we can continue to enjoy and live out the balance of freedom of religion in our public schools. >> to watch all the prize-winning documentaries, visit studentcam.org. >>'s supreme court will hear a commence on the constitutionality of south dakota law imposing sales tax on out-of-state internet businesses with no physical presence in the state. the heritage foundation debated some of the legal issues. >> good afternoon. welcome to the heritage foundation. we of course welcome those who join us on our heritage.org

website and those who are joining us on c-span tv. for those in-house, we ask a courtesy check the mobile devices have been silenced or turned off in those watching online are welcome to send comments or questions at any time by e-mailing speaker@heritage.org. leading our discussion today is elizabeth slattery who serves as legal follow that the advocacy program manager and our ed wynn center for legal and judicial studies. she of course focuses on the supreme court's separation of powers, judicial nominations in a variety of other constitutional issues. she also manages heritage sessions to prepare litigators for oral arguments in cases pending before the supreme court. please join me in welcoming elizabeth slattery. elizabeth. [applause]

elizabeth: tomorrow, morning the supreme court will hear oral arguments in south dakota versus wayfarer dealing with whether states can require out-of-state retailers to collect sales tax on sales tax on the residents make an online purchase. the court previously held versus north dakota the retailers must have a president such as a storefront for employees in the state in order to be subject to their taxing authority. justice scalia explained that congress has the final say over regulation of interstate commerce and it can change the rule by simply saying so. the quill case dealt with mail-order retail at and was used before online shopping existed. states argue now they are missing out on billions of dollars in lost sales tax revenue has south dakota decided to challenge the case and the law requiring out-of-state retailers to collect and remit sales tax if they make 200 transactions are $100,000 in sales in the state per year. wayfarer another retailers refuse to comply and now their cases at the supreme court. what will the court deciding how

my congress and the states respond? to unpack these issues we are fortunate to have what does the panel but earth who will discuss the constitutional policy implications of this case. first up will hear from david solomon, partner at morgan lewis when he had that the firm's appellate practice. david focuses on complex constitutional and regulatory matters a range of legal subjects. he started 14 cases before the supreme court and other federal and state court. david previously served as assistant to the solicitor general and law clerk to judge eugene davis of the federal circuit. he's a graduate of brigham young university and university of chicago law school. then we will hear from jonathan william, chief economist and vice president for the center for fiscal reform at the american legislative exchange council. jonathan worked with congressional leaders and members of the private sector to

develop fiscal policy solutions for this day. she previously served as staff economist at the tax foundation. jonathan's work has appeared in "the wall street journal," "forbes" and many other publications and is frequently appeared as a guest on the "pbs newshour" another tv programs . then we'll hear from michael greenwood, professor of law at my alma mater company antonin scalia law, administrative law and federal court. previously a scholar at the american enterprise institute, chairman of the competitive enterprise institute and founder of the center for individual rights. michael has written nine books including style globally, tax locally, which is particularly relevant to today's discussion. it's also read numerous articles and provided testimony at the state and federal level. michael studies political science and philosophy at the university of hamburg in germany and received a phd in governance from cornell. last but not least, we will hear from a colleague at heritage party policy analyst at the

institute for policy studies. his research focuses on the economics of taxation, international tax competition in the federal budget. his work has appeared in "the new york times" and "the wall street journal" and many other news outlets. he proves they were at the al qaeda center -- he has a bachelor's degree from whitman college and is currently pursuing a phd in economics at george mason university. so with that, we will start out with david. david: good afternoon. i will start with a history of the commerce clause issue that is at the heart of this case and then i will discuss the competing theories about how it should apply in this case and lastly i'll talk about congress' role in the specific act shims authority taken and is considering taking this should preclude the supreme court from overturning its prior precedent and endorsed in south dakota statute. first the history. they say the only thing short of

-- sure in this life are death and taxes through the history of this case and its predecessor suggests another candidate for the list. states that impose use taxes on the resident out-of-state purchases inevitably will try to conscript out-of-state marriages -- merchants into collecting and remitting of taxes. merchants who precisely because they are out-of-state have no recourse to the ballot box. without fail, states will always choose to impose the tax collection duty on out-of-state merchants to whom they are not politically accountable rather than trying to collect the tax directly from in-state purchasers to whom they are politically accountable. forcing out-of-state merchants especially those engaged in e-commerce to collect and remit is unpopular use taxes is exactly what south dakota seeks to do in this case. south dakota is hardly the first state to do so. both south dakota and others have tried this many times before.

it seems about every 25 years or so another set of state concocts a new regime to test these laws. to date, the supreme court has rejected every such attempt, holding true to the principle that a state can only impose such tax collection obligations on merchants that have a physical nexus to the state. the supreme court announced this rule in 1967. the court recognized the sharp distinction between retailers with outlets, solicitors or property within a state and those who do no more than communicate with customers in the state by mail or common carrier as part of a general interstate business. the commerce clause the court held bart illinois in that case from imposing tax collection duties on out-of-state merchants who lack a meaningful physical nexus to the state. the court emphasized that he reaches any other result, the outcome would be virtual welter of complicated obligations on

interstate sellers. so the issue was quiet for a while. in 1992, the supreme court was faced with another attempt to conserve out-of-state merchants, this time by north dakota who tried to force out-of-state catalogue retailers to collect use taxes for goods shipped into the state. north dakota argue the supreme court's decisions interpreting the dormant commerce clause have evolved and become less rigid and more permitting a state regulation at least in the absence of express prohibitions by congress since the time it was decided. the same evolution of supreme court doctrine of south dakota mason in the state. -- makes in this case. so the supreme court to overturn and the supreme court refused. again emphasize the negative impact it would result on interstate sellers, but more importantly they held that it

must apply and follow its prior precedent in this area because under our constitutional scheme, congress and not the supreme court has the final word as to what regulations in interstate commerce are permissible and by maintaining a consistent interpretation the court explained congress is now free to decide whether, when and to what extent states may burden concerns with the duty to collect interstate taxes, close quote. that brings us to the competing theories at issue in this case. as a threshold matter, the idea that today's court should stand by yesterday's decision even has a different or better rule could be devised. justice brandeis once put it this way. it is more important that the applicable rule of law be settled and it be settled right.

the court has recognized two types for strengths in constitutional cases the supreme court has the final say. stare decisis has relatively low strength. stare decisis concerns must be balanced against the fact that the court retains an important duty to correct erroneous constitutional interpretations precisely because it the only entity to do so. in cases of statutory interpretation, stare decisis has more strength because congress remains free to alter what the court has done. therefore, the constitutional order in the context is best served when courts figure two the prior holdings in family but to congress who alone possesses the legislative power under the constitution to correct any mistakes concerning statutory language. this case presents an interesting opportunity for the car in the context of

constitutional interpretations of the dormant commerce clause. on one hand, and south dakota emphasized the commerce clause is in the constitution and so they claim the supreme court should feel more free to overturn prior precedents in this area when the current court believes they are mistaken. on the other hand, just as in the case of statutory interpretation, because the tuition assigns to congress, not the courts, the final word on how to regulate commerce in this area. congress can bust a regulation that would otherwise violate the commerce clause and prohibit state actions affecting interstate commerce that would not otherwise be unconstitutional. because congress is the final arbiter of all interstate commerce regulation, the better view is the court should give the highest level of stare decisis respect.

that is exactly what the court in quill said when asked to overturn ballot test and whether they were right about the commerce clause and i think there's a very strong case that they were right about the commerce clause. they surely were right that congress had the institutional capacity in constitutional authority to finally resolve all issues of interstate commerce. the last point i will make for now is congress' power in this area is not just theoretical. congress authority taken important legislative action in reliance on ballot test requirement and is actively considering additional legislation in this area. any decision that overturns and endorses south dakota's legislation would be an end run around congress' authority would undermine the actions in this area. south dakota argues 25 years of inaction proved that congress

cannot fix quill. there were at least two things wrong with that assertion. first, south dakota begs the ultimate question, which is whether congress believes quill needs to be fixed at all in the second, congress has been and remains very active in this area. most importantly, congress did the i.t. essay in 1998 and made the statue permanent. as the legislative history makes clear, congress relied and incorporated the nexus principles into that statute and that legislative history states its objective was to provide certainty that those nexus principles would remain in place just as they apply to mail order commerce unless and until a future congress decide. the i.t. essay does a few important things that are worth

remembering. first is prohibiting commerce and defined a discriminatory tax to include any imposed on internet commerce that is either not generally opposed or legally collectible on transactions involving similar property goods, services or information accomplished by other means or that imposes an obligation to collect or pay the tax on a different person or entity then in the case of similar transactions. in many ways, most importantly it prohibits any tax in which the state or local tax is based in the obligation solely on the fact that instead of purchasers access a site on a remote seller's out-of-state computer server. so it's the only connection to the state are the only nation the state is using to impose the tax collection obligations the fact that in state users can

access out-of-state sellers, the statute prohibits that is a discriminatory tax. the itfa shows the supreme court is no longer able to interpret this clause. congress relied on quills nexus requirement has now established legal principles that must be taken into account. i would just mention the solicitor general suggestion emigres brief that they should consider limiting the nexus requirement to interstate catalogue sellers and the dog that they are virtually present in every taxing jurisdiction of the inconsistent with the itfa because it would raise tax collection duty solely on the fact that in-state purchasers are assessing an internet seller's out-of-state computer servers and because they would discriminate against internet commerce versus other forms of commerce. congress has rejected both of

those principles and that should be the end of the matter. lastly i mentioned briefly several other proposals for additional legislation in this area. congress is the right forum for this request. it is far better suited than the supreme court in a case like this to resolve policy questions, including the impact on effects on interstate commerce of state and local regulation, whether free or low-cost software can eliminate to mitigate the cost on internet sellers and how to account for the fact that nearly all large internet sellers are collect any taxes. the cost of overturning quill would fall disproportionately on small businesses. >> good afternoon, everyone. i have to warn you first off i'm not a lawyer, but i did stay at a holiday inn last night. i'm an economist and i will make a few brief points from our

perspective on the state side of things. i represent the american legislative exchange council where we have about two dozen -- 2000 state and local elected officials who are members of our small 50 states, both republicans and democrats who are devoted for free market by many government and the guiding principles. they've caused us to be skeptical of the idea beyond their borders. new studies from the european union. back to the history of our members have felt on this issue going back all the way to the 1990s and has been around since 1973. we have a law against additional view on this issue and i think it's an important one. you hear a lot of mention around a news story that the state wants and needs this new authority. the important thing to point out is that an organization

representing 2000 elected officials that the state and local levels, our members feel differently. we feel constitutional protections ought to be treated with the utmost respect. we really appreciate the leadership of chairman bob goodlatte here in washington, d.c. and his work on the house judiciary committee looking at ways to address these issues while protecting interstate commerce, while protecting >> protecting interstate commerce and very important principles that our members have of ourfor these 45 years organization and since the decision in the early 1990's. as someone who has been to all 50 states and worked with our members, i can tell you, having many conversations with state legislators, i will boil down a few points. i encourage you to take a look at these files in this case. my colleagues will agree. are onn, all of them

that brief as authors and did a remarkable job tracing through our position on this issue. ishink the point that often out there, as i mentioned, that states want and need new revenue. if you paid attention to the news stories recently, you know that state and local revenue hit an all-time high for the seventh year in a row. this is not talking about a shortage of revenue. to spendstates more. that is not my heritage foundation is here. we are here to talk about limited government solutions to problems out there. we encourage states to live within their means, even as they are coming out of the 2008 economic downturn when times are very difficult. they took real steps to live within their means. that prioritizes government services. also, the fact of all-time revenue being high, it not just come taxes. sales tax revenues are also up,

specifically. and 2012 the 2017, state local sales tax revenue was up roughly 25%. there is not a gaping hole in state sales tax systems because of this loophole some refer to as the remote seller provision of sales tax law. underdiscussed parts of this debate is that it empowered state to make a lot of new decisions at their own level of government. we have seen 30 states issue official reports on what the tax cut and jobs act means for their state budget, so similarly, what we saw your ronald reagan's tax ago,m of 1986, 31 years when you brought in the tax pace at the federal level, you see a huge influx of unexpected revenue for state and local government.

the story of the state legislative sessions for many states have been unexpected revenue coming in. debate being about whether they want to use that revenue to grow government or to cut tax rates. -- a limited government organization, we look to make the states more competitive with that money. the vast majority of the 30 states have shown unexpected revenue as a result of federal tax reform. you add that to economic growth, strong all-time record in 2017 of state and local tax revenue. to the effect of the tax cuts and jobs act. states are in very good shape when it comes to revenue. in fact, the discussion is what do you do with the extra revenue sitting around during this legislative session? secondt question -- question, should states be able to tax outside of their borders, and should they be able to regulate outside of their mortise? even -- their borders? even california has a beef with applying environmental

regulations to south dakota and subjecting their businesses to those types of regulations. they should be sympathetic in the sense that we should have some sort of attention from states that are tried to tax and regulate outside of their borders. that is why we commented on the no taxation without representation act before congress or regulation act, and that was an important point to delineate on the tax and regulatory framework, what states can do outside of their borders. you take a look at also the idea of the benefit principle, the idea of the political influence. the political economy piece of this is very important in that when states are having the ability to tax individuals were regulate individuals that are not their constituents, what kind of political influence do those out-of-state entities actually have, could they have? when you talk to state legislators across the country like i have for the last decade, lluringbig, a

factor. how do you spread out across of your government services to out-of-state residents who are not going to write, complain, be involved in the political process, and if they are involved, they have a lot less weight around the state capital then and home grown in state business. there is that aspect of it as well. of course, then you have the being subjecties to out-of-state auditors, who put potentially much less favorably on out-of-state companies as well. the new york example. we have talked about the aggressive test department, how they go after out of date residence on an income basis as well. that is something we supported for the mobile workforce idea before congress, which is to set some reasonable standards on what states can do to tax nonresidents. it began with things like athletes being taxed for a limited time in that state, and

of course, it has been applied by new york's aggressive tax department to potentially business travelers going through kennedy on a connection to europe and sending a few work emails, being subject to new york's income tax. imagine a scenario where the new york tax scenario is empowered to tax small businesses from around the country with no physical footprint in new york and applying that aggressive revenue collection regime on a sales and use tax side. that is a scenario that should keep most small business owners that sell online up at night if they were looking to sell to new york residents. from a fairness perspective, this is the other thing we talk to state legislators quite a bit about. it certainly is a concern. at playfairness issues regardless of what kind of a system you look at when it comes to internet taxation of remote sales, whether it looks at sales tax collection of in-state businesses. that being said though, according to the report, which i encourage any of you that want

to did deeper into this issue to really look at, because they have amazing statistics they have found, only about 2% to 4% of all state and local sales through remoted sales. we are talking about a very small piece of it. now that amazon collects in every single state where there is a still tax, -- sales tax, that has been a huge movement that perhaps was untaxed before. and you look at the idea that the top retailers, of the top retailers, 96% of their sales are taxed currently. this issue that there is a huge, gaping hole in sales tax codes, it it is not supported by the facts. we have seen a rapidly changing environment when it comes to e-commerce. i would argue that physical presents works. when a company like amazon has been successful, when they wanted to expand and do same-day delivery, which i take advantage of, when they wanted to buy a whole foods, when they wanted to

expand to be the juggernaut company they are today, they have developed their physical presents nearly everywhere. that shows that when a business gets to that level, they really would have a physical presents anyway and most of those cases. let me conclude with the idea of founder ofne, overstock the u was testifying in front of the house judiciary a couple of years ago, he made a statement that really stuck with me ever since. it talks about how this potential tax collection regime is perhaps more across the united states and could stop the next amazon, could stop the next overstock or that should be something we all worry about, because when mom and pops look to expand, they are not looking at expanding in a second physical location across the street on main street. they are looking to expand by selling online. this is something that could keep them from selling online with these kind of compliance costs. in 1999, we had 18 employees.

we carried 100 products and had $1.8 million in revenue. if we had been required to administer and collect sales taxes on behalf of remote state governments without any simplification indemnity, our chances of becoming an employer of the 1500 american workers we have today would have been small. issue going, is the forward. i think members who want to protect tax competition and small business and e-commerce going forward are very skeptical of new regime's with potentially 13,000 taxing jurisdictions across the united states. >> thanks. i have to admit, i wrote that book that was mentioned eons ago before some of you here were born. in preparation for this, -- method the topic. in preparation for this event, i slipped to some logs and stuff,

and it is not a single new years.t in all these the unquestioned premise of the usere debate is sales and taxes should be destination- based, based on the purchasers. -- purchasers location. the only question is who is going to collect that and how many ties or context you have to have to that particular jurisdiction to be subject to collection obligations? a policy matter, this is not a good system. i think we should have an origin-based system of taxation, so that it the seller's tax location that determines the tax base and tax rate, and that could either be the principal place of business or retail location, whatever. there are a number of reasons for that proposal.

michael: but there are other reasons. one has to do with the administrative costs of the system. other reasons have to do with caps on position and the territoriality principle. i will make this very brief. if you do not know what a tax system should look like and what would be efficient or not, one good first thing is to figure out a system that memorizes the enforcement costs. a single tax collector and a single person who is in charge or possesses all the information. how do i know this makes sense? every state in this great

country administers an origin-based attacks for sales. not one has destination-based taxes. go ahead. try it. have people show their drivers license or residence cards every time they purchase something at a local store. i do not think that would work very well. i think one state had actually tried once, and that turned out to be a fiasco and lasted 15 seconds. why we would inflict that on the interstate system is not entirely clear to me. you see the same thing in cross-border sales, so there are busloads of shopping tours that schlepped to delaware and purchased stuff. no one asks you for your drivers license. and then they charge you the applicable use taxes.

all the internet does is sort of universal rises and democratize universalizes and democratizes that system. i think tax competition is good, not just on the purchasers side, but also on the sales side. states compete for business in all sorts of ways, including taxes, including regulation, why should this be any different? the aggregate gains from competition are huge, and there is no state in the country that ought to know this better than south dakota. everyone here has a credit card. probably more than one. we would not have that credit but for the supreme court's decision that credit card transactions with respect user fees and so forth under the national bank act are controlled

by the banks. and not by the purchasers. and when the supreme court handed down that decision, the first state to abolish user usery was the state -- laws was south dakota. other states caught up. states not withhold that same privilege of competing from tax-free state or sales tax-free states is beyond me. that was territorial is him under these constitutions. states are equal and territorial. principle isom that citizens choose their state and not the other way around. we have compromised that in all sorts of ways. the supreme court has not

remotely enough to stand in the way, and it's actually a fairly menacing proposition. you look at our fabulous product , which is coupled by whatever hellhole jurisdiction is -- you could control that by making the liability rules travel with the place of retail. somebody has already mentioned renewable portfolio standards in many, many states. in particular, california. they purport to tell other states how to produce energy. california has tried to tell the state of nebraska and oklahoma how big chicken troops have to be. the multistate -- chicken coops have to be. the multistate tobacco

commission posts a universal excise tax on tobacco products across the entire country on an extraterritorial basis, and on and on it goes. i do not hold any great grief for the rule. i think there are better rules out there. but i will say this. at least it is territorial, and that is sort of one reminder that would be useful for all of us to keep in mind. thank you all for joining us. reiterate a couple of points that have been made, and hopefully end on a slightly different note. to reiterate johnson's point, the untaxed internet is largely a myth. the report he pointed you all to is a really great place to start, but if you just survey people after they make their aboutnternet transaction, two thirds of them will tell you they have paid tax on it, and

that vastly understates the amount of tax being collected, because you are relying on people to remember how that transaction went. if you did down in the data, 90% of sales from the top 100 retailers are already taxed because of this. as businesses become larger or their model requires them to be in more and more states, which makes them subject to additional state taxes. we have seen this. it's happening on amazon. amazon, when they were a small start up, again, the expansion of state tax authority. it's outside of state borders. as the company grew, and they had a physical presence in more and more states, their position all of a sudden changed, and this is indicative of the regulatory cost that comes along with expanding a taxing authority beyond their borders. as you become larger, you have taxesility to figure out

down the 10,000 different taxing jurisdictions. whether you are a small start up on ebay and at sea, the ability -- and etsy, the ability to imply that all those regular -- comply with all those regulations becomes harder. state revenue collectors and come businesses can together is really problematic going forward. we should be called as an of the small businesses that are below some of the thresholds that are thrown out there as exemptions to some of the proposals. irs in 2015 estimated there was over 37,000 businesses with no paid employees. it had over $1 million in revenue. withs a small business large revenue. if you're going to put it on paper. if you have no employees, the additional cost of hiring a business to comply with 50 new taxe taxe systems is a --

systems is a big additional cost could you cannot even hire a first employee. that additional cost is obviously going to be a burden and expanding and becoming an employer of many more people. the last thing i would like to end on is this idea of extraterritorial taxation as constrainingt to government growth and individual liberty. states have delegated the authority of collecting taxes to businesses, and therefore, it makes sense that taxing roles should be tied to the business's location and not all of the different people they may interact with across the world, the of the internet. where -- via the internet. skepticism on the proposal to test large american corporations on their digital to consumerd

locations, so rather than google or facebook being present in european countries, it is just someone in the country who has to interact with the company online. and expanding taxes to that definition of economic activity is really terrifying when you think of the implications of every country around the world that has someone accessing a companies product online, having taxing rights over that business. that sort of expansion of taxing rights is in my view problematic. >> so -- sorry. one last point. it comes back to the title of our panel. do borders matter? should borders constrain state taxing authority? i think the answer is yes to both. yes, borders do matter and should constrain the ability of states to tax businesses that are physically present elsewhere.

thank you. >> sorry about preemptively giving you the question. before we open you up to questions from the audience, do you all have anything to respond to? did anyone bring anything you wanted to address? no takers? ok. i have one question before we open it up. so i thought it was interesting that south dakota in its brief to the supreme court, is that it's missing out on something ine $33 billion annually lost sales tax revenue, but the said it's more like $8 billion, maybe up to $13 billion. i wonder, as someone who has dug into this, could you explain why there is such a big gap between what the state claims it's missing out on and what it might actually be missing out on? you mentioned the age of 13 billion. it's got the assumptions of

physical presence. that would be the biggest logical difference there. the south dakota brief was interesting for that aspect. they are so far off from the gla estimate. they were making the case that states need more money to spend, especially on k-12 education. they make the point in the brief. the coda has been a state that has found a limited government format. it has kept the k-12 spending andw the national averages that has seen higher than average k-12 test results. there is a couple of interesting points about brief when i was reading it a couple of times. the estimate that comes from state revenue collectors are almost always significantly inflated. we have seen estimates in both new york and california where they have expanded their sort of ability to collect tax on various definitions of sales.

the estimates met the state put out are almost always significantly smaller than the actual revenue that materializes from the change. it's just a bias in trying to make their argument stronger. >> i think it also highlights one of the problems with using the vehicle of this case to have this kind of policy debate and outcome. and the state here created a statute for the sole purpose of presenting a vehicle to overturn the supreme court decision, and it rushed through the lower courts on declaratory judgment bases with very little record development, very little testing of evidence back and forth about the underlying facts in terms of the actual effects being had here. that could be characterized as fairly self-serving assertions. they have not really been subjected to much vigorous back and forth. you compare that with the

process that congress employed where people testify. they are under oath. there is information. you have the gao and others that provide information. it's a very different way of building a record to test some of these various assertions. >> from the audience, if you could please wait for the microphone and identify yourself and ask a brief question. please don't make a speech. anyone? down here. >> hello. i am with l for partners. i have the great fortune to work on this issue about 25 years ago, and i was just chatting with michael grimm about it. at the time, i was with americans for tax reform, and i worked on iras at the same time. there is a lot of research showing that any limitation on ira contributions dramatically

reduced ira participation because people assume they would be under the limit. i wonder if there was any research today about whether a de minimis protection for small minimus.iss -- would they assume that the minimus does not apply? in other words, does it do no good at all in fact to say this is an exception for small businesses? do you have data to support that? >> i do not know if there has been someone specifically looking at how a small business thinks about that trade-off? any tax wall that has that ,mpact, some horizon out there and the marginal decision to how fast they expand and where they

expand. if you are well below the threshold, there is a bunch of other literature that support this claim that it does change decision-making on that. on that frontier. exactly, the cost, the risk of that cost, is high. even if you are not going to be the one hanging out there. it's dampening. >> the small seller exemption piece is important in some legislative vehicle. it's not even part in them. it goes away after two years to three years, and applying the full force of the seller's spirit is something to be concerned with. there is no doubt about it. i believe it makes less than $100,000 in a year. all of a sudden, you are applying small seller exemption that 200,000 in sales.

you're looking at a real nightmare for small businesses, let alone the audit risk and potential retroactivity which some states say they will pursue anyway. >> we have never comprehended -- i mean -- i agree. this has sort of been debated in a factory environment. everybody has differences as to how this would work. i have no idea how this would work in practice, what the compliance rates would be, whether states would actually physically send -- i think the scariest piece of this is the auditing requirements. at the tail end. whether new york would have the nerve to send tax collectors to, i don't know, texas or you know, some other place, and physically lean on these people. it's just beyond me. there is something unreal about

this entire debate in my mind. in a possibility, you can see all of the additional legal constitutional questions, due process questions, retroactivity questions, that will come into play if the supreme court reverses its prior decisions in this area. all that had to be sorted out in future litigation, and the costs , especially to the small and medium-sized internet companies, could be really significant. it's important to remember -- the option of a fairly blunt instrument. it's going to keep its prior -- it does not have the ability to draw nuanced lines about what the regime should be to protect against some of these kinds of costs for the most vulnerable businesses. only congress can do something like that. it is the bluntness of the result here that in many ways

would be most disturbing for the supreme court, if they flip over for -- and in all these questions are open. >> other questions? in the middle? ross marsh and, protection alliance. i had a questione on th regulatory -- question on the regulatory components of this. there is no regulatory enforcement by state outside of state borders. let's say i had a coffee company operating out of d.c. and i sent coffee to someone living in california. do i have to label it saying -- in california, they have stringent cancer warning labels or something. what i have to put that label if i was sending it to someone in california? >> that's certainly a concern. if there is not a protection against that kind of

requirement, somebody who enjoys a couple of lattes myself today, company,thing as a they would be worried about. there is a widespread problem that states have had with california and other environmental regulations or agricultural regulations. this is not an isolated incident. this is not a widespread issue. >> colorado has a law that requires businesses outside of the state to collect -- sales tax they don't. they had to report how much their citizens have sent. they had to inform them if there is a use tax liability. there is -- they are pushing the boundaries of what they can do outside of their borders. the supreme court case will not address that issue. congressional action should how farsay what --

states can go in compelling businesses outside of their borders to follow the rules that are legislated within the state. >> that's actually a good point. states are not helpless right now. sometimes, they would like to under current law. they have the ability under the direct marketing case in colorado to have retailers report their sales into the states. and to notify customers of use tax due. they have the ability to enforce use tax. out there are taxes that people see my property taxes. they realize the burden of that government. can you imagine people coming in and writing the checks to state government on their income tax form on the use tax line? not very good in the election year. that is one reason they would like to disperse those out and have out-of-state sellers collect those for them so there is not the pain and cost of the government being that visible.

>> right here? >> johnson. regarding the amount of iferwork, it's something -- something like this were to be overturned, we have heard a lot about over 10,000 taxing jurisdictions with varying roles around the country. who would supply -- let's say we have software as a remedy to deal with that. who would supply such software? would that be the federal government, would individual states supply their own, and who would be taking the winners and losers that would benefit from that sort of deal with the government? dakota, then south states, put out any idea on how to just sort of deal with the nightmare that would come with all of this? >> there is an interesting debate within the briefs on both sides.

ando the effectiveness accuracy of some of the free or low-cost software programs that are available on the internet or when you think about all of the various permutations of use taxes, there is a lot of irrationality. certain products are subject to it. it varies all over the place. there are estimated compliance costs from the gao report. , up are quite substantial to $100,000 over a period of time to pay for a software program that currently available and updated and continued to upgraded as these changes take place. you compare that with what congress intended when it passed the idsa. to bringd a commission all of the states and other

interested parties together to try to work out a compromise, where on the one hand, states would simplify their use tax rules. the commission would propose to congress a uniform nationwide system based on the seller's location. that would provide a mechanism for the collection and remittance of those taxes, and for the most part, the states have refused to participate in instead, they have this strategy of trying to just do a run around what congress had intended and be able to impose this on their own, and the amount of compliance costs, we think, are really quite -- this on the panel. i have seen this before. the compliance costs, the prospect of, you know, compliance costs and inaccuracies in the reporting that might then be auditable and all the rest of it, that was a potent argument against getting

rid of it 20 years ago. the states new it all along. they have undertaken, you know, for 20 years now, efforts -- trust us. compliancecomputer program just around the corner. they have not done it in 20 years. what gives you any hope that the next 20 years will be any better? i do not trust these people at all, quite frankly. >> and also, in a lot of cases, the so-called free software is anywhere but free in terms of matching a product codes to the software offered. the six largest states are not part of the streamlined sales tax protocol. access to not have perhaps the free software that would be offered to member states. at the end of the day, you have to look at who bears the auditte reliability for risk, the changing definition, something we fought against them

a bad tax policy, sales tax holidays, for various reasons. always coming on and off the books in local definitions, where in some states, you have this treated as a food product and snickers treated as a candy product. it's treated different under state and local sales tax laws. i do not know that i trust the software to necessarily keep up with the changing rules and regulations at the state and local level. who will be the one in the courtroom potentially dealing with auditors? it will not be the software. it will be the small business owner. >> enforcement risks, if you under collect, you have consumer class actions, and in many ways, other actions. and you have not only assertion of regulatory, but inevitably, jurisdiction against those types of claims. its underlying what the states are trying to do here, which raised a host of issues, so the

potential liability risks for these companies, specially small and medium-sized companies, is really substantial. follow this out and say we are going to sort of make all the sales tax regime took similar so the compliance costs are lower, that undermines the benefits of tax competition we have heard about. guidelines, then there is no ability for state to experiment with tax systems that are best for their constituents. it's not just a race to the bottom. thatll have a tax system collects more revenue. just jurisdictional diversity is also a good thing. this is the correct way to do it. it prohibits that sort of experimentation. >> please join me in thanking our panelists. [applause] -- [coughing]

>> california governor jerry brown has challenged the trump administration on a number of issues, including sending national guard troops to the border, climate change, and environmental policy. governor brown is at the national press club on tuesday. my coverage begins on tuesday on c-span2. the nominees to leave the u.s. pacific command and north american aerospace defense command take questions from members of the senate armed services committee. live coverage at 9:30 eastern. you can follow both events on c-span.org and with the c-span radio app.

>> c-span's washington journal, live every day with news and policy issues that impact you. coming up this morning, california democratic congressman john garamendi will join us to talk about the u.s. military action against syria amid increased tensions with russia. pennsylvania republican congressman glenn thompson will talk about the farm bill and proposed changes to the snap program. chris edwards of the cato institute will discuss tech policy. be sure to watch washington journal, live at 7:00 eastern this morning. join the discussion. sunday, a look back to the of 1968us year focuses on women's rights, that women's liberation movement, which challenged long-held discussions about american womanhood, transforming society. joining us to talk about women's

rights in 1968, our deborah spahr, former college president, and author of wonder women, sex, power, and the quest for perfection. she is also the author of the upcoming book fix matters. how modern feminism lost touch with science, love, and common sense. watch 1968, america in turmoil, amen's rights sunday at 8:30 eastern on c-span's washington journal and american history tv on c-span3. >> the trump administration recently imposed new tariffs on steel and aluminum. next, a look at the potential impact of that decision with international trade and labor officials. this event was hosted by the afl-cio. much.nks very we will go ahead and begin