Landmark Supreme Court Decisions Overturned: Expect Major Changes in Sales Tax Collection Practices
On June 21, 2018, The Supreme Court of the United States overturned longstanding judicial precedent that physical presence is required in order for a state to require an out-of-state seller to collect and remit sales tax on its sales to in-state customers. In South Dakota v. Wayfair, Inc. (17-494), the SCOTUS ruled in favor of South Dakota, upholding the provisions of SB 106 (eff. 5/1/16). SB 106 requires remote sellers with no physical location in South Dakota to remit sales tax and follow all procedures of the law, as if they have a presence in the state, if they meet one of two criteria in the previous calendar year or the current calendar year:
- The remote seller’s gross revenue of sale of tangible property, any products transferred electronically, or services delivered into South Dakota exceeds $100,000
- The remote seller has 200 or more separate transactions tangible property, any products transferred electronically, or services delivered into South Dakota.
Prior to SCOTUS’ decisions in Wayfair, Quill Corp. v. North Dakota, 504 U. S. 298 and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753 established that states were not permitted to require an out-of-state seller without physical presence in the State to collect and remit sales taxes on goods the seller ships to consumers in the State. Such decisions have been overruled.
The Court’s decision in Wayfair represents its most significant decision in the area of multistate taxation since Quill and National Bellas Hess and will require special attention from remote sellers of many types of products and services. Many other states, including Alabama, Connecticut, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Maine, Massachusetts, Mississippi, Pennsylvania, Tennessee and Wyoming either already have or will enact remote seller rules similar to South Dakota’s. It is expected that numerous additional states will begin to adapt their rules to the Wayfair decision. We will provide more information in the near future regarding the potential implications of the Wayfair decision to your business.
The Barnes Dennig Tax Team will keep you informed of any updates and changes as they occur, please reach out if you have any questions about the changes above, and a member of the tax team will contact you.