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Concern Builds That Congress Could Act on Wayfair in Must-Pass Bill

POSTED ON Nov. 7, 2018
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State organizations are monitoring Congress out of concern that lawmakers might include language limiting the ability of states to implement South Dakota v. Wayfair Inc. in “must-pass” legislation in the last days of the year.

Organizations on watch include the Multistate Tax Commission and the Federation of Tax Administrators, according to Utah State Tax Commission Chair John Valentine, who also chairs the MTC.

“We keep hearing rumors that the plan is to take the Sensenbrenner bill and stick it into a bill that must pass in the lame-duck session,” Valentine said November 6 during the MTC’s fall committee meetings.

He was referring to H.R. 6824, the Online Sales Simplicity and Small Business Relief Act of 2018, introduced by Rep. F. James Sensenbrenner Jr., R-Wis., in September. The bill would ban states from retroactively enforcing Wayfair and would exempt remote sellers from collection duties if they have $10 million or less in annual gross national sales; it also would require states to join a congressionally approved compact before imposing collection requirements.

“I think there’s a real risk they could try to sneak it in in another bill,” Valentine said.

The rumor has basis in fact. The American Catalog Mailers Association (ACMA) in October started mobilizing its industry members to persuade federal lawmakers to include at least some provisions addressing Wayfair in must-pass legislation. Based on advice from Capitol Hill staff, the association had dropped the idea of asking Congress to wrap the full text of Sensenbrenner’s measure into a must-pass bill.

“The Sensenbrenner bill, in its entirety, may be too large a package to tack onto ‘must pass’ legislation at the end of the year,” the association said in an October 17 email to industry members. “Rather, a smaller ask is more politically feasible and only needs to have the ‘sign off’ of leadership and support from Members of Congress.”

More than 100 of the ACMA's industry members signed their company names to an October 23 letter to congressional leaders asking for passage of Wayfair-related provisions requiring a uniform April 1, 2019, implementation date and no retroactive state enforcement of remote sales and use tax collection obligations.

ACMA President Hamilton Davison on November 6 told Tax Notes that the association has “had a large number of Hill meetings where many offices have expressed sympathy for our two requests of no retroactivity and an orderly phase-in period, especially when they listened to constituents describing how hard and expensive this is, or how states like Massachusetts are sending out threatening collection notices and assessments.” Davison added that the National Conference of State Legislatures, “which has traditionally been on the other side of this issue, is counseling states to be reasonable and orderly in their approach, which clearly is not happening in some jurisdictions.”

Also, Davison said that what Congress ultimately does will, of course, be determined in part by the November 6 elections, the implications of which could take days or weeks to understand. “But ACMA plans on being very visible on the Hill when a lame-duck session starts, assuming it is held,” Davison said.

Meanwhile, Richard Cram, director of the MTC’s National Nexus Program, mentioned ongoing Wayfair-related discussions between state organizations and industry representatives during a November 6 update on significant nexus developments. 

Davison, Wayfair Inc.’s counsel George Isaacson of Brann & Isaacson, and Steve DelBianco of NetChoice initially met with the MTC in July to discuss industry’s proposal for federal legislation that would put conditions on the implementation of Wayfair. The discussions continued during the Streamlined Sales Tax Governing Board’s October meetings, where the industry leaders received pushback from the streamlined states. 

“States thus far have not been receptive to anything involving getting Congress involved in implementing Wayfair,” Cram said. He added that the parties are scheduled to next meet during the NCSL Task Force on State & Local Taxation meeting in Scottsdale, Arizona, November 16–17. Additional state organizations participating include the FTA and the National Governors Association.

DelBianco, for one, seems to have soured somewhat on talks.

"At this point the tax commissioners at MTC are focused on extracting more taxes from their citizens’ pockets when they buy from out-of-state retailers,” DelBianco said in an email to Tax Notes. “But that focus could be short-sighted, since their win in Wayfair could come undone if states [flout] the Wayfair standards of joining Streamlined and adequately protecting small sellers.”