Michaela Merz

US Supreme Court overturns physical presence rule for state taxation

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Last week, 21 June, the Supreme Court ruled 5-4 in favour of South Dakota in the South Dakota vs. Wayfair, Inc. case, which reverses the 1992 Quill Corp vs. North Dakota ruling. The Court remanded the case to the South Dakota Supreme Court to address the matter in light of its decision. Going forward, states now will be allowed to impose sales tax on a seller’s taxable transactions whether or not it has a physical presence in the state. Currently, approximately 15 states have existing laws and regulations that consider out-of-sellers as doing business in the state based on economic factors. However, this historic ruling changes the landscape of sales tax collection for remote sellers and has far-reaching implications. The ruling may also influence Congressional action on the issue.

Justice Anthony Kennedy delivered the opinion of the Court, stating that Quill imposes the sort of arbitrary, formalistic distinction that modern Commerce Clause precedents disavow in favor of a sensitive case-by-case analysis of purposes and effects. The Court concluded that the doctrine of stare decisis no longer can support the prohibition of a valid exercise of the state’s sovereign power. The Court noted that South Dakota law includes several features intended to prevent undue burdens on interstate commerce, which include no obligation to retroactively remit the sales tax. The case was remanded for proceedings not inconsistent with the opinion.

Please see the attached newsletter for further details. A transcript of the Supreme Court ruling is also attached:

US Supreme Court Wayfair Alert

US Wayfair Supreme Court decision

 

Bildquelle: Carl-Ernst Stahnke  / pixelio.de

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