SR68

A Senate Resolution urging Congress and the President of the United States to enact legislation to allow a state to require out-of-state merchants to collect the state’s sales and use tax on sales to its residents.

Whereas, Nationwide sales by electronic shopping and mail-order merchants increased from $35 billion in 1992 to $235 billion in 2009 and their share of all retail sales rose from 1.9 percent to 6.5 percent, according to the United States Census Bureau; and

Whereas, A prominent research firm projects that e-retail will account for 11 percent of all retail sales made in the United States by 2015; and

Whereas, New Jersey retailers currently must collect the State’s sales and use tax from their customers on retail sales of taxable goods and services in or to a New Jersey location; and

Whereas, In National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967) and Quill Corporation v. North Dakota, 504 U.S. 298 (1992), the Supreme Court of the United States held that the United States Constitution prohibited a state from requiring out-of-state vendors to collect sales and use tax on their sales to customers in the taxing state if the vendors’ connection with customers in the taxing state is limited to the use of a common postal carrier or United States mail; and

Whereas, New Jersey imposes a use tax that New Jersey residents must report and pay to the State on taxable purchases from out-of-state sellers who do not collect New Jersey sales and use tax on behalf of the State; and

Whereas, New Jersey residents reported and paid to the State only $2.0 million in use tax on their 2009 gross income tax returns, which suggests widespread noncompliance with the provisions of existing tax law regarding purchases from out-of-state sellers; and

Whereas, New Jersey has passed conforming legislation with the Streamlined Sales and Use Tax Agreement that seeks to simplify sales and use tax collection and administration responsibilities by electronic shopping and mail-order merchants to reduce their burden if they are required to register as a seller and comply with state and local sales and use tax laws, rules, and regulations; and

Whereas, The low rate of reporting and remitting use tax liabilities has placed New Jersey retailers at a competitive disadvantage with out-of-state sellers and has eroded New Jersey sales and use tax collections; and

Whereas, The United States Supreme Court surmised in Quill Corporation v. North Dakota that “it is not unlikely that the mail-order industry’s dramatic growth over the last quarter century is due in part to the bright-line exemption from state taxation created in Bellas Hess;” and

Whereas, The United States Supreme Court indicated in Quill v. North Dakota that it was the prerogative of the United States Congress to enact legislation authorizing states to compel the collection of a state’s sales and use tax by out-of-state vendors; and

Whereas, Compelling out-of-state sellers to collect New Jersey’s sales and use tax will level the playing field between in-state and out-of-state sellers by ending the ability of taxpayers to evade the payment of tax on out-of-state sales; now, therefore,

Be It Resolved by the Senate of the State of New Jersey:

1. The United States Congress and the President of the United States are urged to enact legislation to allow a state to require out-of-state sellers to collect and remit its sales and use taxes on the seller’s sales to customers in the state, thereby making possible the equal tax treatment of in-state and out-of-state sellers.

2. Copies of this resolution, as filed with the Secretary of State, shall be transmitted to the President of the United States, the Majority and Minority Leaders of the United States Senate, the Speaker and Minority Leader of the United States House of Representatives, and each member of Congress elected from this State.

STATEMENT

This resolution urges Congress and the President of the United States to enact legislation that authorizes states to require remote, out-of-state sellers to collect and remit its sales and use taxes in connection with sales of taxable goods and services to in-state consumers, as a means to level the playing field between in-state and remote, out-of-state sellers.

Under current law, sellers that maintain a physical presence in this State are required to collect and remit to the State the sales and use tax determined to be due on sales of taxable goods and services made to their New Jersey customers from a location in or outside of this State. Due to a federal prohibition, remote, out-of-State sellers that do not maintain a physical presence in this State are not required to and cannot be compelled by the State to collect and remit the tax due in connection with sales of taxable goods and services made to their New Jersey customers from a location outside of this State.

While current law places the responsibility on State residents to report and remit any use tax that is due and payable to the State on purchases of taxable goods and services from remote, out-of-State sellers, amounts collected suggest compliance is limited. This arrangement has the effect of treating New Jersey and remote, out-of-State sellers unequally and of eroding State tax collections.

In Quill Corporation v. North Dakota (1992), the United States Supreme Court indicated that it was the prerogative of Congress to enact legislation that would authorize states that had simplified their sales and use tax laws, rules, and regulations to compel remote, out-of-state sellers to collect and remit a state’s sales and use tax. This resolution urges Congress and the President of the United States to enact legislation that resolves this critical issue in-line with the Court’s decision, and permits states to restore greater parity to the tax treatment of in-state and remote, out-of-State sellers.