WASHINGTON — Maryland and Virginia leaders are reviewing Thursday’s Supreme Court ruling that allows states to require that online retailers collect sales tax even if those companies do not have a physical presence in the state.
While new tax charges will not immediately show up on online purchases, the ruling has particular importance in Maryland and Virginia beyond the expected budget windfall.
State laws adjusting gas taxes over the last five years included triggers that would have limited gas tax increases in each state if Congress passed a law giving states the authority to collect these online sales taxes. The Maryland gas tax increase that kicked in back in 2015 did not include a clause to roll it back if online sales taxes began to be collected later, but the 2013 Virginia bill did if Congress approved the change.
No Va. gas tax impact yet
Because the Supreme Court ruling is not legislation, and because certain parts of it are specific to the South Dakota law at issue, it does not trigger any immediate changes to Virginia’s gas tax or transportation-funding policy, said Finance Secretary Aubrey Layne.
It could add hundreds of millions of dollars in revenue statewide, some of which would be distributed to local governments and transportation projects.
It is not clear how long it might take for online sales taxes to apply universally, or whether new state legislation would be required to implement it in Maryland or Virginia.
“States can tax it. The question is: Do we have that stuff in place?” Layne said.
The sales tax changes may be able to be implemented through regulations, but otherwise could require legislation.
Layne does not expect that this would rise to the level of an issue that would be taken up in a special session, which means any legislative action in Richmond would come next year.
Legislators’ focus would be on getting the full benefit of the sales tax — including sorting out how to ensure that the higher sales taxes in the Northern Virginia and Hampton Roads regions for transportation projects are properly applied — and on dividing up the millions in expected new revenue each year, Layne said.
Franchot ‘exceedingly pleased’
In Maryland, Comptroller Peter Franchot said in a statement that he was “exceedingly pleased” with the Supreme Court ruling.
“My office is now in the process of reviewing the details of the Supreme Court’s decision, and we will be communicating with businesses and taxpayers as quickly as possible with information regarding implementation and compliance with the court’s guidance,” Franchot said.
It is not yet clear whether changes would come in days, weeks or months, a spokesman for Franchot’s office said.
He called the previous rules limiting states’ ability to require web retailers to collect sales tax — unless those retailers have a physical presence in the state — “fundamentally outdated and unfair.”
Consumers were supposed to pay the sales tax themselves, but rarely did.
“It effectively penalizes ‘brick-and-mortar’ businesses that choose to locate, hire employees and invest in the State of Maryland,” Franchot said.
Companies such as Amazon already collect sales taxes on online purchases directly from the company for orders shipped to Maryland, D.C. and Virginia, but other retailers do not.
Like WTOP on Facebook and follow @WTOP on Twitter to engage in conversation about this article and others.