Alabama’s About to Put Some Weight on Web Sellers’ Shoulders

On CyberMonday presidential candidate Marco Rubio and three fellow Republican senators sent a letter to the Senate Majority Leader and the Speaker of the House to decry a “misguided and destructive Internet tax collection scheme,” adding that “only in Washington would such a proposal be labeled as the “Marketplace Fairness Act.”

Way down South in Alabama, neither the letter nor the message has reached Julie Magee, the state’s Commissioner of Revenue. On January 1, 2016, an economic nexus tax regulation issued by Magee’s department will take effect and challenge the 1992 Quill Corp v. North Dakota Supreme Court decision, which held that state sales tax could be collected only from businesses with a physical presence (nexus) inside the state. Magee envisions the court overturning Quill as a result, leading to the passage of MFA.

But things might be easier than Magee imagines. Just weeks before the new law is to take effect, no material challenge has been mounted by e-commerce or catalog companies. Should Alabama’s levy go uncontested, it’s a matter of time before other states jump on the bandwagon.

It’s not for lack of trying. The True Simplification of Taxation (TruST) coalition—formed by catalog, direct marketing, and electronic retailing associations—has issued alerts to members of the groups inciting them to action. “If this rule is allowed to stand, other states will follow suit as well,” read one, the emphasis added by TruST. “In fact, Alabama may be deliberately trying to provoke a judicial challenge to the Quill constitutional standard.”

If so, the way thing stands now it will be the Joe Pesci’s sketchy litigator from My Cousin Vinny who’s likely to be defending remote sellers and their bottom lines before the highest court in the land. One founder of TruST, American Catalog Mailers Association President Hamilton Davison, is doing his darndest to rally support (read: dollars) to do a little better than Vinny. He figures the coalition needs about $400,000 and he’s been on the phone conducting a one-man telethon.

“[The ACMA board] is not resourced to fight this because it’s a state and not a federal issue. The same goes for some of the other associations,” Davison says. “We’ve got to have individual companies willing to step up, so right now we’re dialing for dollars. We’ve gotten some good response, but we’re not there yet.”

The ACMA, the DMA, and NetChoice have gallantly fought a David versus Goliath battle against the massed forces of the brick-and-mortar retail industry since the U.S. Senate passed an earlier version of the Marketplace Fairness Act in 2013. Should they stumble and fall over a hickory stick of a gauntlet thrown down by Alabama, state tax floodgates will open up from sea to shining sea and engulf thousands of catalogers and retailers that do business on the Web. Will they sit on their checkbooks and face spending mega-dollars on the construction of an ark when that deluge comes? Or will they get out their pens and launch a couple of battleships to Montgomery right now?

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