US Supreme Court to revisit Quill’s physical presence standard
Multistate Tax alert | January 13, 2018
On January 12, 2018, the US Supreme Court granted certiorari in South Dakota v. Wayfair, Inc. et al., a case challenging South Dakota’s anti-Quill sales tax nexus law.1 This significant development suggests that the US Supreme Court may be ready to reconsider the decades-old “physical presence” nexus standard required in order for a state or locality to impose a use tax collection duty upon a remote seller.
In its 1992 decision in Quill, the US Supreme Court affirmed the existence of a bright-line physical presence standard for substantial nexus under the Commerce Clause before a state or locality may impose a duty to collect use tax on a remote vendor.2 In a direct challenge to the current physical presence requirement of Quill, the state of South Dakota enacted a law in 2016 providing that sellers—without a physical presence in South Dakota are required to collect South Dakota sales tax on sales into South Dakota if, in the previous or current calendar year, the seller’s sales into South Dakota exceed $100,000 or the seller had two hundred or more separate transactions into South Dakota.3 On September 13, 2017, the South Dakota Supreme Court affirmed a lower court holding which had struck down the South Dakota law as unconstitutional in violation of the Quill physical presence requirement, commenting, “[h]owever persuasive the State’s arguments on the merits of revisiting the issue, Quill has not been overruled.”4
In the petition for writ of certiorari, the state of South Dakota presented the single question of whether the US Supreme Court should “abrogate Quill’s sales-tax-only, physical-presence requirement.”5 In granting certiorari, the US Supreme Court may be prepared to provide its view on the relevance of a physical presence sales and use tax nexus standard in a 21st century e-commerce environment.
If you have questions regarding this South Dakota litigation or other sales and use tax nexus matters, please contact any of the following Deloitte Tax professionals:
Dwayne Van Wieren, partner, Deloitte Tax LLP, Los Angeles, +1 213 593 3734
Valerie Dickerson, partner, WNT Multistate Deloitte Tax LLP, Washington DC, +1 202 220 2693
David Vistica, managing director, WNT Multistate Deloitte Tax LLP, Washington DC, +1 202 370 2268
David Welliver, senior manager, Deloitte Tax LLP, Minneapolis, + 1 612 659 2938
Michael Bryan, managing director, WNT Multistate Deloitte Tax LLP, Philadelphia, + 1 215 977 7564
J Snowden Rives, manager, WNT Multistate Deloitte Tax LLP, Washington DC, +1 202 220 2753
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1 South Dakota v. Wayfair, Inc., et al., 901 N.W.2d 754 (S.D. 2017), cert. granted (U.S. Jan. 12, 2018) (No. 17-494).
2 Quill Corp. v. North Dakota, 504 U.S. 298 (1992).
3 S.D. Codified Laws § 10-64-2. Please refer to our previously issued Multistate Tax Alert available here for additional information on South Dakota’s enactment of Senate Bill 106 of 2016.
4 South Dakota v. Wayfair, Inc. et al., 901 N.W.2d 754 (S.D. 2017).
5 Petition for Writ of Certiorari, South Dakota v. Wayfair, Inc., 901 N.W.2d 754 (S.D. 2017), cert. granted (U.S. Jan. 12, 2018) (No. 17-494).