With its more-conservative members taking the lead, the Supreme Court today opened the way for states to begin imposing their sales taxes on Internet commerce, even for sellers that don’t have a presence in their states, through South Dakota v. Wayfair. The judges’ reasoning was that previous Supreme Courts had incorrectly applied the Commerce Clause of the United States Constitution on this topic.
From an originalist point of view, then, the states have always had the authority to collect sales taxes, but as various technologies have eased the ability to conduct commerce across state lines, Supreme Court decisions have incorrectly restrained that authority. This point is especially relevant in Rhode Island, because our state law (RIGL 44-18-15.2) instructs the executive branch to begin collecting sales taxes from online retailers “upon passage of any federal law authorizing states to require remote sellers to collect and remit sales and use taxes.”
State law also (RIGL 44-18-18) requires the executive branch to lower the rate for all sales taxes from 7% to 6.5% “upon passage of any federal law that authorizes states to require remote sellers to collect and remit sales and use taxes.” So, “on the date that the state requires remote sellers to collect and remit sale and use taxes,” every retailer in the Ocean State (and those outside of Rhode Island, like Amazon, that already collect our sales tax) should begin to collect 50-cents less for every $100 of a sale.
Here’s the possible catch: Does a Supreme Court ruling count as “passage of any federal law”? Rhode Islanders should watch closely for signs of the following possibilities:
- The executive branch asserts that it is already authorized to collect the online sales tax based on 44-18-15.2, in which case taxpayers would have a very strong claim that it must also collect tax at the 6.5% rate.
- The General Assembly rushes to change state law in a way that allows the collection of Internet sales taxes without dropping the rate.
- The General Assembly attempts to sneak in the same result in some way, perhaps by inserting a phrase like “or upon a Supreme Court ruling to the same effect” into 44-18-15.2 but not into 44-18-18.
Frankly, it’s disappointing that no state-level politicians (particularly legislative leaders) have yet proclaimed their happiness that the state can now lower its sales tax rate. Presumably the scheming remains offline for now.