On April 17, 2018, the U.S. Supreme Court heard oral arguments in South Dakota v. Wayfair, a case that may change the tax landscape for online retailers and possibly all taxpayers. The court has been asked by South Dakota to reconsider a previous U.S. Supreme Court ruling, Quill v. North Dakota, that limits the ability of state governments to require the collection and remittance of use tax in the absence of an online retailer’s physical presence in that state.
South Dakota Enacts a “Kill-Quill” Statute
South Dakota, and several other states unhappy with the prior U.S. Supreme Court physical presence requirement, passed what some commentators have called “Kill-Quill” legislation. Under South Dakota’s Kill-Quill law, sellers of “tangible personal property” who lack a physical presence in South Dakota must collect and remit if they meet either of two standards:
These Kill-Quill laws, understood to be unconstitutional by the states at the time of enactment, were intended to put the case before the U.S. Supreme Court in the hopes that the court would reverse its prior decision and permit the states to impose taxation on online retailers.
Excerpts from the Oral Arguments
Although many commentators believed that the U.S. Supreme Court was inclined to reverse its prior decision in Quill, the court did not show such a strong inclination during the oral arguments. South Dakota and the Solicitor General of the United States argued that Quill should be overruled. Wayfair’s outside counsel, of course, argued that Quill and its physical presence standard should be maintained or that the matter should be left to Congress.
The justices seemed to revisit several issues in its discussions with the three attorneys.
Consequences of the Decision
DGC intends to monitor this decision as it could change the filing standards for sales and use tax and may have other tax implications. If South Dakota wins, companies will need to revisit their filing responsibilities and may need to address the taxability of their sales in new states.