Sales Tax Slice: When Old Laws Become New

Prior to the Wayfair ruling, nearly half of all states had already enacted a nexus standard based on "economic" presence rather than physical presence. Those that did not, however, may still have a case for joining collection efforts even before their legislative sessions convene in January.

Reminiscent of the recent wave of legislation leading up to South Dakota v. Wayfair, Inc., the period following 1967’s National Bellas Hess v. Illinois Dept. of Rev. decision drew a surge of legislation from states aiming to expand their taxing authority to reach remote retailers. The earlier series of changes, known as “anti-Bellas Hess” laws, sought to widen definitions of “retailer” to include the solicitation of sales that were “continuous,” “systematic,” and/or “purposeful.”

The most famous of these, North Dakota’s § 57-40.2-01(6), amended the definition of “retailer” in 1987 to include “every person who engages in regular or systematic solicitation of a consumer market in th[e] state.” It was this change that produced the Quill v. North Dakota case that ultimately cemented the physical presence standard for 26 more years.

Following the Quill decision, some states formally repealed these laws, such as Arkansas and Nevada. However, most chose to stop enforcing them rather unceremoniously.

New York, one of the states that opted not to repeal its statute, had expanded its definition of “vendor” in 1989 to include those whose solicitation “satisfies the nexus requirement of the United States Constitution.” This statute is technically still on the books, and in fact now appears to be valid—given that the court has held physical presence is no longer needed in order to satisfy the nexus requirement.

As taxing authorities and practitioners continue to sort through the effects of Wayfair, it will be interesting to see whether states that have not passed a “modern” economic nexus provision, yet also have not repealed their old provision, like New York, will make any efforts to revive them.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Do you think any states will attempt to enforce their anti-Bellas Hess laws?

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