Andy Haile analyzes tax law related to e-commerce on WUNC radio’s The State of Things
In an interview on WUNC radio's The State of Things, Elon Law professor Andy Haile reviewed pending court cases and precedent setting U.S. Supreme Court decisions impacting the ability of states to tax retail purchases made over the internet.
Introducing the program, WUNC’s Frank Stasio described the significance of the issue.
“Here in North Carolina we’re facing a possible 400 million dollar budget shortfall this year,” Stasio said. “Next year the deficit is likely to be twice as much. As lawmakers grapple with what combination of spending cuts and tax hikes will make up the difference, another part of the solution may be lingering in the courts. Right now, legal restrictions prevent North Carolina from collecting tens of millions of dollars every year from online retailers. Internet purchases are on the rise, but sales tax revenue is not.”
Haile described the precedent setting Supreme Court case that prevents states from requiring many companies to collect sales taxes when they sell products over the internet.
“It all goes back to a Supreme Court decision in 1992 called Quill, in which a company was selling office supplies to residents of North Dakota,” Haile said. “North Dakota tried to have that company collect sales tax on its sales. The Supreme Court decided in that case that if a company does not have a physical presence in the state, then the state can’t require them to collect sales tax on sales. And so that’s the basis for why North Carolina is unable to have Amazon, for example, collect taxes on its sales of books to North Carolina residents.”
Haile reviewed the reasoning of the court in its decision in Quill, related to the Commerce Clause of the U.S. Constitution, and then summarized recent legislation enacted into law in New York, North Carolina, and Washington states, as well as lawsuits challenging that legislation, all aimed at more precisely defining the ability of states to collect taxes on purchases made over the internet.
Haile then discussed the revenue at stake for North Carolina should pending court cases find that states can tax sales made over the internet from companies without a physical presence in the state.
“The latest estimate that was put forth by the Secretary of Revenue, Secretary Lay here in North Carolina, is about 160 million dollars a year [in lost revenue from the inability to tax retail sales over the internet],” Haile said. “Internet commerce has increased exponentially over the last decade or so. The latest number I had was over $100 billion of retail internet commerce occurs each year in the U.S., and it’s increasing at more than a 10 percent annual rate.”
Click here to listen to Haile’s interview on the State of Things.
An article by Haile, titled, "A Time for Action: Reforming the North Carolina Tax Code," was recently published by the North Carolina Law Review. That article explores weaknesses in North Carolina's current tax code and suggests alternatives to modernize the state's existing tax structure. Click here for details.
Haile presented a comparative analysis of state tax policies regarding sin taxes in testimony before the Vermont Blue Ribbon Tax Structure Commission on March 15. He has analyzed the tax policies of numerous other states through recent published writings and news commentary. Click here for more information about Elon Law professor Andy Haile.