RISMedia's Real Estate Magazine

AUG 2018

Real Estate magazine is the industry's leading source for real estate news and information since 1980. Published monthly by RISMedia, Real Estate magazine offers timely and relevant real estate news to the industry's top brokers and agents.

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RISMedia's REAL ESTATE August 2018 15 {Policy Matters} Supreme Court Ruling in Wayfair Case a Win for Real Estate and States This column is brought to you by the NAR Real Estate Services group. by Erin Stackley O n June 21, the Supreme Court issued its hold- ing on South Dakota v. Wayfair, Inc., reversing a long-standing rule on online sales tax collection in a decision that's a win for real estate, brick-and-mortar retailers and the states. The case dealt with whether states can re- quire out-of-state online retailers to charge and remit sales tax on pur- chases made by residents. Upend- ing a long-held precedent, the Court ruled that the South Dakota law in question, which did just that, could stand, and that the previous doc- trine controlling this issue no longer applies. The Wayfair decision reverses a 1992 Supreme Court case, Quill Corporation v. North Dakota, which held that states couldn't require remote sellers (at the time, cata- log retailers) to collect state sales tax unless they had a "nexus" to the state via a physical presence within its borders. The decision also stated that "Congress may be better qualified to resolve [the problem]," but in the 26 years since then, Congress failed to do so. This is despite bipartisan leg- islation being introduced each Con- gress. The National Association of REALTORS® (NAR), a member of the Marketplace Fairness Coalition and advocate for internet sales tax fairness, has long supported these measures. Though Congress came close at times, it was unable to get legislation on this issue signed into law. In the time that passed, as e- commerce grew, the issue only be- came more pronounced. In the absence of Congressional action, the Wayfair decision opens the door for other states to enact similar laws to South Dakota's, which will go a long way toward leveling the playing field between retailers regardless of where they exist. The majority opinion, writ- ten by Justice Kennedy, reflects on the changing nature of commerce in the 21st century, declaring that the physical presence test is out of date and that "economic and virtual contacts" with a state are enough to satisfy the nexus requirement. For commercial real estate, the states and NAR, which have long been advocating for sales tax par- ity between online sellers and brick-and-mortar stores, this ruling is a victory. Main Street retailers are important to the communities they serve and are a crucial sector in commercial real estate. Compet- ing against online retailers that of- fer goods at seemingly lower prices due to not charging sales tax has hurt their ability to grow, and, in some cases, resulted in them go- ing out of business. In addition to leveling the playing field, the ruling will help states, which have strug- gled to make up for lost sales tax money, estimated to be billions of dollars each year. That money can be reinvested into infrastructure, schools, public works projects and other areas that make communi- ties attractive and increase prop- erty values. This ruling still limits states' au- thority. The South Dakota law only requires sales tax collection by sell- ers delivering more than $100,000 of goods or services into the state, or engaging in 200 or more sepa- rate transactions for the delivery of goods or services per year. In addition, the decision included the requirement of "economic or vir- tual contacts," which will likely be a source of debate between states and online retailers. Overall, the Wayfair decision is a positive step on an issue that's been stagnant and harmful to com- mercial real estate for many years. NAR joined two amicus briefs that were sent to the Court for this case, supporting the position, which ulti- mately prevailed. NAR is pleased with how the Supreme Court ruled, and looks forward to seeing Main Street businesses once again com- peting on a level playing field with e-commerce retailers. RE Erin Stackley is a senior policy representative for Commercial Issues for the National Associa- tion of REALTORS®.

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