SALT Blawg – State and Local Tax Blog
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On August 29, oral arguments were held in South Dakota v. Wayfair, Inc. S.D., No. 28160, which challenges the state’s remote sales tax legislation, S.B. 106.
Enacted during March 2016, S.B. 106 requires remote sellers to collect and remit tax to the state – even if they have no physical presence in the state – if they have more than $100,000 in sales or make more than 200 separate sales into South Dakota annually. The Bill was specifically crafted as a vehicle to undo the U.S. Supreme Court’s ruling in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), which prohibits states from imposing sales and use tax collection obligations on sellers who do not have a physical presence in the state. The lower court found in favor of the taxpayers, holding that the law was unconstitutional pursuant to Quill, and the State quickly appealed to the South Dakota Supreme Court.
During oral arguments at the South Dakota Supreme Court, the State asked the court for an expeditious denial of its appeal so that it can file a writ of certiorari with the U.S. Supreme Court. Additionally, the State requested that the court provide “a critical and important voice” urging the U.S. Supreme Court to grant cert.
Counsel for the taxpayers explained that the purposeful drafting of an unconstitutional bill in order to challenge a long-standing U.S. Supreme Court decision was unconventional and controversial. Counsel questioned whether purposefully enacting unconstitutional legislation creates bad precedent/practice.
Further, counsel for the taxpayers argued that Congress has the power to regulate interstate commerce and that Congress should decide the fate of state sales tax collection. Currently, there are four different bills pending before Congress seeking to deal with this issue.
Counsel for the taxpayers also claimed that important facts were not developed and included in the record at the lower court – such as, what the projected lost revenue is to the State. Counsel for the taxpayers concluded by asking that the decision be affirmed as unconstitutional, without the court weighing in on complex policy issues.
Once the South Dakota Supreme Court issues its opinion, the parties will have 90 day to petition the U.S. Supreme Court for cert.
Jennifer W. Karpchuk is co-chair of Chamberlain Hrdlicka’s state and local tax practice. She represents companies and individuals in all aspects of state and local tax litigation, controversy, compliance and planning. She has ...