BILLIONS of dollars have been left on the table by states that still haven't passed pertinent laws after the U.S. Supreme Court ruled in June that states are entitled to sales taxes that should be collected from all online purchases.
Congress could -- and should -- help fix this situation by passing a nationwide law that will streamline both the collection and distribution of these funds.
Illinois, for once, is ahead of the game and has passed laws and tax regulations that may allow the state to get its share of what's being collected by online sellers. That is important in a state still reeling from the fiscal devastation caused by two years without a budget, a massive backlog of overdue bills and the nation's most underfunded pension system.
Missouri, on the other hand, has no regulations that would allow it to capture sales tax collections. Iowa has pending regulations.
In addition, a handful of states collect no sales taxes from brick-and-mortar stores and find it problematic to suddenly treat their residents who buy online differently.
This unequal system cries out for a solution.
The U.S. Government Accountability Office issued a report that estimated state and local governments in 2017 could have collected between $8.5 billion and $13.4 billion from online sales taxes.
The National Governors Association did its own analysis and said collections could have reached $26 billion last year.
There has been a scholarly debate among states rights advocates that tax collection rules should be left up to the states individually. Unfortunately, that's unlikely to work since some states don't collect sales taxes. There already have been questions about whether companies that are physically located in those states might be able to skirt some of the collection requests by other states. Beyond that, it will be harder for online sellers to comply with a patchwork of state collection rules.
A nationwide system would simplify things for everyone. It also would avoid the problem of conflicting court decisions in different states that eventually will have to be decided in federal courts.
The Commerce Clause in the U.S. Constitution gives Congress the authority "to regulate commerce with foreign nations and among the several states."
The U.S. Supreme Court's decision in South Dakota v. Wayfair Inc. has made online tax collections a matter of settled law but without benefit of a regulatory framework. Spelling out the details with a federal law is the only option that makes sense going forward.