Twitter is abuzz with ChatGPT, OpenAI’s recently-released chatbot that is extremely good at mimicking normal human conversations. But before we at NTUF embraced our new robot overlords, we wanted to make sure it could get right some more nuanced policy issues of the present day.
To that end, we asked ChatGPT what it thought about the aftermath of the Supreme Court’s decision in South Dakota v. Wayfair, feeding it this prompt:
"Since 2018, states have been able to collect sales taxes on the basis of "economic nexus" rather than physical presence. This has resulted in greatly increased tax burdens for small online businesses, who now must collect and remit sales taxes on behalf of states around the country. Is there a place for a federal framework to limit complexity and improve simplicity for businesses overwhelmed by these burdens?"
The response we got back was, unsurprisingly, very close to on-point. ChatGPT responded with:
"Yes, there is a need for a federal framework to address the issue of economic nexus and simplify sales tax collection for small businesses. In 2018, the Supreme Court ruled in South Dakota v. Wayfair, Inc. that states can collect sales taxes from out-of-state businesses on the basis of economic nexus, even if the business does not have a physical presence in the state. This ruling has made it more difficult for small online businesses to comply with sales tax laws, as they now may need to collect and remit sales taxes for multiple states.
One potential solution to this problem is for the federal government to establish a uniform sales tax collection system that would allow businesses to collect and remit sales taxes on behalf of all states, rather than having to navigate the different rules and regulations of each state. This would greatly simplify the process for businesses and help to reduce the burden of compliance.
Another potential solution is for the federal government to pass legislation that would limit the ability of states to collect sales taxes on the basis of economic nexus, or that would establish clear guidelines and thresholds for when a state can require a business to collect and remit sales taxes. This would provide businesses with greater certainty and help to prevent states from imposing excessive tax burdens on small online businesses."
Not only does ChatGPT do an excellent job of summarizing the issue at hand, it seems to appreciate the seriousness of the problem better than many legislators. In fact, its first recommended solution is more than anything Congress is considering. ChatGPT first offers the solution that Congress should impose a standardized sales tax system and administer it at the federal level. That would certainly simplify the process of state sales tax compliance for remote businesses, but at the cost of curtailing state powers to each collect their own sales taxes.
Its second proposal is far more along the lines of what NTUF has recommended: a federal framework that sets some ground rules protecting businesses from overly burdensome tax obligations, compliance with which would allow states to otherwise administer remote sales tax collection as they please. This would accomplish the goal of providing sales tax compliance relief to remote sellers without the constitutional failings of the first proposal.
This is mostly a humorous exercise, but it is worth noting that ChatGPT formulates its answers by synthesizing data already available on the internet — in other words, it’s summarizing what people are already saying about Wayfair. In any case, small businesses can at least rest easy knowing that when the inevitable machine uprising occurs, it will come with reform to state sales tax compliance burdens for remote sellers.