News and Insights

U.S. Supreme Court Will Reconsider Quill

Tax Development Jan 15, 2018

The United States Supreme Court has granted certiorari in a challenge of the 2017 South Dakota Supreme Court ruling that determined that physical presence is required to compel an out-of-state seller to collect tax on sales delivered to South Dakota.

In South Dakota v. Wayfair Inc. et al.,1 the consolidated case including Wayfair, Inc., Newegg Inc., and Inc., the taxpayers challenged the recently enacted (2016) South Dakota law—containing an economic presence provision—which requires remote sellers of tangible personal property, electronically transferred property, or taxable services for delivery into South Dakota to register, collect, and remit South Dakota sales taxes as if the seller has a physical presence in the state. 

The central issue in this case is the continued feasibility of the physical presence nexus standard decided by the 1992 Quill Corp. v. North Dakota2 U.S. Supreme Court decision, which has been followed for the last 26 years. Upholding the physical presence standard for purposes of imposing a sales tax requirement, the Court stated in Quill that it was up to Congress to determine the appropriate constitutional standard for allowing states to impose a state sales tax collection obligation. The only action taken by Congress during that time was the consideration of the Marketplace Fairness Act of 2013, which passed in the Senate but did not survive the House Judiciary Committee. This inactivity has spurred several states to enact statutes or implement regulations that contradict this precedent, anticipating an eventual challenge of the standard.

Oral arguments in this case are expected to occur in the spring, with a decision by the end of this term.

1 South Dakota v. Wayfair, Inc. et al., 2017 S.D. 56 (S.D.  S. Ct. Sept. 13, 2017), petition for cert. granted. DKT No. 17-494 (U.S. S. Ct. Jan. 12, 2018).

2 504 U.S. 298 (1992). 


Mary Bernard