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Wash. Legislature Will Reconvene to Vote on Boeing Construction Package

Avi Niman of StateTrack reports that Washington Gov. Jay Inslee (D) has called a special session of the state’s legislature, to convene Nov. 7. Lawmakers will consider approving a package of legislation that will enable the construction of the new 777X jetliner by The Boeing Company in Everett, Wash.

The proposed package includes tax incentives, education and workforce development, a transportation revenue package, streamlined permitting, and water quality solutions. Inslee has stated that ratification of this legislative package is crucial for the economic growth and development of jobs in the state.

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Internet Sales Tax Debate Rages in the States

Amazon.com began collecting the 6.25 percent state sales tax on any purchases by Massachusetts’ residents starting November 1. The tax revenue collected by the company will then be submitted to the state’s Department of Revenue.

Amazon.com agreed to collect the tax when it acquired Kiva Systems last year based in North Reading, Massachusetts. Amazon is now either collecting state sales tax or is expected to start for orders originating in 16 states: Arizona, California, Connecticut, Georgia, Indiana, Kansas, Kentucky, Massachusetts, New York, North Dakota, Pennsylvania, Texas, Virginia, Washington, West Virginia and Wisconsin. 

The main reason the company agreed to voluntarily collect online sales taxes in these states was directly due to the establishment of a physical presence in those states as Amazon.com has opened fulfillment warehouses, made acquisitions or agreed to keep in-state Amazon.com associates. Amazon.com simply dropped their sales affiliates in seven states where the company had no physical presence instead of collecting and remitting sales taxes including: Arkansas, Maine, Missouri, Minnesota, North Carolina, Rhode Island and Vermont.

The practice of taxing an out-of-state retailer for in-state sales was largely invalidated in the 1992 Supreme Court Ruling Quill Corp v. North Dakota. Since then, a new type of tax law, dubbed ‘affiliate nexus’ laws, have begun to take a new approach by taxing the sales of online retailers who do business through a third party located in the state. Typically, these third parties will link to a vendor’s website and are in turn compensated for any sales made through these types of referrals. If the amount of sales made through these referrals exceeds a certain threshold, typically $10,000, then all of the vendor’s sales made to consumers in that state become subject to state tax laws.

For example, Arkansas in 2011 enacted a law to require large e-commerce retailers to collect and remit state sales taxes if they generate more than $10,000 in sales a year through in-state sales affiliates. Connecticut requires e-commerce retailers to collect and remit state sales taxes if they generate more than $2,000 in sales a year through sales affiliates based in the state. A seller who enters into an agreement with a person in Maine, for a commission or other consideration, refers potential customers and has cumulative gross receipts from retail sales in excess of $10,000 must register with the tax assessor and collect and remit taxes. In Rhode Island, retailers that generate more than $5,000 in sales through sales affiliates based in the state must collect the tax. In response to these initiatives, Amazon has canceled affiliation agreements in many of the states that have enacted this type of law.

Meanwhile, the issue has been working its way through the courts. The Illinois Supreme Court on October 18 struck down an affiliate nexus law. The decision was a first, as courts in New York had previously upheld them. The Illinois court’s majority argued that there does not seem to be a difference between digitally linking customers and using means that are not taxed, like advertising promotional codes in print publications or radio broadcasts.

For years many state lawmakers have been hoping Congress would resolve the issue, but the current bill, The Marketplace Fairness Act, is stalled in the House. This bill would grant states the authority to compel online and catalog retailers, no matter where they are located, to collect sales tax at the time of a transaction. The bill would grant this authority only to states that have simplified their sales tax laws. Under this bill any online retailer with sales exceeding $1 million across all states would become subject to the same in-state taxes as brick and mortar operations. Notably, Amazon supports this bill but other online giants like eBay do not.

State and Local Issues to Dominate U.S. Supreme Court Docket

The U.S. Supreme Court will hear cases this term related to campaign finance, affirmative action, public prayer and unions. The court’s ruling in these cases could make state elections much more expensive and change the way state and local governments hire and interact with their employees, especially their unionized workforce.

The most politically-charged case on the 2013-2014 docket is McCutcheon v. Federal Election Committee, a case related to the amount individuals can contribute to candidates and political parties. Should the court agree with the plaintiff’s argument that the two-year aggregate campaign contribution limit violates the First Amendment, they would expand upon Citizens United by increasing the threshold for individual contributions directly to candidates or political parties from $123,000 every two-year election cycle to $3.6 million. The court will be asked to agree with an amicus curiae brief presented by the Republican National Committee and Senate Minority Leader Mitch McConnell, R-Ky., and do away with direct contribution limits altogether.

Race-based policies have drawn  a skeptical response from the Supreme Court in recent years, and states like Oklahoma, Nebraska and Arizona have responded by approving constitutional amendments banning affirmative action. Against this backdrop, the justices took up Schuette v. Coalition to Defend Affirmative Action, Integration & Immigrant Rights, and Fight for Equality by Any Means Necessary, a Michigan affirmative action case with a 10-year history. In 2006, Michigan voters overwhelmingly approved a ballot initiative amending the state constitution to ban affirmative action in higher education and public sector hiring, and consequently, minority enrollment at the University of Michigan plummeted. A federal appeals court in 2012 ruled that the voter-approved referendum itself was discriminatory, and opponents of the referendum point out that all other state admissions policies are set by a popularly-elected board of regents. The state could take away the regents’ power to set admissions criteria or could enact another system that promotes diversity. To do so, however, minority groups would have to embark on the costly and challenging process to re-amend the state constitution with a second referendum. The vote for affirmative action in 2003 was 5-4; justices stressed at the time the intended temporary nature of the programs.

The high court will consider the constitutionality of prayer in legislative settings in Greece v. Galloway. In Greece, New York, a local preacher has traditionally opened town meetings with a prayer. The town argues that the meetings are open to anyone who wants to give a prayer, but the invocations are consistently Christian in nature and often ask non-Christians to participate.  The appeals court ruled the activity an endorsement of a certain religion. In a recent brief issued by the White House, the Obama administration stated, “So long as the goal of the government-backed prayer is not to recruit believers or criticize a given faith then the practice should be supported.”  Depending on the breadth of the ruling, the decision’s impact could seriously affect religion’s role in the public sphere.

SCOTUS also granted certiorari to a number of cases related to employment law. The court’s decisions last session could be characterized as pro-employer, and court watchers expect this trend to continue in the 2013-14 term.

The Illinois case Harris v. Quinn promises to have great repercussions for the future unionization of state and municipal workers. The plaintiffs claim that SEIU’s collection of non-political dues from non-member home health care workers employed by the state constitutes a violation of their First Amendment rights of association and petition. Also at issue in this case is whether workers paid through Medicaid but employed as independent contractors can be considered state employees. The district court dismissed the plaintiff’s claim, but the Supreme Court could find in their favor. According to Gabriella Khorasanee, a blogger for FindLaw, SCOTUS may even nullify its previous decision in Abood v. Detroit Board of Education to argue that non-union members cannot be forced to pay non-political portions of union fees laid out in collective bargaining agreements.

In another union related case, the Eleventh Circuit found in Florida case Mulhall v. Unite Here Local 355 that union arrangements with management to ease the process of unionization in exchange for its neutrality can constitute a bribe. They argued that the employee contact list that the management of Mardi Gras Gaming turned over to UHL was a “thing of value,” but the union claimed that these kinds of agreements are regular features of labor relations, and to make a change now would “wreak havoc” with labor law.

The decision in an Indiana case could “rein in the Department of Labor’s efforts to alter the Fair Labor Standards Act without formal (i.e., legislative) changes,” according to Sara Eber of employment law firm Seyfarth Shaw LLP. In Sandifer v. US Steel, SCOTUS will decide whether the time spent “donning and doffing” protective gear should be paid. The Department of Labor argues that it should, but the Seventh Circuit found in favor of US Steel.

Ark. Legislators Reconvene to Address Teachers’ Insurance Rates; N.H. Lawmakers to Tackle Medicaid Expansion in Nov.

Update at 2:45 p.m.: StateTrack’s Manuel Alex Moya notes that the New Hampshire Legislature will meet for a two-week special session in November.

The Executive Council of New Hampshire approved Gov. Maggie Hassan’s request for a Nov.  7-21  so  legislators can work toward a bipartisan plan to expand Medicaid.

“We have a significant opportunity to improve the health and financial well-being of our families, strengthen our economy, and improve our state’s financial future,” said Hassan.

In order for a consensus to be achieved, Democrats, who control the House, will need the support of Republicans, who hold a 13-to-11 seat lead in the Senate.

An attempt to come to such an agreement failed earlier this year during regular session. Instead, a bipartisan advisory panel was established to hear testimony from state and national experts for almost four months. They eventually concluded with a unanimous recommendation that New Hampshire expand Medicaid through the promised $2.5 billion in federal funding while also considering private insurance options and ways to protect taxpayers.

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StateTrack‘s Cheryl Robins reports that Gov. Mike Beebe (D) called for a special session in the Arkansas General Assembly to address the forthcoming health insurance rate increase for the Public School Employee Plan.  The session will begin on Thursday at 3 p.m. and will likely conclude by the end of the day on Saturday.

One proposed measure would reduce the 2014 rate increase from 50 percent to 10 percent through the provision of $43 million in one-time surplus funds. Proposed legislation also would redirect future savings from the Education Facilities Partnership Fund; modify requirements for Teacher Professional Development; establish a task force to study and revise the Public School Employees Plan; and clarify the distribution of state revenue generated from the Uniform Rate of Tax and direct that revenue to the Educational Facilities Partnership Fund.