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States’ online tax laws continue to prompt lawsuits

There is no end in sight for legal challenges to state government efforts to tax remote sales. The latest involves a lawsuit that Bloomberg made available online, filed by NetChoice and the American Catalog Mailers Association. They say that a new Tennessee administrative rule violates the precedent established in the now familiar 1992 U.S. Supreme Court case, Quill Corp. v North Dakota, which made it unconstitutional for states to impose a use tax collection duty on out of state sellers with no physical presence in that jurisdiction.

The new administrative rule that the suit is premised on contains a nexus provision calling for “[o]ut-of-state dealers who engage in the regular or systematic solicitation of consumers in this state through any means,” with sales to in-state consumers of more than $500,000, to register with the Department, and collect the applicable sales and use taxes on those sales.

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