The ACMA is leading the charge in challenging state overreach in California, and now New York, on behalf of its membership, remote sellers. It’s first legal challenge of state overreach in California led to a victory of federal supremacy. Future challenges are aimed at reducing the compliance burden on remote sellers.

By Stacey Roberts

Key Takeaways:

  • The ACMA is evolving in response to the changing market dynamics post-Wayfair decision by advocating for simpler tax collection processes.
  • The Wayfair decision has increased the tax burden on businesses, especially smaller ones, due to complex multi-jurisdictional tax compliance requirements.
  • Litigation in California has set a precedent for challenging state-level tampering with federal law that regulates interstate commerce.

The SALTovation podcast recently hosted a discussion into the ACMA’s advocacy in the face of the Supreme Court’s Wayfair decision and the contentious nature of Public Law 86-272. The ACMA has been at the forefront of representing direct marketers, catalog mailers, e-commerce merchants, and now, mobile marketers. The organization has expanded its advocacy to accommodate a broader spectrum of remote sellers in response to the evolving market.

Remote sellers face significant challenges in the wake of the Supreme Court’s 2018 Wayfair decision. VP and Deputy Director Paul Miller explains that the ACMA is pushing for federal legislation that simplifies tax collection for companies working in multiple jurisdictions. “We aim to change it, to streamline that… it’s not so much that our members are happy to collect the taxes. The problem is in the actual act of collecting them,” Miller stated, emphasizing the complexity of the issue.

Supporting Small Businesses 

The ACMA’s rebranding as the American Commerce Marketing Association reflects its commitment to a wider range of companies. The goal is to lessen the burden of SALT compliance, which disproportionately affects smaller enterprises.

“You have to hire someone to be on hand all the time to handle this stuff… one wrong move and you get nasty grams from different states,” Miller continues, shedding light on the relentless effort required to comply with varying state tax laws.

Challenging State Overreach in California

David Swetnam-Burland is an attorney at Brann & Isaacson and attorney in the ACMA’s legal challenge against the California Franchise Tax Board’s interpretation of Public Law 86-272. According to Swetnam-Burland, California sought to redefine “doing business” in a way that weakens this federal protection. 

The California case represents a significant effort by businesses and their representative associations to restrain states from eroding federal protections meant to simplify interstate commerce. “Public Law 86-272 appears to us to be the next front in this conflict between the aggressive state tax agencies… and Public Law 86-272 is a pretty bright-line rule,” said Swetnam-Burland, outlining the conflict at hand.

In a landmark decision, California’s court sided with the ACMA, deeming the FTB’s regulations contradictory to federal law and improperly issued without adequate administrative process. “The FTB has been extremely aggressive in its position,” said Swetnam-Burland.

Broader Implications in SALT Complexity

The high-stakes debate over Public Law 86-272 underscores the critical issue at the heart of SALT complexities—it’s not just about tax collection but also about the predictability and ease of doing business across state lines. This is precisely why some states are actively pursuing avenues to reduce compliance burden.

Meredith Smith, the podcast host at TaxOps, paints a vivid picture of the daunting task small businesses face in grappling with sales taxes and the prospect of income tax filings across multiple jurisdictions. “If you have, call it a sales tax license in all 46 states, and you’re no longer really afforded that protection to not file per se and have to pay income tax…that’s just increased in addition to the sales tax kind of burdens,” Smith explains.

As ACMA continues its push for fairness in SALT policies, the outcome of California’s next steps will be closely watched. Will they follow proper procedures, or will they appeal the decision? This ongoing saga reflects a broader struggle that has implications for all remote sellers in the United States.

Impacting Everyday Business

In the complex world of state and local taxes, this and other legal battles are being fought, including the ACMA’s latest volley in New York. These issues impact everyday business operations, particularly those of small and medium enterprises. ACMA’s role as an advocate for these businesses, striving for simplicity and fairness in taxing remote commerce, has never been more critical—as indicated by the recent federal lawsuit win against California.

Transparent and predictable SALT policies are essential for a healthy interstate commerce environment. Businesses, both large and small, depend on organizations like ACMA and legal experts to navigate these turbulent waters and ensure that overzealous taxation does not hamper growth or innovation.

As states continue to erode the protections of Public Law 86-272 in a bid to expand their tax base, remote sellers must remain vigilant and informed. Such insights and efforts to streamline tax complexities are imperative to overcome barriers to compliance and reduce the impact of non-compliance on profitability for the unwary.

Listen to the podcast Challenging California’s Underground Regulations: Exploring the ACMA’s Advocacy Efforts.

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