GAO Report Highlights Urgent Need for Post-Wayfair Reform

NTUF has long covered how the aftermath of the Supreme Court’s decision in South Dakota v. Wayfair is unsustainable. Just last week, we estimated that nearly 50,000 retailers lacking a physical storefront were out of compliance at the end of 2019.NTUF encourages states to reduce the burden on small online sellers and help them comply with exponential increases to their sales tax collection and remittance obligations. We have also encouraged Congress to set a baseline of simplification measures for remote sellers that states must adhere to. NTUF has put forward a menu of solutions that Congress could consider as part of this framework.

But it’s not just NTUF ringing the alarm. The Government Accountability Office (GAO) also came out with a report this past week urging Congress-led reform on the post-Wayfair landscape. GAO’s report does a good job of summarizing the challenges and difficulties that businesses are facing as they attempt to comply with a shifting sales tax landscape.

GAO’s report highlights, for example, the patchwork nature of state economic nexus rules, the difficulties presented by local taxing jurisdictions, and the enormous compliance costs businesses incur (often exceeding the value of the actual sales taxes remitted), just to name a few issues.

While the GAO report does not completely endorse any specific reform, it does bring up many of the reform proposals that NTUF has endorsed, including:

  • A single statewide point of contact for collection and audit procedures,

  • A single rate per state for remote sellers, including a weighted-average rate for states with local taxing jurisdictions that remote sellers remit and the state parcels out to local jurisdictions on the back end

  • Counting only taxable sales towards economic nexus thresholds

  • Relief for out-of-compliance sellers

  • Software and assistance with the costs associated with integrating software into business operations

  • Standardized tax definitions

Congress should heed GAO’s advice and act to provide relief to remote sellers facing unmanageable burdens in the aftermath of Wayfair. The Wayfair Court always assumed (optimistically) that states would make a far greater effort to reduce compliance obligations for remote sellers once it gave the green light to economic nexus rules. Now that states have failed to do so, it is up to Congress.