Hawai‘i Joins 34-State Coalition Urging Supreme Court to Reconsider Online Sales Tax Rule

Attorney General Doug Chin. Courtesy photo.

Hawai‘i joined 34 other states and the District of Columbia in urging the US Supreme Court to reconsider the Court’s outdated “physical presence” rule, which restricts states’ ability to collect certain taxes from out-of-state retailers.

The brief, led by Colorado Attorney General Cynthia Coffman, supports the State of South Dakota in South Dakota v. Wayfair, Inc.

“As more and more people shop online – including just by using their phones – states are losing tax revenues to which they are entitled,” said Attorney General Chin.

“There is no longer a justifiable legal reason to tax brick and mortar stores differently from online retailers. This is why Hawai‘i has taken the position that ‘physical presence’ alone should not determine whether a retailer can be taxed in Hawai‘i. The position we are asking the Supreme Court to take will clarify this nationwide,” AG Chin added.

In 1967, the US Supreme Court ruled in National Bellas Hess v. Department of Revenue that states were prohibited from requiring out-of-state retailers to collect sales and use taxes on goods purchased through the mail.

South Dakota recently passed a law requiring online retailers to collect South Dakota sales taxes. On Sept. 14, 2017, the South Dakota Supreme Court held South Dakota’s statute unconstitutional because only the US Supreme Court can reconsider its own rulings. South Dakota asked the US Supreme Court to revisit the matter.

AG Chin says Hawai‘i supports South Dakota’s effort to overturn the physical presence rule set forth in Bellas Hess and later reaffirmed in the US Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota.

Colorado and Hawai‘i were joined in the brief by Alabama, Arkansas, California, Connecticut, Florida, Illinois, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Utah, Washington, Wisconsin, Wyoming, and the District of Columbia.