Author: Whitney Afonso (page 1 of 3)

Wayfair Windfall?


Where is the windfall promised by the South Dakota v. Wayfair, Inc ruling? This is the first blog post in a short series about economic nexus, local sales and use taxes, and your revenue!

Well, first let’s all get on the same page.  What is the South Dakota v. Wayfair, Inc (Wayfair) ruling, and why do we care about it?

The Wayfair case was ruled on by the Supreme Court in the summer of 2018.  It found that South Dakota’s laws regarding economic nexus were Constitutional.  Still sound like gobbled gook to you?  Let’s back a bit further then.

In 1992 the Supreme Court ruled in favor of Quill in the Quill Corp v. North Dakota case.  This case, much like Wayfair, was about whether the state could require remote vendors to collect use taxes (think sales taxes for purchases made out of state).  Back in 1992 this was largely purchases made by catalog or over the phone for one of those snazzy gadgets being sold on that infomercial.

By finding in favor of Quill, the Supreme Court acknowledged (and highlighted) the burdens that would be placed on remote vendors that are not present for brick and mortar retailers.  Examples of these burdens are knowing the state and local laws including what is taxed, what isn’t, and the sales tax rates.  And c’mon, we are not talking about that much money really???

Well enter the internet, Amazon, and REAL money.

So, while states and brick and mortar stores were concerned about the fairness and loss in revenue by not taxing remote vendors before the internet, all of that ramped up tremendously in the 2000’s and has continued to grow.

States began to get creative.  They began to try and shift away from the basis of physical nexus (actually having a store front or a warehouse in the state) to other standards.  There were laws introduced about click-through nexus and affiliate nexus.  In fact, Amazon briefly stopped allowing North Carolina residents to be “Associates” because North Carolina passed a law that would have used that program to establish nexus and force Amazon to begin to collect sales/use taxes.

In addition to these backdoor efforts to compel remote vendors to collect sales/use taxes, many states joined the Streamlined Sales and Use Tax Agreement (SSUTA) in an effort to get remote vendors to voluntarily collect sales/use taxes.  To become a member of SSUTA a state has to simplify and standardize their sales and use taxes and, these days, contract with a vendor to provide sales tax software to aid remote vendors in calculating and remitting taxes.

Then in 2017 a couple of states introduced the notion of economic nexus, which is ultimately what went to the Supreme Court.  Economic nexus is the idea that if you do enough business in the state, that you have a substantial enough presence there that you should and can collect sales and use taxes.  This is, of course, in addition to physical nexus—so if you are floundering small business in a state you still have to collect those taxes!

The idea of economic nexus spread quickly amongst the states, including South Dakota, where it was challenged by Wayfair, Inc.

Many of you are probably thinking “How much is enough?”, the majority of states that have adopted economic nexus laws have also adopted safe harbor thresholds.  These safe harbors have to be met in order for the remote vendor to establish economic nexus.  In most states there are two components to the safe harbor thresholds: 1) the number of sales and 2) the dollar amount of sales.  These safe harbors are intended to protect small companies that may not have the capacity to navigate complicated sales and use tax laws.

So, where is that windfall?  Well, we will get to some of that in the next few blog posts.


For more information and a more detailed analysis of this topic, please see my paper:

Whitney B. Afonso (2019), The Barriers Created by Complexity: A State-by-State Analysis of Local Sales Tax Laws in Light of the Wayfair Ruling National Tax Journal72:4, pp. 777-800



Social Impact Bonds: A Magic Tool for Financing Innovation?

Have you heard about social impact bonds (SIBs) yet?  If not there are a lot of resources and discussion out there regarding this magical fix of financial woes of government.  While many have viewed these as too good of an opportunity to pass up (for example, see here and here), others have been slightly more skeptical.

Here is a nice summary of three common mistakes about SIBs to provide some additional background, like they are not bonds.

What are SIBs?  Well basically they are a form of impact investing, which allows for increased investment in social programs from the private sector.  A private financing is used to implement a new program that is intended to address specific social outcomes for marginalized or at risk populations.  The goals (or outcomes) are determined before the intervention and if they are not met by the program than the government does not have to repay the investors.  If they are met (i.e., the pay for success) than the government pays back the investor and a return for the private sector (who is motivated to do this by profit and social good).  So in essence it allows for the public sector to take risk and innovate without financial risk.

For information from the architects (and advocates) of SIBs starting with Social Impact Bonds: A Guide for State and Local Governments prepared by the Harvard Kennedy School is a good choice.


How to conceptualize Social Impact Bonds?


Or as Goldman Sachs (a pioneer in this area) describes it:

Sounds great, right?  Well SIBs have their share of critics.  In fact, a great deal of the academic literature is not favorable towards SIBs, which may surprise many of you.  SIBs are innovative, they allow governments to try new things with less risk, and they are data driven policies–isn’t that what your professors back in school encouraged you to do?  This blog is not going to debate the issue, I will not take sides, I will present you with some of the concerns that the literature has presented regarding SIBs.

Like everything using performance targets, how those targets are established and whether they are measuring the right thing is critical.  Since these targets/outcomes are defined on the front end, the intervention will likely focus on meeting those targets–because that is how success (and thus payment) will be decided.  This allows for the potential of gaming both the targets on the front end and the intervention.

Additionally, they may or may not be saving money.  The literature has defined two substantial ways that they may not provide the promised cost savings.  First, they are complicated legal arrangements and that is expensive to negotiate and administer.  Second, many of the SIBs are invested in because they are actually not that risky.  Frequently there is substantial evidence that the intervention will succeed.  While we clearly want to be investing in good programs, if we (governments) are paying a large premium to avoid any risk of failure when that risk is already low, that will end up costing more money than it saves.

Finally, there is the concern that it makes these issues, people, problems a commodity.  That putting financial values on all social problems and on different populations may make the system too transactional.

However, even the most adamant of critics recognize there may be a role for SIBs.  If the SIB is using log-term objectives to build a systematic change.  The SIBs success can then be used to move the conversation forward at a broader (for example, statewide) scale.  For example, South Carolina’s ECE SIB has been viewed as very successful.  In part, the return on private investment was also lower and they were able to scale it up.

One of the leading academics who is voicing concerns regarding the use of SIBs is Mildred Warner and her work shaped the concerns shared in this blog post.  If interested in the not so rosy side of SIBs here are a few references:

Warner, Mildred E. “Private finance for public goods: social impact bonds.” Journal of economic policy reform 16.4 (2013): 303-319.

Tse, Allison E., and Mildred E. Warner. “The razor’s edge: Social impact bonds and the financialization of early childhood services.” Journal of Urban Affairs (2018): 1-17.

Dr. Warner also recommends the documentary The Invisible Heart.

Once again, there are also passionate advocates for SIBS—this blog is written under the presumption (based on conversations with folks) that you have likely heard more from the advocates than the skeptics.  There are great possibilities with this model, it is just important to (like with any other tool) to carefully consider when it is appropriate.


Budgeting in Local Government course: Registration now open


Budgeting in Local Government
November 6-9, 2018, School of Government

This four-day course covers the legal and management framework of budget preparation and enactment in North Carolina local government.  Participants will discuss the numerous processes and techniques used to produce an annual operating budget and capital budget.


Program Topics:

  • Local Government Fiscal and Control Act (Only for participants who have not attended Introduction to Local Government Finance)
  • Tax Efficiency & Equity
  • Economic Development
  • Revenue Forecasting
  • Resource Allocation
  • Budgeting for Schools and Human Services
  • Budgeting for Enterprises
  • Fund Balance
  • Citizen Engagement
  • Capital Improvement Program
  • Financial Condition Analysis
  • Budget Presentation
  • Revenue-Neutral Property Tax Rate
  • Budget Award & Course Evaluation


Who Should Attend: This course is intended for city and county managers, budget and finance officers, budget and financial analysts, and other officials who have significant responsibilities for annual budget preparation and enactment.


Cost:  $550


Registration:  Register online at for this course.


Faculty Coordinator: Whitney Afonso, Assistant Professor of Public Administration and Government.


For more information: Contact Alycia Inserra, Program Management Team Lead, at 919.843.7736 or



Sales Tax Reform: Articles and Virtual Roundtable

In the wake of the Wayfair ruling and our changes happening in North Carolina I am excited to share a virtual issue of Public Budgeting & Finance that I edited.  It compiles articles published in the journal and presents questions and concerns regarding the future of sales tax policy.  It also makes access to the articles open (i.e., FREE!) for the next six months.  So please take a look, there are a mix of studies that examine state and local issues.



Also, in addition to editing the virtual issue, I will be moderating a virtual roundtable next Thursday (Sept 6th) on the topic.  Please tune in!  The presenters are: Donald Bruce from the University of Tennessee, Cynthia Rogers from the University of Oklahoma, and Barry Boardman is the Chief Economist for the NC General Assembly. The presenters are very knowledgeable and experts on different aspects of sales taxes and are sure to share important insights, suggestions, and considerations.  See the flier for the event!


Upcoming Workshop: Implementing Field Experiments for Innovation and Success

Good morning!  I wanted to make people aware that there will be a free workshop on 12/13 from 11-12 as a pre-conference event for the North Carolina Local Government Budget Association’s Winter Conference (NCLGBA).  This year’s NCLGBA conference is in Durham at the Washington Duke Inn.

Implementing Field Experiments for Innovation and Success

Is your service delivery not as effective as it should be? Could your department streamline current processes?   Do you see problems in your organization but lack ideas on how to address it?  If so, this is the pre-conference workshop for you.

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Consulting with Citizens

Consultation is a different beast altogether than information sharing.  Whereas information sharing is a one way relationship, consultation creates a two way relationship based on citizen feedback.  It relies on a fundamental assumption by local leaders that citizen feedback is beneficial to the budget process and decision making (often with regard to expenditures or even tax rate setting).  This method provides for and encourages citizen input while still allowing local leaders to define the agenda.  The key is that practitioners and elected officials solicit input a set of issues and questions that they create and control. 

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Budgeting in Local Government: Registration now open

Budgeting in Local Government
October 31st – November 3rd, 2017, School of Government

This four-day course covers the legal and management framework of budget preparation and enactment in North Carolina local government.  Participants will discuss the numerous processes and techniques used to produce an annual operating budget and capital budget.

Continue reading

Engaging our future: A guide to going into the classroom

In the last three blogs we have been talking about citizen engagement (see here, here, and here).  One of the areas that is most frustrating for governments is often their attempts to engage citizens are not particularly successful.  Citizens may not have time or easy access to the events and resources, but there are ways around that.  What happens when it is simply that citizens DO NOT WANT to engage?  That is often the reality.  Governments spend precious time and resources developing great opportunities but no one (or few) takes advantage of them.  This is an aspect of citizen engagement I have been personally interested in and one that I believe we can address by starting ‘em young.

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The classics: Traditional modes of information sharing


Consider these tactics and efforts the Moby Dick, Wuthering Heights, and Alice in Wonderland of sharing budget information.  Except no one makes you read (or watch) these in high school.

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The first step in citizen engagement: Information Sharing

The first step, in my opinion, in productive citizen engagement is providing information and helping educate citizens about government and budgeting.  This is because government is just a black box to most people.  They sort of understand some of the most basic functions of government, but may not have any idea of which level of government does it.  Who pays for libraries? Roads? Do I have police and a sheriff?  What about fire service?  What does the state even do?  These are not unrealistic questions. Continue reading

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