Retailers push to end special tax treatment for online brands

Conventional retailers are working with industry groups to overturn a tax break that benefits e-commerce brands.

On Monday, the Retail Industry Leaders Association public policy organization called Retail Litigation Center, along with more than 20 retail and wholesale trade associations, filed a document to overturn a rule that the Supreme Court adopted in the pre-Internet era. Specifically, the group hopes to influence the court to reverse special tax breaks given to online retailers.

The brief highlights the pending Supreme Court case, South Dakota v. Wayfair, Overstock, and Newegg, which seeks to repeal the law that keeps states from collecting sales tax from online purchases unless those retailers have a physical presence within their state.

The 1992 decision of Quill Corp. vs. North Dakota upholds this law, which still keeps states from applying sales tax to online purchases. However, the new brief explains that this decision is outdated, since it originally pertained to a majority of catalog companies — a segment that had sales of roughly $180 billion at the time. Currently, online sales today are almost $6 trillion.

“Today’s online giants do not need or deserve the special tax treatment that the court gave mail order catalog companies a half century ago,” said Deborah White, general counsel for the Retail Industry Leaders Association, and president of the Retail Litigation Center. “These online companies have taken advantage of a bygone decision in order to evade the tax collection duties that their brick and mortar competitors perform every day.”

White detailed how prevalent online retailers are, especially with increased access through consumers’ smartphones, laptops, tablets, and computers.
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