Overturning the North Dakota vs Quill case has been the goal of all the states since the case was decided in 1992 by the U.S. Supreme Court. South Dakota is the latest state to try to get the overturned either by the U.S. Congress or the court systems.
Since Congress didn’t act on the Marketplace Tax Act that would have required out-of-state vendors to collect and remit sales taxes to the states in which they don’t have a physical presence or employees.
Under North Dakota vs Quill, the U.S. Supreme Court set up a physical presence where the out-of-state seller (vendor) had to have sales, employees, and physical presence in a state before the seller would be liable to collect and remit sales taxes to the state.
States have argued for years that sales alone should be significance for enough for creating a economic nexus instead of a physical nexus.
States were rejoicing this week when the U.S. Supreme Court agreed to hear a case called South Dakota vs Wayfair. Wayfair is an out-of-state seller selling and shipping products into South Dakota using a third party shipping company (ie UPS, FedEx, or United State Postal Service).
South Dakota sued Wayfair for not registering to collect and remit sales tax to South Dakota. South Dakota actually sued four companies (WayFair, Overstock.com, Newegg, and Systemax.
Systemax registered with South Dakota to collect and remit sales tax after receiving the lawsuit. However, the other three companies (WayFair, Overstock.com, Newegg) did not register with the state.
The case will be heard before the Justices on the Supreme Cout in April with a decision expected by June.
As tax preparers, businesses, and individuals, we need to prepare for an Court Decision that will either find in favor of South Dakota or WayFair. Either way, the landscape of internet sales taxes is changing as the states begin aggressively pursuing internet sales and the companies.
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