June 21, 2018
In what could be one of the most significant decisions on state taxation in the last 50 years, the Supreme Court today ruled on South Dakota v. Wayfair. In a 5-4 decision, the Court held that the physical presence requirement for state tax jurisdiction is incorrect and not a requirement under the Commerce Clause of the U.S. Constitution. Thus overruling Quill Corp. v. North Dakota, 504 U. S. 298, and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753—which held that a State cannot require an out-of-state seller with no physical presence in the State to collect and remit sales taxes on goods the seller ships to consumers in the State.
The decades old decisions made it more difficult for states to collect sales tax on certain online purchases, and more than 40 states had asked the high court for action, arguing the rulings cost them billions of dollars in lost revenue each year.
Brown Edwards will have more information on the impact of this decision in the future.