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Mississippi Senate kills online sales tax bill

  • Mar 6, 2017 | Gail Cole

 Remote sales of taxable goods are not tax-free in Mississippi, even if sales tax isn't collected at checkout.

Early last month, the Mississippi House approved a measure that would require certain out-of-state sellers with a “substantial economic presence” in the state to collect and remit Mississippi sales and use tax. Governor Phil Bryant supports taxing remote sales, and had the bill made it to his desk, he would likely have signed it. Yet many lawmakers in Mississippi, including the lieutenant governor, oppose such a tax policy, and the opposition succeeded in killing the bill in the Senate.

Lt. Gov. Tate Reeves said of the now dead House Bill 480, “We believe it is very clear that this statute violates the Quill case, and quite frankly I have yet to hear from one lawyer who thinks otherwise, including many of the House members who voted for this bill. The most likely scenario is that it would put Mississippi in litigation, along with Alabama and other states” (The Clarion-Ledger).

Quill guides interstate tax policy

Reeves was referring to Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the pivotal U.S. Supreme Court case holding that a state cannot require a business to collect and remit sales and use tax unless the business has a substantial physical presence in the state. The ruling has come under fire in many states, which have seen their sales and use tax revenues decline with the rise of ecommerce. It is time, legislators in many states believe, for Quill to be challenged and overturned. Supreme Court Justice Anthony Kennedy expressed a similar sentiment last year, writing that “it is unwise to delay any longer a reconsideration of the Court’s holding in Quill.” He continued, “A case questionable even when decided, Quill now harms States to a degree far greater than could have been anticipated earlier. … It should be left in place only if a powerful showing can be made that its rationale is still correct” (Colorado joins line to overturn Quill).

The tax revenue sought by the Mississippi bill would have raised revenue for transportation infrastructure improvements, which the state sorely needs. But as Reeves has pointed out, that tax revenue would not be available were the policy to face legal challenges. He said any money HB 480 would have brought in would be “fake money,” noting that it “could not be spent until the U.S. Supreme Court says it can be collected.”

That’s certainly been the case in Colorado, where a sellers use tax notification requirement has been embroiled in legal battles since being introduced in 2010. The U.S. Supreme Court let the requirement stand last December, and the case was settled in state court on February 23. Notice and reporting requirements will begin July 1, 2017 (DMA press release).

Remote sales are not tax-free

Rep. Trey Lamar III (R), who penned House Bill 480, also believes the measure would have been challenged. Yet he does not think the legislation is unconstitutional. He also insists his bill did not impose a new tax. As in all states with sales tax, consumers in Mississippi are required to pay use tax on purchases if sales tax wasn’t collected at the point of sale. Taxable goods don’t suddenly become exempt just because the transaction occurred online, or by mail or phone.

Department of Revenue looking to tax out-of-state sales

Although HB 480 is dead, Mississippi may still end up taxing more out-of-state sales. The Mississippi Department of Revenue has proposed a new rule that would impose a sales and use tax obligation on remote vendors with a substantial economic presence in the state.

Businesses that sell to consumers in Mississippi would be wise to prepare for any eventuality. Learn how tax automation software facilitates and improves sales and use tax compliance in all states.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.