Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
South Dakota’s online sales tax legislation is one step closer to its intended destination: the U.S. Supreme Court.
The South Dakota Sixth Judicial Circuit ruled March 6 that the state’s economic nexus regime ( S.B. 106) is unconstitutional. The statute, signed into law in March 2016, requires remote retailers with annual in-state sales exceeding $100,000 or 200 separate transactions to collect and remit sales tax ( South Dakota v. Wayfair, Inc., S.D. Cir. Ct., No. 32 Civ. 16-000092, 3/6/17 ).
Attorneys for the retailers named as defendants—Wayfair Inc., Overstock.com Inc. and Newegg Inc.—didn’t immediately respond to requests for comment.
“For decades, the playing field has been stacked against Main Street and in favor of online merchants,” according to a National Governors Association news release. “But today’s decision moves us one step closer to resolving this longstanding issue with broad bipartisan support.”
State lawmakers presented the law as a direct challenge to the U.S. Supreme Court rule from Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which prohibits states from imposing sales and use tax collection obligations on sellers without an in-state physical presence. The NGA said that Quill hasn’t kept up with “today’s modern economic and technological realities.”
The opinion is under direct attack in Alabama court as well, and is expected to prompt lawsuits in many other states amid a surge of state activity to broaden tax authority over online sales.
The South Dakota case originated in late April 2016, with the state seeking a declaratory judgment validating the law. The removed the matter to the U.S. District Court for the District of South Dakota, prompting the state’s request for remand. The federal district court returned the case to state court in January.
Matthew P. Schaefer, a partner with Brann & Isaacson and counsel for the retailers, told Bloomberg BNA after a Dec. 8 hearing that the federal court recognized there is no dispute regarding the retailers’ right to summary judgment—given that both sides agree the law is invalid under Quill. He further noted that the DOR told the federal judge it would take the same position on the retailers’ right to summary judgment should the case return to state court.
In a Jan. 17 e-mail, Schaefer noted the importance of the federal proceedings for the state court’s determination.
“While the federal court did not reach the Defendants’ motion for summary judgment, because it ruled it lacked jurisdiction, the Court’s opinion reiterates that the State has acknowledged in its briefing (as well as on the record in open court) that the Defendants are entitled to summary judgment on the grounds that S.B. 106 is unconstitutional under current Commerce Clause standards as set forth in Quill Corp v. North Dakota,” he said. “Whether the matter had remained in federal court, or as it now moves forward in state court, there is no dispute that the lower courts must enter judgment invalidating the law.”
To contact the reporter on this story: Jennifer McLoughlin in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Ryan C. Tuck at email@example.com
Text of the opinion is at http://src.bna.com/mKY
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)