South Dakota is taking the physical presence rule back to our nation’s highest court in its dispute with Wayfair, Inc., to determine whether it may continue to require out-of-state sellers such as online retailers to register with the state and collect and pay over sales tax. In the seminal case from 1992, Quill Corp. v. North Dakota, the U.S. Supreme Court ruled that retailers did not have to collect sales tax in any state where they have no physical presence. However, the exponential growth of eCommerce and internet sales has significantly changed the retail landscape since that time.
Many states have enacted their own laws to address the changing times and to ensure collection of sales tax for sales made to its resident consumers. For example, California has an economic nexus standard for out-of-state retailers who reach a certain level of annual gross receipts in our state. (See our most recent update on California nexus here.)
Stay tuned for important updates on the pending Supreme Court case as the story unfolds.