Opening Remarks by Senator Chuck Grassley of Iowa
Ranking Member, Finance Subcommittee on Fiscal Responsibility and Economic Growth
Hearing titled, “Providing Small Business Relief from Remote Sales Tax Collection”
Wednesday, September 25, 2024
Thank you, Chairwoman, for having this hearing. It follows on problems – in other words, the Supreme Court didn’t settle everything, and we’re dealing with what they didn’t settle.
For most of the internet’s history, Supreme Court precedent barred states from compelling online retailers to collect sales taxes on out-of-state remote sales.
For decades, Congress grappled with the question of whether to use its power under the Commerce Clause to grant states authority to do so.
We heard passionate arguments from advocates on both sides of the issue.
On the one hand, states with sales taxes argued that rapidly increasing online sales threatened revenues necessary to fund their vital government functions.
On the other hand, small online retailers worried that the burden and cost of complying with the sales tax rules in thousands of state and local taxing jurisdictions would be crippling.
My good friend, now deceased former Senator Mike Enzi, was a strong proponent of granting states authority to collect sales taxes from online retailers.
His Marketplace Fairness Act would have allowed just that, but only if a state joined the Streamlined Sales and Use Tax Agreement or adopted certain rules designed to minimize compliance costs and protect small business.
Then, as we all know, in 2018, the Supreme Court flipped the script with its ruling in South Dakota v. Wayfair.
The Court overturned prior precedent, effectively giving the green light to states to compel online retailers to comply with state and local sales tax rules.
While the Supreme Court’s decision in Wayfair suggests constitutional limits on states interstate taxing authority remain, it largely punted the issue to Congress, hence today’s hearing.
Many of the issues Congress grappled with for decades prior to Wayfair remain. Only now, the question is what, if any, federal rules are necessary to minimize compliance burdens and provide guidance to the states.
Today, we’ll hear about challenges many online retailers face as they attempt to navigate sales tax rules that vary wildly from state to state and even jurisdiction to jurisdiction.
We’ll also learn about actions states have taken since Wayfair.
As a member of the Sales and Use Tax Agreement, Iowa, my state, has voluntarily implemented reforms to facilitate and simplify compliance by online retailers selling into Iowa.
However, only 24 of the 45 states with a general sales and use tax have joined Streamlined, and no states have joined since the Wayfair decision was handed down.
Obviously, this hearing is very important way to move forward on this issue, and I thank the chairwoman for having it.
-30-