The U.S. Supreme Court today granted certiorari in a case in which South Dakota seeks to have a statute imposing economic nexus standards on remote sellers upheld by the Court. In its petition for certiorari, South Dakota asked the Court to revisit and abrogate the sales and use tax physical presence nexus requirement upheld in “Quill v. North Dakota.”
The case is: South Dakota v. Wayfair, Inc., cert. granted (January 12, 2018) (No. 17-494)
In 2016, South Dakota became the first state to enact “pure” economic nexus provisions for sales and use tax purposes. Specifically, effective May 1, 2016, all entities with annual sales in South Dakota exceeding $100,000 or with more than 200 separate transactions in the state were required to collect and remit South Dakota sales and use tax. These provisions were intended to―and quickly did―jump-start litigation because the measures directly contravened the Quill physical presence standard.
In September 2017, the South Dakota Supreme Court held that the state was bound to follow established U.S. Supreme Court precedent, and therefore, the law imposing economic nexus standards on remote retailers was not valid in light of the physical presence standard. In reaching this conclusion, the state’s high court rejected the state’s arguments that the Quill physical presence standard is outdated in light of advances in software and technology. South Dakota, as expected, petitioned for certiorari.
The granting of certiorari in this case may have sweeping implications for all states and state taxpayers.
It remains to be seen when the oral arguments will be scheduled, but it is believed the case will be heard in the spring. It also remains to be seen whether the Court will accept South Dakota’s invitation to overturn Quill. Whatever the outcome, the holding will have a significant impact on remote sellers and on states. About a dozen other states have enacted laws similar or somewhat similar to South Dakota’s measures.
Read a January 2018 report [PDF 44 KB] prepared by KPMG LLP
© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.KPMG International Cooperative (“KPMG International”) is a Swiss entity.
Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.