In a petition filed Monday with the nation's highest court, Ooma Inc. said the justices should overturn lower court decisions that ruled Ooma is subject to Oregon's emergency, or 911, tax. Those holdings, Ooma said in the petition, did not properly apply the Supreme Court landmark decision in South Dakota v. Wayfair.
The justices should grant the petition to clarify that states should take virtual contacts, not just economic contacts, into account before asserting nexus, Ooma said.In Wayfair, the justices ruled that states have the right to compel businesses with no physical presence in those states to collect and remit tax just as if they were brick-and-mortar stores.
In the petition, the company maintains it does not have the "requisite virtual contacts" with Oregon that would be necessary under Wayfair to have to pay the 911 tax. It said one of the reasons Wayfair found that internet companies should have to collect and remit the same tax as companies with physical presence is that the internet companies were maintaining a strong virtual presence. That could be interpreted as unfair competition since the internet companies had a strong presence but did not have to pay tax, Ooma told the justices.
"This court determined that the remote sellers in Wayfair had substantial nexus with South Dakota based on the fact that they were 'large, national companies that undoubtedly maintain an extensive virtual presence,'" Ooma told the justices.
But Ooma, a Voice over Internet Protocol provider, said it has no such extensive virtual presence in Oregon, only an economic presence. Without the extensive virtual presence, it should not have to pay the 911 tax, it said.
On Dec. 23, 2021, the Oregon Supreme Court upheld rulings from two different divisions of the Oregon Tax Court that Ooma had the necessary contacts with Oregon to be subject to the tax. But in its petition, Ooma said those rulings had taken into account only economic factors, which it contended was not the U.S. Supreme Court's intention in the Wayfair decision.
"In this case, the Supreme Court of Oregon held that Ooma had substantial nexus with the state based solely on its sales volume and customer count," Ooma said in the petition.
Ooma said the Supreme Court of Oregon held that the U.S. Supreme Court did not say virtual contacts are a requirement for substantial nexus, but that is incorrect, the company said.
"Not only is the existence of virtual contacts a constitutional requirement, it is the focal point for the constitutional analysis," Ooma said.
Still, it said, Oregon and other states that have enacted economic presence nexus in the wake of Wayfair have disregarded the court's guidance on the importance of virtual contacts.
"Despite this clear instruction from the court, states have rushed to adopt economic nexus laws mirroring [South Dakota]," Ooma said. "Each such state law is narrowly focused on brightline economic thresholds for substantial nexus. These state laws do not require any consideration of a remote seller's virtual contacts with the state."
And the justices should hear the case to clarify that these state laws are misguided under Wayfair, Ooma said.
Counsel for Ooma and a representative of Oregon declined to comment Tuesday.
Ooma is represented by Michael J. Bowen, Peter O. Larsen and Kristen M. Fiore of Akerman LLP.
Counsel for Oregon was not immediately available Tuesday.
The case is Ooma Inc. v. Oregon Department of Revenue, case number 21A502, in the U.S. Supreme Court.
--Editing by Roy LeBlanc.
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