That’s the message from the U.S. Supreme Court. The justices last week all but invited Congress to remove the longstanding ban on state taxation of mail-order sales. Until now, states could collect sales taxes only from companies that had a local “physical presence”; out-of-state mail-order houses like Lands’ End were exempt. That distinction, wrote Justice John Paul Stevens, was obsolete because of the “continuous and widespread solicitation” by catalogers. (Perhaps one Lillian Vernon brochure too many arrived at the Stevens household last Christmas?)
The decision sets up a fierce battle between cash-starved local governments and a powerful commercial lobby. Mayors and governors, who, of course, buy their ties only on Main Street, view the catalog business as a $3 billion cache of pennies. For its part, the mail-order industry vows to fight to its last drop of maple syrup. The problem isn’t just the potential loss of customers, but the headache of paying taxes to more than 6,500 separate jurisdictions.
Both sides indicate a willingness to compromise, but the merchants may hold a trump card. Senate Majority Leader George Mitchell has already declared his opposition to any tax bill. Mitchell happens to be from Maine–home of the big mail-order duckfoot L.L. Bean.
