On Thursday the Supreme Court’s 5-4 ruling, which did not split along ideological lines, overturned the 1992 decision and said states can tax internet sales.
The ruling doesn’t mean such a sales tax will begin immediately in Wisconsin as it will in many other states that have laws where the court decision automatically triggers a sales tax collection for online sales.
Walker’s office, the state Department of Revenue and the Legislative Fiscal Bureau are still reviewing the decision and declined to comment before completing the review. So it’s unclear if new legislation is needed or whether the Walker administration can collect the tax from out-of-state companies through regulatory changes.
Walker and the Legislature enacted a law in 2013 requiring income tax rate cuts corresponding to any potential online sales tax revenue collections “as a result of any federal law to expand the state’s authority to require out-of-state retailers” to collect the tax. But that law doesn’t refer to U.S. Supreme Court decisions.
Rep. John Macco, R-Ledgeview, chairman of the Assembly Ways and Means Committee, said state DOR officials told him the additional revenue could be about $160 million per year.
The state should act quickly to begin collecting sales tax on online purchases from out-of-state retailers, Macco said. But he added it’s not yet clear if it could do so under existing law or if a new law is needed. “It would be my intention that if we need legislation, we draft it right away,” Macco said.
Rep. Dale Kooyenga, R-Brookfield, who helped lead Assembly Republicans in crafting previous tax policy proposals, including the 2013 budget language, also said any new revenues should go toward cutting income tax rates. Kooyenga said he expects Walker agrees, based on his longstanding opposition to tax increases.
“This is really an opportunity for tax reform,” Kooyenga said.
Macco and Kooyenga also said they oppose requiring very small businesses to collect and remit tax for online sales. Both said they favor setting a “high” threshold for the amount of online sales a business would make in Wisconsin before they would be required to start collecting sales tax.
“Our concern is this: to be no burden on small businesses, but to catch the big fish,” Macco said.