Supreme Court delivers – POLITICO
SUPREME COURT DELIVERS: The Supreme Court’s groundbreaking decision on online sales taxes doesn’t look like it will be the final word on the issue. The 5-4 ruling opens the door for states to require out-of-state online retailers and other remote sellers to collect sales tax from their customers, overturning a prior court decision that states have fought for years and that the court upheld in 1992’s Quill case.
But almost immediately after the opinion was handed down, questions started swirling about what might come next as states start to take advantage of the decision. Both Congress and state legislatures will face decisions in coming months over how – and, in some cases, if – to respond now that the longstanding wait on the South Dakota v. Wayfair case has ended, as your normal Morning Tax host Bernie reports. “Lawmakers from both parties said Thursday that they’re interested in following up the court’s ruling with legislation, after the four dissenting justices said that Congress was better suited to handle the issue,” according to Bernie.
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Some on Capitol Hill forecast a need for legislation to help retailers navigate complexities they’re sure to face as they begin to deal with tax laws in states and localities from coast to coast. “We’re still digesting the court decision, but it looks like even though it was favorable that maybe Congress may need now to act,” said Sen. John Thune (R-S.D.), who voted for legislation in 2013 to give states more power to tax out-of-state businesses that sell to their residents. “I think it’s probably coming. It’s just a question of when.”
A tough sell: That Senate bill five years ago, the Marketplace Fairness Act, S. 976 (115), garnered 69 votes, but nothing happened in the House. Getting legislation through Congress is never easy, to put it mildly. “I’ll do everything I can as the top Democrat on the Finance Committee to protect Oregonians – and small business everywhere – from being harmed by this catastrophic decision,” said Sen. Ron Wyden, whose state is one of five that doesn’t have a sales tax.
Outsiders weigh in: Some business groups indicated that the court decision was enough for their members, including the Retail Industry Leaders Association. Similar reaction emerged from the National Conference of State Legislatures.
Still other supporters of the ruling like the National Retail Federation called for further clarification from Congress. In the tech world, a statement from the policy, research and advocacy group Engine urged Congress “to step in to help prevent this ruling from hurting the very startups which are driving our nation’s economic growth and innovation.”
TRUMP TWEETS, TOO: President Donald Trump took to Twitter to praise yesterday’s ruling. “Big Supreme Court win on internet sales tax – about time,” he wrote hours after the decision was handed down. But analysts said the ruling might only marginally affect Trump’s frequent online sales target, Amazon, wrote Steven Overly for Pro Tech. That’s because the Seattle-based e-commerce giant, “which has distribution centers scattered all over the country, already collects sales tax in every state that has one,” as Steven put it. Amazon could instead face issues related to third-party sellers it hosts, though the company is on solid footing regardless. “Most consumers use Amazon for convenience, selection, service and Prime, not to find the lowest prices,” said Colin Sebastian, senior equity research analyst for Robert W. Baird & Co.
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IRS NOMINEE HEARING SCHEDULED: In other long-awaited news from the tax world, the Senate Finance Committee finally scheduled a hearing for next Thursday on Trump’s pick to run the IRS, Chuck Rettig. A tax lawyer by trade who’s specialized in tax controversies between his clients and the IRS and state tax authorities, Rettig enjoys widespread popularity throughout the legal community.
Trump nominated him in February to succeed former IRS Commissioner John Koskinen, who left when his term ended in November.
Rettig began one-on-one meetings with Senate Finance members this spring, and his nomination isn’t considered controversial, though some Democrats are expected to press him on transferring his management experience from the relatively small law practice where he works in Beverly Hills, Calif., to the IRS and its tens of thousands of employees. Some might also quiz him on aggressive postures taken by some of his clients in their tax controversy cases. Those lines of questions notwithstanding, Rettig’s nomination is considered one of the most sound selections Trump has made in his tenure, one tax lobbyist said.
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BLOW YOUR HORN: In another tax case wrapped up Thursday, the Supreme Court took the side of railroads and their workers in a dispute with the IRS over whether stock options given to the workers could be taxed under the Railroad Retirement Tax Act of 1937. For the court’s majority, which ruled against the IRS, it came down to whether stock options fell into the category of “money remuneration,” which is taxable under the Depression-era law. Writing for the 5-4 majority, Justice Neil Gorsuch said no. When Congress passed the law, money was understood to be a medium of exchange, he wrote. “While stock can be bought or sold for money, few of us buy groceries or pay rent or value goods and services in terms of stock. When was the last time you heard a friend say his new car cost ‘2,450 shares of Microsoft’? Good luck, too, trying to convince the IRS to treat your stock options as a medium of exchange at tax time,” Gorsuch wrote.
SWINGING AT CHEVRON: Yet another case that could have ramifications for the IRS involved the court’s long-standing Chevron doctrine, which holds that courts should defer to agencies on regulatory decisions when the laws underlying them are ambiguous. Pro Energy reporter Alex Guillén noted that Justice Anthony Kennedy became the latest justice to question whether the doctrine should be reconsidered. Gorsuch and Justice Clarence Thomas have also criticized it. “In a concurring opinion filed in an immigration case, Kennedy, seen as the court’s moderate swing vote, wrote about his ‘concern’ with how so-called Chevron deference ‘has come to be understood and applied,’” Alex wrote. Interestingly, the IRS played the Chevron card in the railroad case, and Gorsuch dismissed it, saying the Railroad Retirement Tax Act left “no ambiguity for the agency to fill.”
MAY I HAVE ANOTHER? A day after Ways and Means members pounded the Justice Department for its handling of contested asset forfeitures, the committee sent out a new release reprising the greatest hits. Could that be a sign of things to come? “The DOJ is really abdicating its responsibility to return those dollars to innocent victims,” Chairman Kevin Brady told Tax Analysts after the hearing. “I think it angers both parties in Congress, [and] based on the answers and non-answers we got today, we’re weighing further action.”