George Leef’s latest Forbes column focuses on U.S. Supreme Court Justice Anthony Kennedy’s role in helping states that want to tax Internet commerce.
Probably the greatest rarity among politicians would be one who said (and really believed), “The government collects plenty of money as it is and I don’t want to plunder the taxpayers any further.” The vast majority of them know that spending tax dollars helps them remain popular and that’s why they’re constantly looking for new revenue streams.
They will even trample upon clear legal rulings when they get in the way of their designs on the wealth of the citizens they supposedly serve. A new example is the renewed push by state officials to impose sales taxes on out-of-state transactions, especially Internet purchases.
This is a rather old battle that seemed settled by the Supreme Court almost a quarter century ago.
In its 1992 decision in Quill Corp. v. North Dakota, the Court held that a state can only tax sellers who have a physical presence within the state. Otherwise, such taxation runs afoul of both the Due Process and Commerce Clauses of the Constitution. …
… State officials, however, keep trying to pry the lid off the Internet treasure chest. One such effort led to a case that reached the Court last year, Direct Marketing Association v. Brohl. Based on Quill and earlier precedents, the Court ruled against a Colorado attempt to collect the taxes indirectly, by imposing a “use tax” on good purchased online. …
… The problem is that in his concurring opinion, Justice Kennedy opined that the Court needs to revisit Quill.
Commenting on the holding in Directing Marketing Association, the New York Times wrote, “Tuesday’s ruling was not especially consequential. But Justice Kennedy’s concurrence seemed likely to prompt new suits on Internet sales taxes.”
In that opinion, Kennedy stated, “When the Court decided Quill, mail-order sales in the United States totaled $180 billion, but by 2008 e-commerce sales alone totaled $3.16 trillion per year.” That bothers him because he thinks this hole in the tax structure leads to “startling revenue shortfalls in many states, with concomitant unfairness to local retailers and their customers who pay taxes at the register.”
Judges usually create trouble when they depart from their proper roles to meddle in public policy. This is an excellent example.