Jun 22, 2021
Last week, the U.S. Supreme Court ruled once again on the constitutionality of the Affordable Care Act (ACA) rejecting arguments that the ACA was unconstitutional under Congress’ taxing power. Last year, the Supreme Court heard testimony in California v. Texas which focused on whether the ACA’s individual mandate to maintain health insurance was beyond Congress’s powers given that it no longer raises tax revenues and, if so, whether other parts of the law would need to be struck down along with the mandate. This case marked the third time the court had heard a significant challenge to the law.
Justice Stephen Breyer delivered the 7-2 opinion which stated the individuals that brought the lawsuit challenging the ACA’s individual mandate did not have the standing to challenge the law: “ we conclude the plaintiffs in this suit failed to show a concrete, particularized injury fairly traceable to the defendants’ conduct in enforcing the specific statutory provision they attack as unconstitutional,” wrote Breyer.
What does this mean?
The Supreme Court upheld the ACA, including its many tax provisions.
If you filed a protective claim in hopes the Supreme Court would rule the ACA, and its many tax provisions, retroactively unconstitutional, these protective claims are no longer valid. Protective claims are filed to preserve the taxpayer’s right to claim a refund when that right is contingent on future events and may not be determinable until after the statute of limitations expires.
If you have questions regarding your individual circumstance, please contact your William Vaughan Company representative or call our office at the number below.
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Categories: Tax Compliance
Jun 20, 2018
April 17 was not only the end of tax season but also the day the Supreme Court heard South Dakota vs. Wayfair, Inc. This case will likely affect every business, no matter size or revenue. This case spotlights the collection and remittance of sales tax, specifically whether the responsibility should lie with the state or the business. Sales tax is considered a consummation or a value-added tax and is typically assessed to the end purchaser or user of a product. Most businesses are responsible for collecting and remitting these taxes. However, with any tax law, there are exemptions.
One of these exemptions comes from a previous Supreme Court Case from 1992 – Quill v. North Dakota. In this case, the Supreme Court ruled businesses only had to collect sales tax in states where they had a physical presence. Therefore, an out-of-state business whose only contact with a state was the sale of tangible personal property, did not need to collect and remit sales tax. If the sales tax wasn’t collected by the business the burden to remit to the State was then transferred to the resident of the State. Basically, if you don’t pay sales tax on a taxable purchase, YOU are now required to pay the tax on your individual tax return. And this is where the issue lies.
States governments argue the cost to enforce collections from an individual greatly outweigh any unpaid tax. As a result, state officials are pushing for the responsibility to lie with the business. Last year, South Dakota took action with the following economic threshold law: if your business has $100,000 in gross sales or over 200 varying transactions to consumers located within the state, then your business must collect and remit tax – no exceptions.
This brings us to South Dakota vs. Wayfair, Inc.
South Dakota wants to overturn the 1992 Quill ruling arguing the development of the internet and e-commerce establishes the physical presence of a business as outlined in Quill, therefore making businesses responsible for the tax collection. In addition, state officials maintained if an online business is doing substantial trade within their borders, then bricks-and-mortar businesses are at a disadvantage as consumers may opt to purchase a product online without paying sales tax.
Conversely, Wayfair argues the complexities of such transactions are too much for smaller businesses to overcome. Under current law, 45 states and thousands of local jurisdictions assess sales tax. Additionally, each state has varying laws on what is a taxable transaction and was is not. Lastly, Wayfair has contended any internet sales are at a disadvantage due to shipping and handling charges.
All eyes are now on the Supreme Court, who is set to rule by the end of this month on the “tax case of the millenium”. Stay tuned to see how this may impact you.
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