In a significant first step toward potentially leveling the playing field for all retailers for the foreseeable future, the U.S. Supreme Court has decided to consider a case with that would change the legal obligation of online retailers regarding collecting sales tax. On Friday, January 12, the Supreme Court announced the decision to review South Dakota v. Wayfair, Overstock, and Newegg. The case could change what constitutes a physical presence in a state in regard to collection and remittance of sales tax. In November, the American Booksellers Association filed an amicus brief in support of revisiting the nexus definition.
“This is a significant and very important step forward in terms of leveling the playing field for independent booksellers once and for all,” said David Grogan, ABA director of Public Policy and Advocacy. “If the Supreme Court sides with South Dakota, it will ensure that no future online company can grow its business by unfairly skirting its obligation to collect and remit sales tax. We are grateful that the Supreme Court will consider this case.”
The 1992 Quill vs. North Dakota U.S. Supreme Court decision currently forbids states from requiring retailers that do not have a store, office, warehouse, or sales agent in the state to collect and remit sales tax to that state. Notably, in a 2015 decision, Supreme Court Justice Anthony Kennedy welcomed a challenge to reconsider the precedent set by Quill. ABA was one of 15 groups to file an amicus brief in support of South Dakota’s petition to the Court to reconsider the 1992 decision.
The South Dakota petition to the Court stems from a state statute passed in 2016 designed to challenge Quill directly. The statute requires out-of-state retailers to collect and remit sales tax if they transact either more than $100,000 of business in South Dakota or more than 200 sales. The 2016 statute was challenged by Wayfair, Overstock, and Newegg.
This past September, in a case challenging the new law, the Supreme Court of the State of South Dakota ruled that the state cannot force remote retailers to collect and remit sales tax if they do not have nexus in South Dakota. While many states have enacted sales and use tax compliance measures, no state has come close to fully recovering the sales tax revenues from online sales lost due to Quill. South Dakota Attorney General Marty Jackley appealed the decision to the U.S. Supreme Court, giving the justices a chance to overturn the 1992 Quill Corp. v. North Dakota precedent.
Along with the American Booksellers Association, groups that filed briefs last week in support of sales tax fairness were: Attorneys general from 36 states; State & Local Legal Center, which includes the National Governors Association, the National Conference of State Legislatures, and the U.S. Conference of Mayors; Multistate Tax Commission; Streamlined Sales Tax Governing Board; Senators Heidi Heitkamp (D-ND), Lamar Alexander (R-TN), Richard Durbin (D-IL), and Michael Enzi (R-WY); Reps. Kristi Noem (R-SD) and John Conyers, Jr. (D-MI); Tax Foundation; a group of law professors and economists; American Farm Bureau; ICSC, Investment Program Association (IPA), National Association of Real Estate Investment Trusts, National Association of Realtors, and the Real Estate Roundtable; South Dakota Retailers Association; American Lighting Association, American Supply Association, and the American Veterinary Medical Association; National Association of Wholesalers; National Retail Federation; and the Retail Litigation Center.