tv Internet Sales Tax CSPAN April 16, 2018 10:32pm-11:29pm EDT
erik jaffe clerked for supreme court justice clarence thomas. join the conversation. us at c-span. we have resources and background on each case. >> the supreme court will hear arguments on the constitutionality of a south dakota law imposing sales tax on out-of-state internet businesses with no physical presence in the state. of the heritage foundation debated some of the legal issues.
>> welcome to the heritage foundation. we of course welcome those who join us on our heritage.org website and those who are joining us on c-span tv. for those in-house, we ask a courtesy check the mobile devices have been silenced or turned off in those watching online are welcome to send comments or questions at any time by e-mailing email@example.com. leading our discussion today is elizabeth slattery who serves as legal follow that the advocacy program manager and our ed wynn center for legal and judicial studies. she of course focuses on the supreme court's separation of powers, judicial nominations in a variety of other constitutional issues. she also manages heritage sessions to prepare litigators for oral arguments in cases pending before the supreme court.
please join me in welcoming elizabeth slattery. elizabeth. [applause] elizabeth: tomorrow, morning the supreme court will hear oral arguments in south dakota versus wayfarer dealing with whether states can require out-of-state retailers to collect sales tax on sales tax on the residents make an online purchase. the court previously held versus north dakota the retailers must have a president such as a storefront for employees in the state in order to be subject to their taxing authority. just as philia explained that -- justice scalia explained that congress has the final say over regulation of interstate commerce and it can change the rule by simply saying so. the quill case dealt with mail-order retail at and was used before online shopping existed. states argue now they are missing out on billions of dollars in lost sales tax revenue has south dakota decided to challenge the case and the law requiring out-of-state retailers to collect and remit sales tax if they make 200 transactions are $100,000 in sales in the state per year.
wayfarer another retailers refuse to comply and now their cases at the supreme court. what will the court deciding how my congress and the states respond? to unpack these issues we are fortunate to have what does the panel but earth who will discuss the constitutional policy implications of this case. first up will hear from david solomon, partner at morgan lewis when he had that the firm's appellate pack is. -- appellate practice. david focuses on complex constitutional and regulatory matters a range of legal subjects. he started 14 cases before the supreme court and other federal and state court. david previously served as assistant to the solicitor general and law clerk to judge eugene davis of the federal circuit. -- of the fifth circuit. he's a graduate of brigham young university and university of chicago law school.
then we will hear from jonathan william, chief economist and vice president for the center for fiscal reform at the american legislative exchange council. jonathan worked with congressional leaders and members of the private sector to develop fiscal policy solutions for this day. she previously served as staff economist at the tax foundation. jonathan's work has appeared in "the wall street journal," "forbes" and many other publications and is frequently appeared as a guest on the "pbs newshour" another tv programs produce a graduate of northwood university. then we'll hear from michael greenwood, professor of law at my alma mater company antonin scalia law, administrative law and federal court. previously a scholar at the american enterprise institute, chairman of the competitive enterprise institute and founder of the center for individual rights. michael has written nine books including style globally, tax locally, which is particularly relevant to today's discussion. it's also read numerous articles
and provided testimony at the state and federal level. michael studies political science and philosophy at the university of hamburg in germany and received a phd in governance from cornell. . last but not least, we will hear from a colleague at heritage party policy analyst at the institute for policy studies. his research focuses on the economics of taxation, international tax competition in the federal budget. his work has appeared in "the new york times" and "the wall street journal" and many other news outlets. he proves they were at the al qaeda center -- he has a bachelor's degree from whitman college and is currently pursuing a phd in economics at george mason university. so with that, we will start out with david. david: good afternoon. i will start with a history of the commerce clause issue that is at the heart of this case and then i will discuss the competing theories about how it should apply in this case and lastly i'll talk about congress' role in the specific act shims authority taken and is considering taking this should
preclude the supreme court from overturning its prior precedent and endorsed in south dakota statute. first the history. they say the only thing short of the slave are death and taxes through the history of this case and its predecessor suggests another candidate for the list. states that impose use taxes on the resident out-of-state purchases inevitably will try to conscript out-of-state marriages in the collecting and remitting of taxes. precisely because they are out-of-state have no recourse to the ballot box. without fail, states will always choose to impose the tax collection duty on out-of-state merchants to whom they are not politically accountable rather than trying to collect the tax directly from in-state purchasers to whom they are politically accountable. forcing out-of-state merchants
, especially those engaged in e-commerce to collect and remit is unpopular use taxes is exactly what south dakota seeks to do in this case. south dakota is hardly the first state to do so. both south dakota and others have tried this many times before. it seems about every 25 years or so another set of state concocts a new regime to test these laws. to date, the supreme court has rejected every such attempt, holding true to the principle that a state can only impose such tax collection obligations on merchants that have a physical nexus to the state. the supreme court announced this rule in 1967. the court recognized the sharp distinction between retailers with outlets, solicitors or property within a state and those who do no more than communicate with customers in the state by mail or common carrier as part of a general interstate business.
the commerce clause the court held bart illinois in that case from imposing tax collection duties on out-of-state merchants who lack a meaningful physical nexus to the state. the court emphasized that he reached any other result, the outcome would be virtual welter of complicated obligations on interstate sellers. so the issue was quiet for a while. in 1992, the supreme court was faced with another attempt to conserve out-of-state merchants, this time by north dakota who tried to force out-of-state catalogue retailers to collect use taxes for goods shipped into the state. north dakota argue the supreme court's decisions interpreting the dormant commerce clause have evolved and become less rigid and more permitting a state regulation at least in the absence of express prohibitions by congress since the time it was decided. the same evolution of supreme
court doctrine of south dakota mason in the state. so out the supreme court to overturn and the supreme court refused. again emphasize the negative impact it would result on interstate sellers, but more importantly they held that it must apply and follow its prior precedent in this area because under our constitutional scheme, congress and not the supreme court has the final word as to what regulations in interstate commerce are permissible and by maintaining a consistent interpretation the court explained congress is now free to decide whether, when and to what extent states may burden concerns with the duty to collect interstate taxes, close quote. that brings us to the competing theories at issue in this case. as a threshold matter, the idea that today's court should stand by yesterday's decision even has a different or better rule could be devised.
justice brandeis once put it this way. it is more important that the applicable rule of law be settled and it be settled right. the court has recognized two types for strengths in constitutional cases the supreme court has the final say. stare decisis has relatively low strength. stare decisis concerns must be balanced against the fact that the court retains an important duty to correct erroneous constitutional interpretations precisely because it the only entity to do so. in cases of statutory interpretation, stare decisis has more strength because congress remains free to alter what the court has done. therefore, the constitutional order in the context is best served when courts figure two the prior holdings in family but
-- holdings and leave it to congress who alone possesses the legislative power under the constitution to correct any mistakes concerning statutory language. this case presents an interesting opportunity for the car in the context of constitutional interpretations of the dormant commerce clause. on one hand, and south dakota emphasized the commerce clause is in the constitution and so they claim the supreme court should feel more free to overturn prior precedents in this area when the current court believes they are mistaken. on the other hand, just as in the case of statutory interpretation, because the tuition assigns to congress, not the courts, the final word on how to regulate commerce in this area. congress can bust a regulation that would otherwise violate the commerce clause and prohibit state actions affecting interstate commerce that would not otherwise be unconstitutional.
because congress is the final arbiter of all interstate commerce regulation, the better view is the court should give the highest level of stare decisis respect. that is exactly what the court in quill said when asked to overturn ballot test and whether they were right about the commerce clause and i think there's a very strong case that they were right about the commerce clause. they surely were right that congress had the institutional capacity in constitutional authority to finally resolve all issues of interstate commerce. the last point i will make for now is congress' power in this area is not just theoretical. congress authority taken important legislative action in reliance on ballot test "end-quotes requirement and is actively considering additional legislation in this area. any decision that overturns and endorses south dakota's legislation would be an end run
around congress' authority would undermine the actions in this area. south dakota argues 25 years of inaction proved that congress cannot fix quail. there were at least two things wrong with that assertion. first, south dakota begs the ultimate question, which is whether congress believes quill needs to be fixed at all in the second, congress has been and remains very active in this area. most importantly, congress did the i.t. essay in 1998 and made the statue permanent. as the legislative history makes clear, congress relied and incorporated the nexus principles into that statute and that legislative history states its objective was to provide certainty that those nexus principles would remain in place just as they apply to mail order commerce unless and until a
future congress decide. the i.t. essay does a few important things that are worth remembering. first is prohibiting commerce and defined a discriminatory tax to include any imposed on internet commerce that is either not generally opposed or legally or legallyy imposed collectible on transactions involving similar property goods, services or information accomplished by other means or that imposes an obligation to collect or pay the tax on a different person or entity then in the case of similar transactions. in many ways, most importantly it prohibits any tax in which the state or local tax is based in the obligation solely on the fact that instead of purchasers access a site on a remote seller's out-of-state computer server.
so it's the only connection to the state are the only nation the state is using to impose the tax collection obligations the fact that in state users can access out-of-state sellers, the statute prohibits that is a discriminatory tax. the itfa shows the supreme court is no longer able to interpret this clause. congress relied on quills nexus requirement has now established legal principles that must be taken into account. i would just mention the solicitor general suggestion emigres brief that they should consider limiting the nexus requirement to interstate catalogue sellers and the dog that they are virtually present in every taxing jurisdiction of the inconsistent with the itfa because it would raise tax collection duty solely on the fact that in-state purchasers
are assessing an internet seller's out-of-state computer servers and because they would discriminate against internet commerce versus other forms of commerce. congress has rejected both of those principles and that should be the end of the matter. lastly i mentioned briefly several other proposals for additional legislation in this area. congress is the right forum for this request. it is far better suited than the supreme court in a case like this to resolve policy questions, including the impact on effects on interstate commerce of state and local regulation, whether free or low-cost software can eliminate to mitigate the cost on internet sellers and how to account for the fact that nearly all large internet sellers are collect any taxes. the cost of overturning quill would fall disproportionately on small businesses.
>> good afternoon, everyone. i have to warn you first off i'm not a lawyer, but i did stay at a holiday inn last night. i'm an economist and i will make a few brief points from our perspective on the state side of things. i represent the american legislative exchange council where we have about two dozen state and local elected officials who are members of our small 50 states, both republicans and democrats who are devoted for free market by many government and the guiding principles. they've caused us to be skeptical of the idea beyond their borders. or countries tax and beyond their borders as we have seen in new studies from the european union.
back to the history of our members have felt on this issue going back all the way to the 1990s and has been around since 1973. we have a law against additional view on this issue and i think it's an important one. you hear a lot of mention around a news story that the state wants and needs this new authority. the important thing to point out is that an organization representing 2000 elected officials that the state and local levels, our members feel differently. we feel constitutional protections ought to be treated with the utmost respect. we really appreciate the leadership of chairman bob goodlatte here in washington, d.c. and his work on the house judiciary committee looking at ways to address these issues
while protecting interstate commerce, while protecting important principles that alec members have valued for these 45 euros of our organization and certainly since the quill decision in the early 1990s. as someone who's been to all 50 states now working with our members, i can tell you many conversations with state legislators. all boil down a few of the main points are taken away, but i encourage you to take a look at what alex filed in this case. jonathan pond, hollinger, all in a brief and did a remarkable job tracing through. to the point that often is out there as i mentioned that states want and need new revenue. if you paid attention to news stories recently camino state and local revenue just hit an all-time high for the seventh year in a row. this is not talking about a shortage of revenue. perhaps if uribe government advocated to spend more. that is not why alec is here. we're talking about solutions to problems out there. we encourage states to live within their means, even if they were coming out of the 2008 economic downturn when times are very difficult. they did take real steps within their means are not as an important function to protect taxpayers and prioritize government services. also, the fact of the all-time
revenue being high is not just income taxes driving this. income tax revenue is up, property tax revenue is up, it's important to note the sales tax revenue is up specifically. in 2012 until 2017, state sales tax revenue is up roughly 25% so there's not a gaping hole in the state sales tax systems because of the supposed end quote, unquote loophole that some refer to as the remote seller provision in state sales tax law. also, a very under discussed element of this debate and certainly one of the untold stories as a successor federal tax reform has been empowered states to make a lot of new decisions at their own level of government. we have seen about 30 states issue official reports on what the tax cut in jobs asked me for their state budgets. similar to what we saw after ronald reagan's tax reform of
1986, 31 long years ago when you broaden the tax is at the federal level, you see a huge influx of unexpected revenue for state and local government. the story of the 2018 legislative session for many states has been unexpected revenue coming in and whether they want to use the revenue to cut tax rates and certainly has a limited government organization, encourage them to look for ways to make state more competitive with the money. vast majority of the states reported to have shown unexpected revenue with federal tax reform. you add that economic growth that we've seen a strong all-time record in 2017 for state and local tax revenue to the effect of the tax cuts and jobs act in a scenario where states are in good shape when it comes to revenue. in fact two of the discussion is what he do it the revenue sitting around during the legislative session. first question.
second question now should states be able to tax outside of their borders and should they be able to regulate outside of their borders? even south dakota has had a brief with the idea california would be zero to supply their environmental regulation to south dakota and subject businesses to those types of regulations so they can be sympathetic in the sense that you can have some sort of protection from states trying to tax and regulate outside of their borders. that is why we have commented on taxation without representation before congress or regulation acts. that was the important point to delineate on the tax and regulatory framework what states can do outside of their borders. take a look at also the idea of the benefit principle. look at the idea that political influence. the political economy piece of this is very important that when states are having the ability to
tax individuals are regulate individuals that are not constituents, what kind of political influence to the out-of-state entities have, could they have appeared when you talk to state legislators across the country like i have over the last decade, it is a big alluring factor of policies and how you export your tax burden. how do you spread out the cost of your government services to out-of-state residents who then are not going to complain and be involved in the political process and if they are involved to have a whole lot less weight around the state capital than in homegrown and state business. certainly that aspect as well. of course then you have the idea of companies being subject to out-of-state auditors who potentially much less on an out-of-state company as well. my mind goes to the new york example. we've all talked about new york's aggressive tax department, how they go after an income tax basis as well. that is something we supported that the mobile workforce idea before congress, which is to set some reasonable standards on what states can do to tax
nonresidents. begins with things like athletes coming into the state send unlimited time and not date and of course nullified by new york's aggressive tax department to business travelers going through the connection to your been sending a few work e-mails. imagine that scenario where the new york tax department has empowered the small businesses from around the country with no physical footprint whatsoever in new york and applying that kind of aggressive revenue collection regime on sales and use tax. that is a scenario that should keep most small business owners that want to sell online up at night if they were looking to sell to new york residents. finally from a fairness give them and this is the other thing we talked to state legislators legislators about and is certainly a concern. there's no doubt about it there's fairness issues at play regardless of what the system looks at with internet taxation of remote sales and sales tax
collection of in-state businesses. that being said, according to the gao report which i encourage to dig deeper into the issue to look at because we have amazing acoustics that we have found. only 2% to 4% of all state and local sales tax goes on tax through sales. we are talking about a very small piece of it now that amazon collects in every single state with the sales tax and a huge movement towards states collect 10 what perhaps was untaxed before. you look at the idea that the top retailers 87 to 96% are tax currently. this issue that there is a huge gaping hole in sales tax codes is not run by the facts. i would argue it shows physical presence works. when a company like amazon has been successful at providing goods and services to so many americans out there and they want to expand same-day delivery which i take advantage of common when they want to do things like that to have them expand to the juggernaut companies that they
are today, dave developed a physical presence nearly everywhere. and when a business gets to that level, they really would have a physical presence in those cases. let me just conclude with the idea of patrick byrne, founder of overstock, when he was testifying in front of house judiciary a couple years ago and he made a statement that really stuck with me ever since. it talks about how this potential tax collection regime perhaps more across the united states could stop the next amazon, could stop the next overstock and that is something we all worry about. when mom and pops expand or not worried about across the street. they're looking to expand
of you here were born. in preparation for this, i then and ine topic alone preparation for this event i flipped to some blogs and there is not a single new argument in all of these years. the premise of the entire debate is sales and use tax taxes should be destination-based from the purchaser's location and then the only question is how many ties or contacts do have to have to that particular jurisdiction to be subject to collection obligations and i think it's a policy matter this is not a good system. i think we should have an origin-based system of taxation so that it is a seller's tax location that determines the tech space and the tax rate and
ratee tax base and the tax . there are number of reasons for to make sense. i will leave for one off, which is the political responsibility and accountability idea, which both previous speakers mentioned. it is very important in my mind to align political responsibility with taxes. but there are other reasons. one of them has to do with the enforcement of the at the strait of cost system. other reasons have to do a tax competition and the territoriality principle. i will make this brief. if you do not know what attack system should look like and what would be efficient or not, one good first step is to figure out a system that minimizes the administrative enforcement cost. have a single tax collector and
a single-payer or who is in charge of or already possesses the information needed to figure out what the taxes. how do i know this make sense? because everything will state in this great country administers an origin-based tax for-sale. not one is destination-based. south dakota to try it. go ahead. have people show their drivers license or residence cards every time they purchase something at a local store. i do not think that would work very well. i think one state actually tried and it turned out to be a fiasco and lasted 15 seconds. why we would inflict it the interstate system is not entirely clear to me. you see the same thing even in cross-border sales, so there are busloads of shopping tourists
that slip to delaware and .urchase stop -- stuff nobody in the mall asks you for your drivers license and then charges you the applicable use taxes taxable at delaware's rate. -- all the university dunces universalize and regularize that system. with respect to competition, think tax competition is good. not just on the purchase side sales side. states compete for business and all sorts of ways including taxes. including regulation. why should this be any different? the aggregate gains from competition are huge and there is no state in the country where optional is better than south dakota. everyone here has a credit card. probably more the and one.
you would not have that credit card but for the supreme court decision that credit card transactions under the national bank act or control by the banks. by the purchasers. and when the supreme court found that decision, the first state to abolish was the state of self dakota. -- south dakota. that is why all credit cards came to -- from south dakota before others. why that state would hold the competing ise of beyond me. i will say something on a brighter note, and that is territorial is some under the constitution. constitution -- and the constitutional the states are equal in territorial.
the rock-bottom principle is that citizens choose their state and not the other way around. we have compromised that in all sorts of ways and the supreme court has not done remotely enough to stand in the way. it is actually a fairly menacing proposition. you look at our product liability law, which is controlled by not what our jurisdiction lawyer manages to find, he could control that too by making the liability rules trouble with the place of retail sales. that would be the same and spoke, but you don't. somebody has already mentioned renewable portfolio standards in many, many states which purport to tell other states how to produce energy. to temper has tried
with -- tell the state of oklahoma and nebraska how the chicken cubes at two b. the multistate settlement on poses as taxation universal excise tax across the anire country on extraterritorial basis. and on it goes. think there are probably better rules out there, but i will say this -- at least it is territorial and that is sort of one reminder that would be useful for all of us to keep in mind. for joining us. i am going to reiterate a couple points at a been made and hopefully and on a slightly different note. to reiterate jonathan's point internet is the kind of a myth. the report he pointed you all to is really a great place to start
but if you just sort of survey people after they make their last internet transaction come about two thirds of them will tell you they pay tax on it and that vastly understates the amount of tax being collected because they are relying on people to remember how that transaction went. if you actually dig down, 99% of sales from the top retailers are already taxed and that's because as businesses become larger, there is this model requires him to be in more states which makes them subject to additional state taxes. we have seen that an amazon as was mentioned the four and amazon, when they were a small there was an and expansion of state tax authority to additional outside of state borders. as the company grew up and had a physical presence in more states, their position changed and this is indicative of the regulatory cost that comes along
with expanding state taxing authority beyond their borders. as you become larger, you have the ability to actually figure out taxes in the 10,000 different taxing jurisdictions. when your small start up in just one state, the ability to comply with all of those area regulations becomes much harder. revenueidea that state collectors and large business can collude to keep startup competitors on the market i think is really problematic but we should become president of the small businesses that may be our below some of the thresholds from out there as exemptions to some of the proposals. the irs in 2015 estimate there are over 37,000 businesses with no paid employees that had over $1 million of revenue. that is a small business with
you are just if going to put it on paper, but if you have no employees, the additional cost of hiring and businesses to comply with 50 states new taxes systems is a youadditional cost and if can't even hire a first employee, than that additional cost is obviously going to be a burden in expanding and becoming an employer of many more people. the last thing i would like to end on is this idea of extraterritorial taxation being a threat to constraining government growth and individual liberty. states have delegated the story of collecting taxes to businesses and therefore it makes sense that taxing roles should be tied to the business location and not all of the different people they may interact with across the world via the internet.
where there is skepticism from all corners of u.s. policymakers of the recent european commission or puzzle to tax large american operations on their digital revenue tied to consumer location, so rather than google or facebook being country,n a european it is just as though someone in that country happened to interact with the company online and expanding taxes to that definition of economic activity really terrified when you think of the implications of every country around the world that has somewhat activate a company's product online having is regulatory over that discovered that kind of expansion is in my view, problematic. last point, i think it comes panel. the title of our do borders matter?
should borders constrained state taxing authority? i think the answer is yes to both. yes, borders to matter and yes, borders should constrain the ability of states to tax businesses that are physically present elsewhere. thank you. >> before we open it up for questions from the audience, do you all have anything you want to respond to? does anyone want to bring anything up to address? yes? ok? >> i have one question before we open it up. i thought it was interesting that south dakota in its brief to the supreme court, and says that it is missing out on something like $33 billion annually in lost sales tax annually by the gao report says it is more like $8 billion. maybe up to 18 billion. i wonder someone who is sort of dug into this can explain why there is such a big gap between what the state claims it is
missing out on and what it might actually be missing out on? >> it has got a be, you $8 billion-$13 billion. it has to be a member of --ation, that would be matter of taxation, that would be the big difference. the brief was interesting in the aspect that they were so far from the gao and also interesting that they were basically making the case that states just need more money to spend, especially on k-12 education. that is ironic because south dakota has been a state that is followed sort of a limited government format and cap k-12 education spending below are seeingerages and actually higher k-12 test results. so that it is an interesting point about that south dakota brief. >> i think the estimates the come from state collection
revenue administrators are always harder. they have expanded their sort of ability to collect tax on various definitions of sales and the estimates that states put out are almost always significantly smaller than the actual revenue that materializes. a bias in trying stronger.eir argument >> i think there are problems in using the vehicle of this case to this kind of policy debate and outcome. you know, the state here has created a statute for the sole purpose of presenting a vehicle to overturn the supreme court decision. it rushed to the lower courts on the territory judgment aces with very little development. there are little testing of evidence back and forth. very little underlying facts in terms of what is being had here
but instead we have what could self-servingzed as by all concerned. hasn't really been subjected to much vigorous back-and-forth. you compare that with a fact-finding that congress can employ, were people testify under oath, there is a back-and-forth. there is real testimony and information. you have the gao and others providing information. it is a very different way of building a record to test some of these various assertions. >> from the audience? if you could please wait for the microphone and identify yourself and ask a brief question, don't make a speech. anyone? anyone? >> hello. i had the great fortune to work on this issue about 25 years ago and i was just chatting about
it. iras andme i worked on there was a lot of research showing that any limitation on ira contributions dramatically reduced ira participation as people assumed they were under the limit. i wonder if there's any research an exceptionhether for small businesses really helps to deal with taxation because in one of these businesses, one million dollars in sale, no employees, the burden would be so high with a it doesn'tmed that apply, and other words, doesn't do no good at all as an exception for small businesses and do you have data to support that? >> i do not not there has been somewhat specifically looking at how a small business thinks about that trade-off, but any tax rule that has that marginal
impact where there is some horizon out there, we know it changes people's virginal decision as to how fast expanded where they expand so even if you are well below that threshold, there is a bunch of other literature that supports the claim that it does change decision-making on that sort of frontier. >> exactly. the cost, the risk of that cost is high even if you do not, even if you are not one that is going to be audited the prospect hanging out there is dampening. >> the accelerator piece is important because in some legislative vehicles it is not even permanent, right? civic is way after two or three years and then in full force of text 12,000 or 13,000 jurisdictions that is something to be concerned with. there's no doubt about it.
when you look at the average small business owner who makes less than $100,000 in a year and all of a sudden you are applying 100l dollar exemption, thousand dollars, two hundred thousand dollars in sales, you are looking at a real nightmare for small businesses let alone the audit risk. little-known retroactivity which some states say they're going to pursue anyways. >> i've never comprehended. i mean, i agree. debated a cell of being in a factory environment. everyone has guesses as to how it would work. i think the scariest part of this is the auditing.
no one would have the nerve to centex auditors to texas or some other place and physically sort of leaning on these people and collected. there is something i'm really to mythis entire us event mind. >> envisioning that possibility, you can see all of the possible legal constitutional questions, due process questions, retroactivity questions that would come into play if the supreme court reverses its your decisions and this area and then, you know, all of that has inbe sorted out reconciliation and cost, especially to the smaller and medium-sized internet companies could be really significant. remember important to the option of a fairly blunt instrument. it is going to reverse or it is going to keep its priority -- it
does not have the ability to draw nuance lines about what the regime should be to protect against some of these for the most honorable businesses. only congress can do something like this. it is the blackness of the result here that in many ways would be most disturbing -- bluntness of the result here that in many ways would be most disturbing. >> anymore questions? no? >> hello. i had a question about the regulatory end of this. one panelist mentioned that her is no sort of regulatory enforcement outside of state borders. let's say i had a company operating out of washington, d.c., and i sent coffee to someone in california and in california they have very stringent cancer warning labels or something, would i have to
include that label if i was sending it to someone and california? certainly a concern. i mean, if there is not a protection against that kind of requirement, as someone who enjoys a couple of lattes myself a day, as a coffee company i would be worried about it for california but as we're talking about earlier, the widespread problems that states have with california and other agriculture regulations, this is taught in isolated incident. this is a widespread issue. >> colorado has a law that requires, does not require businesses outside of states to collect sales tax but they have -- they report them to impel them to report. pushing the boundaries of what they can do outside their borders, although the supreme
court won't address that issue but eventual congressional action should put some sort of -- should clearly say how far states can go in compelling outside of their borders. >> that is a good point. states are not helpless right now. as sometimes they would like to assert under current law. they have the ability, like a direct marketing case in colorado, to have retail report their sales into the state and notify customers of use tax. they also have the ability to put import use tax on the books. not a good political move, though. taxes that people seek him like property taxes, they cut a big check to the government they realize the burden of the government. can you realize on texted this week and people are coming in and writing big checks to stay government on their income tax for the use line?
not good for reelection prospects in an election year. that is one reason they would like to disperse those questions out and have others like that for them so there's not the pain and cost of the government being that visible. >> ellen johnson, citizens for -- citizens -- question: we have heard a lot 10,000 taxing jurisdictions with varying roles around the country. who would supply, let's say we have software, who would supply software? would be the federal government? what each state supply their own? who would be picking the winners and losers that would benefit from that sort of deal with the government? i mean, has anyone in south the
coda put out any ideas -- south >>kota put out any ideas # there is an interesting debate on both sides as to the ofectiveness and accuracy some of the free or low-cost software programs available on the internet or elsewhere. and, when you think about all of the various permutations of use taxes, there is a lot of irrationality subject to it. it varies. compliancestimated costs in the gao report are .uite substantial $100,000 over a time. the software continues to
upgrade as this takes place. you compare that with what congress intended when it bringd the commission to all of the states and other interested parties together to try to work out a compromise where states with simplifies their use tax rolls and an exchange the commission would propose to congress a uniform nationwide system based on the woulds location that provide a mechanism for the collection and remittance of those taxes. for the most part, the states have refused to participate in that and instead have this strategy of trying to do in and do an end run.o costsount of compliance are high. >> i have seen this before.
the compliant cost, the prospect of compliance costs and in accuracies and reporting that might then be auditable and all the rest of that, that is a potent argument against getting it 20 years ago. the states knew it all along. they have under stake in for 20 years now -- undertaken for 20 years now, trust us. we will some confide this. there is a computer compliance program just around the corner. they've not done in 20 years, what gives you any hope that the next 20 years will be any better ? i don't trust these people at will stop >>ankly the so-called free software is anything but free in terms of matching a product codes to the software that is averred. i think the six largest states are not part of the streaming sales tax protocol. so, they don't have access, for instance, to the free software
offer to member states. at the end of the day, you do at who bears the ultimate liability for overpayment or underpayment. the changing conditions. something we fight against. sales tax holidays for various locals, state and definitions. some states treated as a food product for twix, some treated as a candy product. all those kinds of things come i do not know that i would trust the software necessarily to keep up with the changing roles and regulations of the state and local level, because at the end of the day who is going to be the one in the courtroom or potentially dealing with auditors. that is not going to be the software. that is going to be the small business owner. yound enforcement risk, if under collect you have consumer class action. if you over collect and you have
a social of regulatory and audit and inevitably jurisdiction against those types of claims is underlying with what the state is trying to do which raises a host of issues. so the potential liability risk for these kind of companies, especially small and medium-sized companies is prohibitive. >> if we were to follow and say, of we are going to make all the regime's look similar so compliance cost is lower, that undermines the benefits with heard about for tax constitution. at the federal government says, this is a system or these the guidelines, then there is no ability for the states to experiment with tech systems that are best for their constituents. it is not just a race to the bottom, it is also jurisdictional diversity as a good thing. anytime the federal says, this is the correct way to do it in sort of prohibits that sort of
experimentation. >> please join me in thanking our panelists. [applause] announcer: next, a discussion on last week's attack by the u.s. and its allies on syria's chemical weapons sites. this is from monday's washington journal. host: michael eisenstadt joins us now. washington institute for near east policy military and security studies program. last week before the lat