HARRISBURG — The U.S. Supreme Court's 5-4 decision Thursday to allow states to require online retailers to collect billions of dollars of sales tax revenue could provide Pennsylvania with an 11th-hour windfall as lawmakers put the finishing touches on the state budget.
Most lawmakers contacted Thursday said the news is welcome while stopping short of suggesting that the state should try to immediately bake any revenue gains from the Wayfair v. South Dakota decision into the 2018-19 state spending plan. That plan passed the House on Wednesday and will likely be approved by the Senate today.
Court decisions have long held that states can only require businesses to collect sales tax if they have a physical presence within the state borders. The proliferation of online retail has created intense pressure to re-examine that standard
“It’s a major victory” for local stores that have long felt like the law treated them unfairly, said John Holub, a spokesman for the Pennsylvania Retailers Association.
Jeffrey Johnson, a spokesman for the state Department of Revenue, said the agency is still studying the court’s decision to determine how to respond.
He noted the state had already moved, ahead of the court decision, to get more sales tax from online sales by requiring that Amazon and eBay and similar companies collect sales tax on third-party sales hosted on their websites. The state expects to get about $50 million in 2018-19 from that move — far short of what might be in play now.
A joint study by National Conference of State Legislatures and the International Council of Shopping Centers estimated that states collectively lost $26 billion in uncollected sales and use taxes in 2017.
Amazon and several other large online companies have already been collecting sales tax in Pennsylvania because they have warehouses in the state.
Lawmakers on both sides of the aisle said the move is welcome.
State Rep. Mark Longietti, D-Mercer County, said that the decision reflects the need for our nation’s laws to adjust to changes in the way people buy things.
“With technology the way it is, the law needs to catch up,” he said.
State Rep. Fred Keller, R-Snyder County, said that the decision doesn’t change who is subject to the sales tax, the law has always indicated that people should pay it. The court’s decision just gives states greater standing to demand that businesses collect the tax.
It’s a matter of fairness that will benefit local businesses, he said.
“They are paying property tax. They are paying school tax,” he said. “They’re not being treated fairly if they have to charge more because they had to collect sales tax and out-of-state competitors don’t.”
State Rep. Garth Everett, R-Lycoming County, said that Congress should probably pass federal legislation to clarify how online sales are collected so that there’s uniformity in the way states respond.
Regardless, he said that the state should not budget any immediate new revenue from the law change. If the court decision creates a windfall, the Legislature can always revisit the budget to consider how to use the new revenue, he said.
The Pennsylvania Chamber of Business and Industry is withholding judgment on what the decision means until the group sees how the Department of Revenue responds, said Sam Denisco, vice president of government affairs for the statewide chamber. He said the group agrees that the “market has changed” and that the decision reflects the questions of fairness for small businesses that have been collecting sales tax while competing with rivals who don’t.
It’s the second U.S. Supreme Court decision this year that could open the door to more state revenue. The state budget does include $125 million in new revenue tied to the expansion of gaming, including sports betting now legal after the Supreme Court overturned a federal ban on it.
John Finnerty reports from the Harrisburg Bureau for The Daily Item and other Pennsylvania newspapers owned by CNHI. Email him at firstname.lastname@example.org and follow him on Twitter @cnhipa.