November 7, 2017

AG asks Supreme Court to let states tax internet sales

New Mexico’s Attorney General is joining with others who say the state should be able to collect sales or gross receipts taxes on all internet sales.

Hector Balderas announced Monday that he filed an amicus curiae, or friend of the court, brief in a case challenging a 1992 U.S. Supreme Court decision. In all, 36 attorneys general from 35 states and the District of Columbia signed onto the brief, led by Colorado AG Cynthia H.Coffman. That decision, Quill Corp. v. North Dakota, was aimed at determining whether a state could collect taxes on sales originating from a company with no physical presence, or “nexus,” in that state.

The Supreme Court ruled against the state of North Dakota and said it could not tax sales from Quill Corp., a mail-order office supply vendor.

In the decades since then, with the rise of internet sales, states have sought to tax Amazon and other online-only retailers. Amazon, for its part, has begun paying sales and gross receipts taxes, including New Mexico.

A National Conference of State Legislatures analysis from 2012 found states lost out on $23.3 billion in revenue from sales taxes from either online or catalog purchases.

This led South Dakota to pass a law saying businesses with no physical presence in the state but which sell more than $100,000 worth of goods in the state should be required to pay taxes. The state Supreme Court rejected the bill as violating Quill. This opens the door for the Supreme Court to look at the issue again, 25 years later.

“The foundation of our economy is made up of small businesses and for too long the federal government has put them at a serious disadvantage,” Balderas said. “It’s time for the Supreme Court to close the tax loophole that is harming New Mexico businesses and allowing some of the biggest corporations in the world to avoid paying their fair share.”

New Mexico, which has struggled to balance its budget over the past few years as unemployment remains high and oil and gas prices low, is one of those states that explored taxing internet sales.

Earlier this year the Legislature passed a bill that would impose sales taxes on most sales from internet retailers that do not have a presence in the state. It passed the House 37-32 on a party-line vote and more easily cleared the Senate on a 34-4 vote.

That bill also increased the gasoline tax and delayed the corporate tax decrease enacted in 2013 among other tax code changes.

Gov. Susana Martinez vetoed the legislation.

“From the beginning, I have said that I will not raise taxes, yet the Legislature continues to try to force tax increases on New Mexican families and small businesses,” the governor wrote in her veto message. “I have also said many times that I will consider truly comprehensive tax reform, reform that results in a simpler, more stable, and more predictable tax code.”

NM Political Report reached out to Martinez’s office to see if she supports the amicus brief by Balderas.