A 26-year-old ruling is being challenged in the U.S. Supreme Court for states’ rights to collect sales tax on e-commerce. In South Dakota v. Wayfair Inc., states are seeking to overturn 1992’s Quill v North Dakota which stated that retailers must have a physical presence in the state to establish nexus and be ordered to collect sales tax. Both states and brick and mortar retailers have argued that the physical presence requirement of Quill puts them at an economic disadvantage when compared to online retailers. The inability of states to collect sales tax from out of state sellers has made it difficult to meet state budget demands. Accordingly, states like South Dakota are challenging the viability of Quill when it applies to e-commerce.
In 2016, South Dakota passed a law requiring retailers with over $100,000 in annual sales pay 4.5 percent tax on purchases, regardless of nexus, taking the case all the way to the Supreme Court. To read more on this case, visit https://www.bloomberg.com/news/articles/2018-01-12/bid-to-collect-internet-sales-tax-gets-u-s-high-court-review
A final ruling from the Supreme Court is expected in June. Stay tuned for updates and potential action steps as this key case in sales tax law unfolds.