SALT Blawg – State and Local Tax
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The U.S Supreme Court has agreed to hear South Dakota v. Wayfair - a facial challenge by South Carolina to the U.S. Supreme Court's 1992 decision in Quill v. North Dakota, requiring physical presence.
As previously reported, during August the South Dakota Supreme Court held oral arguments wherein South Dakota urged the court to reject its petition, which would allow it to expeditiously file a petition for cert with the US Supreme Court. The South Dakota Supreme Court abided and quickly affirmed a March 2017 trial court decision granting the remote seller’s motion for summary judgment, holding that the economic nexus law (SB 106) was unconstitutional and directly violated the physical presence requirement of Quill. South Dakota v. Wayfair, Inc. S.D., No. 28160. On October 2, 2017, South Dakota filed a petition for writ of certiorari with the U.S. Supreme Court.
The “Kill Quill” movement was spurred in large part by comments made by a concurring Justice Kennedy in Direct Marketing Association v. Brohl, 135 S.Ct. 1124 (2015). Justice Kennedy criticized Quill stating that:
“The Internet has caused far-reaching systemic and structural changes in the economy, and, indeed, in many other societal dimensions…Today buyers have almost instant access to most retailers via cellphones, tablets and laptops. As a result, a business may be present in a state in a meaningful way without that presence being physical in the traditional sense of the term. Given these changes to technology and consumer sophistication, it is unwise to delay any longer a reconsideration of the Court’s holding in Quill. A case questionable even when decided, Quill now harms States to a degree far greater than could have been anticipated earlier.”
Justice Kennedy then invited a challenge to Quill, writing: “the legal system should find an appropriate case for this Court to reexamine Quill.”
Since Justice Kennedy’s opinion, a number of state legislatures passed or considered passing legislation requiring remote vendors to collect sales tax – representing overt challenges to Quill. See, e.g., Alabama and Tennessee).
If South Carolina is successful, more states would be expected to quickly jump on the bandwagon and implement similar legislation and collection requirements. If South Carolina is unsuccessful, states will likely still attempt to craft new ways to tap into what they perceive as lost revenue and there may be a stronger push on Congress to come up with legislation to address the issue. Whatever decision the U.S. Supreme Court reaches will undoubtedly have substantial ramifications for the SALT world.