A policy brief from the Tax Foundation and the Badger Institute.
On June 21, 2018, the U.S. Supreme Court handed down a landmark decision in South Dakota v. Wayfair, Inc., expanding the ability of states to require out-of-state retailers to collect and remit state sales taxes on transactions involving in-state residents. The Wisconsin Department of Revenue (DOR) has announced that expanded remote sales tax collection will begin October 1, 2018, after the Department takes administrative steps necessary to ensure compliance with Wayfair. This expanded sales tax collection authority is expected to bring in approximately $90 million in additional revenue for Wisconsin in 2018-2019 and $120 million annually in subsequent years. This projection can reasonably be expected to increase as e-commerce continues to gain prominence in the national and global economies.
Compared to many other states across the country, Wisconsin is much better prepared to adhere to the Supreme Court’s standards for constitutional collection of sales taxes on remote transactions, so Wisconsin taxpayers can reasonably expect to start seeing expanded online sales tax collection in the allotted time frame. Further, Wisconsin policymakers have already grappled with how to use any new revenue from expanded online sales tax collection authority. In 2013, when the potential for congressional action on online sales taxes seemed likely, Wisconsin policymakers enacted a law requiring the state to apply any potential new revenue to reducing state individual income tax rates.
Today, legislators have the opportunity to revisit and expand upon that contingent legislation in the current policy landscape. Wisconsin is now ripe for tax reform, and revenue from expanded remote sales tax collection should be applied toward its highest valued use: permanent, comprehensive tax reform that broadens tax bases and lowers rates.