protected Compare the majority and dissenting opinions regarding the availability and cost of compliance software. For the For software. of compliance and cost the availability regarding opinions the majority and dissenting Compare In some of the exchanges between the justices and lawyers at the oral argument in argument the oral at and lawyers the justices between In some of the exchanges case was decided in the South Dakota courts without a trial, there was no process to resolve factual disputes. factual resolve to no process was without a trial, there courts decided in the South Dakota case was frustrated that Congress had not acted in the 25 years since since in the 25 years had not acted Congress that frustrated do so if to motivated more the the dissent, For short period of time.” in a available become “well may cost” “reasonable at such systems majority, As the debate.” subject to are and its capabilities and expense in its infancy, still “is of such software development What remains of the Dormant Commerce Clause? Commerce of the Dormant What remains

24 138 S. Ct. at 2098. 23 tax collection issue. However, in tax collection issue. However, Quill Wayfair the majority from E. of interstate in the protection erosion an unmistakable reveal time over opinions The Court’s birth. the Court that commerce to the nation’s at one time viewed as foundational Clause doctrine, the Commerce keeping with its Dormant episode in this jurisprudential drama. In Court both in The size of a “small business,” the nature of these “other theories,” and the requirements of proof proof of requirements and the “other theories,” of these the nature “small business,” of a The size against this becoming a of speculation. The best insurance other matters are associated with them on responsibility to impose the use tax collection attempting from to refrain for a state is problem businesses with 138 S. Ct. at 2099. 138 S. Ct. at 2099. The difference may be suggested in the following passage: the following be suggested in may The difference

A FLORIDA TAXWATCH REPORT 20 25 cooperate intheenforcement oftheirrespective laws. Section 55.501, into thestate.If asellerfailstodoso,itcanbeheldliableforthetax itfailedtocollect.States typically By its terms, G. defines theterm “physical presence.” the statesmayandnotdo. Still further, billsintroduced atthe federal level inthisarea rely onphysicalpresence todelimit what state lawquestionofwhatismeantby “physical presence” underthestatestatutemustbeanswered. does nothave aphysicalpresence inthe state.” Before constitutionalimplicationsare considered, the the South Dakota salesthresholds thatwere before in theCourt Second, physicalpresence even intheworldofeconomicnexus.For continuestosurface example, past half-century. what constitutesasufficient “physical presence” forthe -thesameissuethathasbeensoimportant be required tocollectthetax.Thisleaves openthepossibilityfor renewed constitutionaldebate over seller with sales below the threshold but who has physical presence withinthe state can presumably tocreate “economicassumes thatsomelevel ofsalesactivityisconstitutionallynecessary nexus,” a imposing theusetaxcollectionresponsibility, itremains relevant foratleasttworeasons. First, ifone Although physicalpresence withinthetaxingstateisnolongeraconstitutionalrequirement for F. than sellers. from thatitshouldbe sales intoastatecouldhave difficultyconvincingtheCourt treated differently revenue andinequitytomainstreet retailers. Amarketplace provider thatderives economicbenefits On theother hand,the power torequire theprovider tocollectthetaxisnotcontrolled by asamarketplace providerbetween sellingand serving or facilitator allows theargumentthatastate’s legislation thatappearsonthewebsite oftheMultistate Tax Commission(“MTC”). are not.Functions thatcouldclassifyabusinessasmarketplace provider are listedinthedraftmodel In fact,thebusiness modelscanvary. Some marketplace providers mayalsobesellers,whileothers The functionofamarketplace provider (aka “facilitator”) isobviously different thanthatofaseller. can berequired tocollecttheusetaxonbehalfofsellerswhotheirsites. eBay andAmazon. In The issuehere involves online businesses that function as “marketplaces” for sellers. Examples include E. the Commerce Clause. Inc., Congress instead.ThisalsocallsintoquestionwhethertheCourt’s citationto Here, issayingthatsmallremote theCourt sellersdonotneeditsprotection; theyshouldlookto

Physical presence. Marketplace nexus. FINAL.pdf.aspx Wayfair-Implementation-Informational-Project/Post-Quill-Model-Legislation-Economic-Nexus-and-Marketplace- Multistate Tax Commission (“MTC”) available at Offshore sellers. discussed previously, offersany real prospect thatsuchsellersstillhave ajudicial remedy under Wayfair See, allows astate to impose the use tax collectionduty based on the level ofsales Wayfair footnotes 10-13andrelated text. Wayfair the Court wasnotpresentedthe Court withthequestionwhetherthesebusinesses See, opinionisemphaticallypredicated onconcernsover lossesofstate H.R. 379andS128,now pendinginthe116 http://www.mtc.gov/getattachment/Uniformity/Project-Teams/ Wayfair Wayfair. et seq., onlyapplytoaseller“who Pike v. Church, Bruce Florida Statutes, for th Congress. S.128 25 Thedistinction 21 WAYFAIR: FORMULATING A FLORIDA RESPONSE opinion suggests that the basis for that the basis opinion suggests Wayfair Wayfair has resulted in a flurry has resulted activity in other states, and of Wayfair resolved and those it left unresolved may be useful in crafting may be useful in crafting and those it left unresolved resolved A table showing activity in other states and at the federal level level federal the at and other states in activity showing table A

Wayfair Wayfair The change in legal landscape caused by landscape caused The change in legal Congress. in introduced legislation in in the Appendix. is provided question of how the collection responsibility can be enforced against such a seller. against such a seller. can be enforced the collection responsibility question of how the issues that Understanding the most consumers, and state tax administrators, of businesses, the perspective From policy. a state’s for making responsible who are those by option is that it be clearly expressed critical aspect of any such decisions. example, provides that the judgment entered by the court of another state can be recorded and court the by state can be recorded of another entered that the judgment provides example, a collection duty against the use tax the tools to enforce have a state may Thus, in Florida. enforced the majority in Nothing in another state. seller remote open the this leaves However, States. United the sellers located outside for be different nexus would

A FLORIDA TAXWATCH REPORT 22 the in-statesalesare characterized. are sufficienttoallow Floridato require collection oftaxonthe remotesales.Thisdependson how be whetherthosesales,standingaloneorincombination withthein-statesalesduringseminars, annually. On theotherhand,ifcompany’s remote saleswere below thethreshold, theissuewould responsibility couldconstitutionallybeimposedirrespective ofthethree daysofin-stateseminars South Dakota’s andacompanylikeShare hadsalesinexcess ofthethresholds, theusetaxcollection of When considered with that “substantial nexus” waslacking. exploit theconsumermarket inFlorida.” Apparently onthisbasistheState Supreme agreed Court “Share didnotcreate acustomerbaseinFlorida duringitspresence attheseminarsanddidnot the State mustbeanalyzed todetermineifithad “substantial nexus.” hadfoundthat Thetrialcourt “bright linetest” ofthosecases didnotapplyto“insulate” Share, andits“additional connections” to but pointedoutthatneitherdecisionwascontrolling becauseofthein-stateseminarsales. the case.Indeclined toentertain reaching itsconclusiontheFlorida cited court sales. AunanimousFlorida Supreme answered Court inthenegative, andtheU.S.Supreme Court The issuewaswhether Share wasliabletothe State forthetaxithadfailedtocollectonmailorder sued tocontesttheassessment. ofRevenuetax onthosesales.AfteranaudittheDepartment issued anassessmentasaresult. Share Florida. Share alsosoldproducts toFlorida customersthrough mailorder, andcollectednoFlorida total sales,andallbut16%oftheseminarsaleswere madeto non-residents attendingtheevents in collected Florida sales tax on those sales. The seminar sales constituted approximately 4.5% of its supplies conductedseminarsinFlorida forthree dayseachyear, soldproducts attheseminars,and denied, cert The second Florida caseis economic nexus. confined toanarrow setofcircumstances, inwhichastate relies uponphysicalpresence ratherthan eyes oftheCourt. With thephysicalpresence abandoned,however, rule therelevance of between anemployee andanindependentjobberbeing“without constitutionalsignificance” inthe Notwithstanding theabsenceofemployees withinthestate,jobberscreated nexus,thedistinction became thebasisfor“attributional nexus” theoriesadvanced insubsequentdecades. nexus foraGeorgia sellermakingsalesintoFlorida. TheU.S. Supreme decisioninthiscase Court issue presented was whether the presenceprimary of independent jobbers within the State created Scripto, Inc. v. Carson, Two significant casesaddressFlorida court nexusunderChapter212, Florida Statutes. The firstis A. V. Share International Florida caselaw. 519 U.S.1056(1997).There, a Texas manufacturer anddistributorofchiropractic Experience, Challenges,Opportunities Florida Nexus Law:

is uncertain. If Florida isuncertain. were toenactaneconomicnexusstatutepatterned after 105 So. 2d 775 (Fla. 1958), Wayfair’s Department ofRevenueDepartment v. Share International, abandonmentofthephysicalpresence thecontinuingvitality rule,

affirmed, affirmed, 362 U.S. 207 (1960),inwhichthe 676So.2d 1362(Fla. 1996), Bellas Hess and Scripto Quill

The is

23 WAYFAIR: FORMULATING A FLORIDA RESPONSE

Quill 26 and constitute constitute not 430 U.S. 551 (1977); 551 (1977); 430 U.S. Bellas Hess Bellas The DepartmentThe did . ). However, these marginal these However, ). that the in-state sales do sales in-state the that Share International Share Share International International Share because they include provisions that literally would impose because they include provisions National Geographic v. California Bd. of Equalization, Equalization, Bd. of California v. Geographic National Quill Quill physical presence could not be required to collect the tax. be required could not physical presence and no

Bellas Hess Bellas , the distinction between seminar sales and remote sales by the same seller is arguably seller is arguably the same sales by sales and remote seminar between , the distinction Some of the differences between section 212.0596 and 212.06(2): section 212.0596 imposes the collection duty if the imposes the section 212.0596 and 212.06(2): section 212.0596 between Some of the differences sellers subject to section 212.0596 are not required to collect the local option surtax. collect to not required are section 212.0596 sellers subject to seller has in-state agents who transact business for the seller, even if the sales subject to tax are unrelated to the to unrelated tax are to if the sales subject even the seller, for business agents who transact seller has in-state based on activities of the agents, apparently to file a group eligible duty if the seller is a member of an affiliated imposes the collection section 212.0596 under section has Florida nexus; other member of the group and any tax return income federal consolidated and registration; and the Department can waive the statute, sellers subject to applies to fee no registration 212.0596, Wayfair Florida nexus statutes. Florida

situations did not prevent the rule from providing a clear guidepost for the Department and remote a clear guidepost for the Department and remote the rule providing from situations did not prevent A seller with sellers generally. 26 a “gloss” embedded within them. a “gloss” statutes imposing the rule as an implicit element of the Florida the physical presence Treating of the rule. its edges At nature easy because of the “bright line” was relatively collection responsibility what occasional disputes over than its moniker would suggest, prompting was less “bright” the “line” as (such presence physical sufficient a constituted law as established in in Florida presence on sellers without a physical the collection responsibility that under to such sellers, in recognition not attempt to apply these provisions in the criterion, although not expressed The physical presence it could not constitutionally do so. as treated was effectively responsibility, collection the for imposing condition an essential as statutes 1949, also identifies the conditions that create “dealer” status and therefore require collection of the of collection require therefore and status “dealer” create that conditions the identifies also 1949, this list bears similarities to the one in section remote sales, tax. Although not specifically targeting The differences physical presence. that do not require 212.0596, and also includes alternatives not material to this discussion. the criteria in sections 212.0596 and 212.06(2) are between been out of sync with the constitutional in that both of them have however, similar, The two statutes are to collect the tax on such sales. The list is long, including Florida domicile, a physical presence, physical presence, Florida domicile, a list is long, including to collect the tax on such sales. The group with a member that has nexus, as alternative advertising, and being a member of an affiliated for the collection responsibility. predicates in sales tax of the enactment original to the traced can be which Statutes, 212.06(2), Florida Section 212.06(2), and 213.256, Florida Statutes. Section 212.0596 is Florida’s “mail order nexus” statute. nexus” order “mail 212.0596 is Florida’s Section Statutes. Florida 212.06(2), and 213.256, to seller a remote 1987, this law sets forth enacted in Originally the activities which would require mail or other means of as sales “by (defined sales” order on “mail use tax collect the Florida in Florida). in another state and the property is delivered is received the order where communication” “dealer”) a seller (the statutoryrequire which purportThe statute then lists the conditions term is to responsibility still cannot be imposed where the volume of remote sales is not considered significant. sales is not considered of remote the volume where still cannot be imposed responsibility the a bearing on whether may still have in-state activity extent of the seller’s and short, the nature In sales. of remote to a limited volume can be imposed with respect collection responsibility B. 212.0596, sections remote sellers are of responsibility to the collection relevant Florida statutes The If a seller’s in-state seminar sales constitute “availing itself” “availing sales constitute in-state seminar within the meaning of the in-state market a seller’s If of courttrial a with ruling But in as irrelevant. court that the collection would find that a Florida it is conceivable of the in-state market exploitation

A FLORIDA TAXWATCH REPORT 24 rule. rule. These fairnessissuescould not adequatelybeaddressed inthepastbecauseof physicalpresence inequity between Floridians whovoluntarily paythetaxonremote salesandthosewhodonot. inability to collect legally-owed use taxes directly from consumers; and the merits of resolving the the competitive disadvantage created for Florida “brick and mortar” retailers; the State’s practical Reasons theFlorida Legislature shouldactinthewakeof C. None oftheFlorida statutesaddresses online“marketplace providers.” enforce thecollectionresponsibility. as tothe nature ofRevenue theDepartment of their obligations, or instruct asto whom itshould not yet been formulated as a theory, Florida statutes do not now provide guidance to remote sellers the usetaxcollectionresponsibility ofremote sellers. Written inanerawhen“economic nexus” had Section 213.256 is thus obsolete and the same may be said of Florida law generally with respect to for suchmembership. petitioning the Streamlined Sales Tax Governing Board for full membership, and receiving approval comprehensive detail.Florida cannotjoinasafullmemberwithoutenactingthosemeasures, states inNovember 2002.Thecurrent agreement prescribes thesimplificationmeasures in the statuteisdistinctfrom SSUTA, whichwasadoptedby adifferent process andorganizationof of simplificationmeasures for remote sellers. Despite itsname,however, theagreement referenced in statute goesontoenvisionaprocess inwhichFlorida andotherstateswouldjoininthedevelopment January 27,2001by theExecutive CommitteeoftheNational Conference ofState Legislatures.” The of Revenue toenterintothe “Streamlined Sales andUse Tax Agreement asamendedandadoptedin “Simplified Sales and Use Tax Administration Act,” directed the Executive Director ofthe Department Also focusedonremote salesissection213.256,Florida Statutes. This2001law, labeledthe answered properly withlegislation,atopicconsidered inmore detaillaterinthispaper. Florida constitutionalenvironment willextendtheusetaxcollectiondutyinnew canonlybe suchaposition.Butdecide totestthelimitsofeconomicnexusandassert thequestionofhow far arguablyleftopenthepossibilitythatasinglesalewouldsuffice.Thus,Court Floridacouldconceivably and the United States argued in It ispossibletomaintainthatasinglesalesufficient create nexusfortheseller, as South Dakota have nobenchmark. implicit in the existing Florida and nexus statutes. Thus, the Department remote sellerspresently essentially quantitative innature measure andnoparticular ofeconomicactivitycanbetreated as gloss.Unlikestatutory the“brightline” characteristicofphysicalpresence, economicnexusis omission isofadifferent nature thanphysicalpresence andisnotsusceptibletobeingtreated asa neither section 212.0596 nor section 212.06(2) contains such an economic nexus criterion. This sustained insteadaneconomicnexusconceptbasedonthelevel ofsalesactivityintothestate.But Wayfair Reasons fortheFlorida Legislature toact. Wayfair discarded thephysicalpresencehadusedasitsbenchmark, thattheDepartment and rule has now removed

that obstacle. Wayfair. By neither accepting nor rejecting thiscontention,the

Wayfair, include thedesirabilityofremoving 25 WAYFAIR: FORMULATING A FLORIDA RESPONSE See, See, and the literal text of Florida’s of Florida’s and the literal text Wayfair Wayfair in the absence of legislative guidance. As discussed above, none of the Florida laws laws Florida none of the above, As discussed guidance. of legislative in the absence . In this regard, consider the plight of remote sellers and the Department of Revenue sellers and the Department of Revenue plight of remote consider the this regard, . In Wayfair Wayfair Wayfair section 212.06(2)(c), (g), (3)(a), Florida Statutes. The Department could invoke such provisions Department such provisions The could invoke Statutes. (g), (3)(a), Florida section 212.06(2)(c), decision for legislators and it is doubtful that any administrative attempt to adopt such standards standards such adopt to attempt administrative any that doubtful is it and legislators for decision rulemakingthrough or otherwise would survive a challenge. the Legislature intends to be Florida’s tax policy now. The Department The cannot simply decide on its tax policy now. Florida’s intends to be the Legislature that the existing rulemaking to declare would at best be effective to the literal text. Even revert to own would henceforth be applied requirement, and no physical presence statutes, with no sales thresholds Department use The not tax. could collect to obligation the trigger would sale single a and literally That is a policy as it has no authority to do so. rulemaking to adopt economic nexus standards responsibility against remote sellers lacking physical presence. The Department The would be abandoning sellers lacking physical presence. against remote responsibility viewed as a constitutionally based interpretation position that is fairly a longstanding administrative Even if the 1949 ratified. its acquiescence effectively by of the statutes, which the Legislature the law has without a physical presence, the collection responsibility intended to impose Legislature of what evidence and its literal text is hardly not been applied that way for the better part of a century, Department audit and enforcement personnel employing different ideas of what constitutes economic different personnel employing Department audit and enforcement all these actors deciding nexus With criteria. nexus own sellers may also devise their nexus. Remote with the situation at odds with Florida’s likely, and litigation are confusion independently, standards tax administration. aspiration to even-handed the use tax collection with attempting to apply existing law to enforce other problems are There aggressive position. It is the Legislature’s prerogative to weigh such factors and to decide that adoption to weigh prerogative is the Legislature’s position. It aggressive should be clearly such an intention But of the State. is in the best interests nexus standard of a low or litigation engage in conjecture to not required so that sellers and the Department are expressed new of decades-old statutes. applications over with different inaction is inconsistent treatment, Another possible consequence of legislative However, the question that must first be answered is whether this is what the Legislature wants the wants Legislature the what is this whether is answered be first must that question the However, collection based on a the lack of clear constitutional authority to require Department to do, given consideration of the risk that such action will provoke involves answer single sale. A reasoned and defend such an to administer required resources State constitutional litigation, and of the dating to 1949 are written, the collection responsibility is imposed on persons “within or outside the or is imposed on persons “within responsibility written, the collection dating to 1949 are threshold. with no sales make sales of tangible personal property who for use in this State, State” e.g., from of sales, despite having refrained seller with only one sale or a small number against a remote a physical presence. doing so for decades in the absence of One may reasonably ask how remote sellers and the Department to apply these can be expected remote ask how may reasonably One nexus as the constitutional physical presence has replaced presence that economic statutes now criterion. The statutory not untenable position. quo places them all in a difficult if status one scenario, the Department take the position that could In as the laws example, a single sale. For collection of the tax based on it to demand nexus laws allow Another compelling reason for legislative action involves a new fairness issue that ironically results results newa ironically that issue fairness involves action legislative for reason compelling Another from after economic nexus. to a gloss based on is susceptible responsibility upon the use tax collection touching

A FLORIDA TAXWATCH REPORT 26 and countyoptionsalessurtaxes; thenumberoftaxratesislimited;and thestateandlocaltaxbases Unlike other states, for example, Florida already centralizes the administration of the state sales tax sales and use tax laws. In some respects the changes in Florida would be less onerous than elsewhere. As previously noted,astate adoptingSSUTA isinevitablyrequired tomakeextensive revisions to its Of thethree South Dakota nexus criteria, the mostchallengingforFlorida istheadoption of SSUTA. retroactive applicationofeconomicnexusstandards. physical presence hasalwaysbeenwrong. Other rule stateshave overwhelmingly refrained from customers onpriortransactionsandare notatfaultfortheSupreme Court’s determinationthatits application inFlorida shouldnotfaceretroactive exposure. Theycannolongercollecttaxfrom Florida taxandfiledno Florida returns ingoodfaith reliance uponthephysicalpresencerule andits ifnorequiredassessment doesnotbegintorun return isfiled. Remote sellerswhocollectedno it shouldnotattempttomakethischangeretroactive. Under Florida lawthestatuteoflimitationson longstanding recognition ofphysicalpresence asapredicate forimposingthecollectionresponsibility Florida decides to exercise constitutional power its new under The secondeasy South Dakota criterionisprospective application,discussedpreviously. However would bethresholds andprospective application. With respect tothresholds, considerthefollowing: criteria, asmanyotherstateshave done.Of thethree South Dakota criteria,theeasiesttoadopt An obvious candidateforconsiderationistheSouth Dakota law. Florida couldadopttheidentical Once inactionisrejected asanoption,thequestionbecomeswhatnexuscriteriaFlorida willenact. D. power tooutofstatesellers. the legislative branch can decide under what circumstances Florida’s policyistoextendtheState’s responsibility for this design cannot be delegated, but that is the effect of legislative inaction. Only has great flexibilityinitsdesignof Florida’s taxsystem.Theessentialmessagehere isthatthe sales couldbeusedtoreduce thesalesandusetaxrate,oroffsetother revenue sources. TheLegislature on remote salescanbeachieved withoverall revenue neutrality. For example,taxrevenues from such collected from consumers)onpurchases atcompetinglocalretail stores. Moreover, usetaxcollection tax.Thetaxisdueonpurchasesimposition ofanew from online vendors, just asitisdue(and An “economic nexus” lawmakingcleartherequirements forusetaxcollectionwould • • • Florida legislative options. (e.g., $500,000in Texas, California,Ohio). Florida isasubstantiallylarger state,andothershave adoptedorare consideringhigherthresholds The Legislature maywishtoconsidera revenue threshold higherthan South Dakota’s $100,000. number oftransactions. alternative criterion,orby requiring annualsalesofaspecifieddollaramount and related functions.Other stateshave addressed thisby eliminatingthenumberofsalesasan revenues tojustifytheState’s administrative costsassociatedwithreturn processing, collection, effective. For example,200salesoflow dollaramountswouldprobably notproduce sufficienttax andunlikelytobecost The numberofsalesasanalternative to adollar volume isunnecessary approval in should beconsidered aconstitutionalminimumsincetheseare thelevels thatobtainedtacit The South Dakota thresholds of$100,000inannualsales revenue or200salesare low and Wayfair.

Wayfair, if it departs from if the it departs and aminimum not bethe 27 WAYFAIR: FORMULATING A FLORIDA RESPONSE 28

http://archive.flsenate.gov/data/session/2005/Senate/bills/analysis/ 27 . TaxWatch suggested at the time that the legislation would be essentially revenue neutral if neutral revenue be essentially would the legislation the time that at suggested . TaxWatch . the fiscal consequences of adopting SSUTA might be evaluated differently. Previously, Previously, differently. might be evaluated SSUTA the fiscal consequences of adopting https://statics3.lobbytools.com/docs/2014/3/18/67255_r_s_revenue_estimating_impact_conference_held_ admonition that they could not be compelled to do so. The State’s Revenue Estimating Revenue State’s The compelled to do so. admonition that they could not be Wayfair, Wayfair, For example, see SB 310 (2015); SB 292 (2016), although these bills would require review to ensure current current ensure to review require although these bills would (2016), SB 292 see SB 310 (2015); example, For The last official estimate of the impact of adopting SSUTA was a $41.5M loss for the State (mostly due to replacing to due (mostly State for the loss $41.5M was a SSUTA of the impact of adopting estimate official last The march_14_2014.pdf compliance with SSUTA. with SSUTA. compliance of the cap on the the removal (due local governments for of $41.1M an increase and with rounding) system the bracket appears at estimate local option surtax). The pdf/2005s0056.cm.pdf the by reduced Fund were Clearing Trust Sales Tax Half-cent Government the Local through the amount shared Estimating the Revenue In 2014 adoption of SSUTA. from resulting local governments to amount of the increase the to of $100M in a loss alone result would with rounding system the bracket replacing that estimated Conference See State.

present the difficulties that will result from inaction. Florida could retain and codify a Florida-specific a codify and retain could Florida inaction. from result will that difficulties the present Florida rule. And since it is no longer a constitutional requirement, of the physical presence version 27 28 In focusing its attention on the use tax collection issue, the Legislature can also address marketplace marketplace address also can Legislature the issue, collection tax use the on attention its focusing In nexus. for preserving a way of doing so which does not the status quo also have Lawmakers with a preference Court approved, it may now be possible to forecast tax revenue from remote sales. remote from revenue tax be possible to forecast it may now Court approved, as and SSUTA another possibility is to view thresholds is problematic, of SSUTA adoption If sellers small remote higher threshold(s), With small seller issue. the of addressing ways alternative and larger sellers would without SSUTA, even the collection requirement by would not be burdened to comply with it. resources sufficient as having likely be considered After use tax without a physical presence Florida collection of the any legislation purporting to require the extent of voluntary existed under a constitutional cloud, and forecasting compliance would have is no that physical presence Given been highly speculative. of simplification would have as a result part having been of a state statutory mosaic that the Supreme and adoption of SSUTA longer required from collection of tax by remote sellers lacking physical presence, in an environment dominated by dominated by an environment in presence, sellers lacking physical remote collection of tax by from Quill’s sales. The REC thus such remote from revenues to attribute increased was reluctant Conference reducing the State, to the fiscal impact in a negative as resulting viewed the adoption of SSUTA for appropriation. available estimated revenue for the local option sales surtax would increase local government revenues, but that increase would but that increase revenues, local government sales surtaxfor the local option increase would elimination of the brackets and caused by collections at the state level the reduced address not directly Library Definitions. of adoption of the SSUTA derived be to revenue increased the been has analysis fiscal prior the in variable primaryThe unknown An impediment to Florida’s adoption of SSUTA in the past has been the difficulty of evaluating the evaluating of in the past has been the difficulty of SSUTA adoption Florida’s An impediment to positive readily quantifiable than the more impacts negative fiscal impact of doing so, with the overall on a sale system to calculate the tax due rounding system to a a bracket Changing from impacts. Library would also of Definitions and adopting the SSUTA total sales tax collections, would reduce sales price cap the $5,000 would be less substantial. Eliminating impact, although it a negative have (with a limited exception) are the same. With respect to the requirements of SSUTA that mitigate the that of SSUTA to the requirements respect With the same. are exception) (with a limited largely in is a state, Florida within tax systems disparate and multiple with complying of burdens and could been introduced previously have Florida in SSUTA bills to adopt Moreover, compliance. be used as a starting point. presumably

A FLORIDA TAXWATCH REPORT 28 and enactinganyoneofthemwouldbeanimprovement over theconsequencesofinaction. and theonlyviablemechanismforthatislegislation. Multiple optionsare available forconsideration state taxissueofmoderntimesonitshead.Likeotherstates,Florida hasnoalternative buttoadapt, VI. knowso thataffectedbusinessandthe Department whatisexpectedofthem. The factorconsidered here astothe mostimportant isclarityandcertainty Florida nexusstandards provoke constitutionallitigation. of more aggressive nexusstandards thanthoseintheSouth Dakota law, eitherofwhich islikelyto appear toentailthelowest islegislative risk.At inaction,andcodification theotherendofspectrum statute, orwhichestablisheshighernexusthresholds, orwhichcodifiesphysicalpresence would A factorinevaluating eachoftheoptionsisrisklitigation.AlawthatcopiesSouth Dakota in-state retailers wouldcontinuetoexperienceacompetitive disadvantage. it isentitled; some consumers would continue to avoid payingtaxes ontheironlinepurchases; and that have madeitahighprofile issue.The Statewouldcontinue tobedeprived of revenue towhich therefore also an option. Of course, retaining a physical presence standard also retains the problems existing, physical presence-oriented administration of nexus in Florida, is if legislatively articulated, “presence” is sufficient to trigger the tax collection responsibility. and refining thePreserving pre- has theflexibilitytodefineitasamatterofstatelawandeliminatemuchcontroversy over what Wayfair Conclusion has turned the jurisprudence related hasturnedthejurisprudence towhatisarguablythemostdifficult 29 WAYFAIR: FORMULATING A FLORIDA RESPONSE No No No No No No No No No No No No No No No Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Legis would adopt would Legis adopt would Legis Yes, but out of compliance Yes, FULL MEMBER OF SSUTA? 29 $250,000 $250,000 $500,000 without newlegislation. A simplified chart of THRESHOLDS 10 sales totaling $100,000 or 100 trx $100,000 $100,000 or 200 trx $100,000 or 200 trx $100,000 $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 or 200 trx $100,000 $250,000 or 200 trx $250,000 $100,000 and 200 trx $100,000 $500,000 and 100 trx $500,000 $300,000 and 100 trx $300,000 $250,000 and 200 trx $250,000 Wayfair 29 Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Admin Admin Admin Admin Admin Admin Admin Admin Admin Admin Legis pending ACTION was decided, states began adopting “economic nexus” measures for use tax for use measures nexus” began adopting “economic was decided, states . Other State and Federal Legislation After Wayfair After Legislation and Federal State Other Wayfair The primary source of information on this chart is the Council on State Taxation website. It should be viewed as a high It should be viewed website. Taxation on State on this chart is the Council of information primary source The The entry “Legis” includes bills that have been introduced but not yet enacted. but not yet been introduced have includes bills that entry “Legis” The level snapshot, as there has been no inquiry into the nuances in specific states and the information is constantly constantly is and the information states in specific the nuances has been no inquiry into snapshot, as there level are framework common than the significantly different are that in ways acted have that states changing. Also, information. definitive for pronouncements and administrative of legislation should check the text reader The omitted. State legislation State

New Jersey New York New North Carolina North Dakota Minnesota Mississippi Missouri Nebraska Nevada Louisiana Maine Maryland Massachusetts Michigan Georgia Hawaii Illinois Indiana Iowa Kentucky California Colorado Colorado Connecticut of Columbia District STATE Alabama Arizona Arkansas California 29 Even before before Even the others it is pending, and in still others enacted legislation, in already states have collection. Some attempting to apply agencies are revenue appears below: of this whitepaper activity as of the preparation Appendix A Appendix A.

A FLORIDA TAXWATCH REPORT 30 that have beenpreviously remains tobeseen. in the past will appear. Whether the prospects congressional for a meaningful solution are better than As the116 in Montana, New Hampshire, andOregon thatlackaphysicalpresence intheotherstates. bill appearsintendedtoprohibit otherstatesfrom requiring collectionoftheirtaxes by remote sellers (Tester, Shaheen, Hassan, Wyden, Merkley). Thesestatesdonotimposesalesandusetaxes, andthe Potential Act of2019’’ wasintroduced by senatorsfrom Montana, New Hampshire, andOregon taxrateandothersimplificationmeasuresa singlestatewide responsibility onremote sellerslackingaphysicalpresence withinthestate,provided thestateadopts Compliance CostAct of2019.” Thisbillwouldallow prospective impositionoftheusetaxcollection The current crop includesH.R.379(Gibbs), dubbedthe“Protecting Businesses from Burdensome approval ofaninterstatecompact.However, nonegainedenoughtractiontopass. predicated thecollectionresponsibility onthestate’s adoptionofSSUTA, oruponCongressional in Congress sincebefore collection responsibility oninterstatetransactions,theissuehasbeensubjectofbillsintroduced With Congress havingthe power undertheCommerce Clauseto provide standards fortheusetax B. Wyoming Wisconsin West Virginia Washington Virginia Virginia Vermont Utah Texas Tennessee South Dakota Rhode Island Pennsylvania Pennsylvania Oklahoma Ohio Federal legislation. th Congress unfoldsthere islittlereason todoubtthatmeasures similartothoseintroduced

Quill wasdecided.In therecent pastsomeofthesemeasures wouldhave Admin Admin Admin Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Legis Must collect with$100,000 notice, reporting require or 200trx;with$10,000 complying withnotice, choice ofcollecting or option to comply with For <$10,000 insales, $100,000 or200trx $100,000 or200trx $100,000 or200trx $100,000 or200trx $100,000 or200trx $100,000 or200trx $100,000 or200trx $100,000 or200trx $100,000 or200trx $100,000 or200trx reporting req. $500,000 $500,000 $250,000 $10,000 ments . S128,namedthe‘‘Stop Taxing Our - No (assoc member) Yes Yes Yes Yes Yes Yes Yes Yes Yes No No No No No 31 WAYFAIR: FORMULATING A FLORIDA RESPONSE this page left blank for formatting purposes

A FLORIDA TAXWATCH REPORT 32 APRIL 2019

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