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Supreme Court Rules in State’s Favor in South Dakota v. Wayfair


On June 21, 2018, the U.S. Supreme Court ruled 5-4 in favor of the state of South Dakota, upholding the state’s sales tax on online retailers and overturning years of legal precedent. Out-of-state retailers, including online retailers, can now be required to collect and remit sales tax in jurisdictions they sell into, regardless of physical presence.

The decision overturned Quill Corp v. North Dakota, the 1992 Supreme Court decision that established that companies without a physical presence in a state did not have to collect sales and use tax. Justice Anthony M. Kennedy wrote the majority opinion. According to Kennedy, when Quill was decided, “the Court could not have envisioned a world in which the world’s largest retailer would be a remote seller[.]” He went on to explain, “Quill has come to serve as a judicially created tax shelter for businesses that decide to limit their physical presence[.]” In a dissenting opinion, Chief Justice John G. Roberts, Jr. discussed the impact on retailers. Roberts expressed concerns regarding the administrative burden this will cause.  He explained, “Correctly calculating and remitting sales taxes on all e-commerce sales will likely prove baffling for many retailers. Over 10,000 jurisdictions levy sales taxes, each with different tax rates[.]”

What’s important to know

It is clear that out-of-state retailers will have to start collecting sales and use tax for transactions to South Dakota customers, assuming sellers’ volume of sales exceeds the threshold in the statute. It is unclear how this case will impact the interpretation of other states’ economic nexus provisions. Presumably, the states that have economic nexus provisions will evaluate whether their provisions are similar to South Dakota’s provision, and therefore are enforceable. However, we do not believe that these states will impose such laws retroactively. In addition, we anticipate other states will move to implement economic nexus statutes as quickly as possible. 

It is also unclear if this case will impact notice or reporting requirement laws. These laws notify purchasers to self-remit applicable use taxes and require retailers to compile information regarding such purchasers on behalf of the states. These provisions may no longer be necessary if states also have economic nexus provisions. However, states may still enforce these notice or reporting requirement laws for sellers that are protected by the safe harbor in the economic nexus laws (for example, sellers with lower volume sales into such states).

We will continue to monitor reactions to this decision, but it is important to understand where your company currently has nexus and how this ruling will affect your business and reporting requirements.

For more information on how this ruling will impact your business or other questions related to state and local taxes, please contact Bernie Ottenlips, Principal, Tax Services, at, or Amy Jackson, Manager, Tax Services, at



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