Question

Can somebody please do a court analysis on South Dakota v Wayfair Inc. case?

Answer 1

The court overturned the physical presence requirement for sales and use tax collection obligation from Quill Corp v. North Dakota. States now have the possibility of enforcing a sales tax collection requirement (nexus) over remote sellers. The Supreme Court viewed that these types of thresholds help to prevent discrimination against different size businesses from undue burdens on interstate commerce. States that do not already have similar thresholds in place will need to determine how to apply the new nexus standard.

Economic Nexus is a  tax collection obligation imposed on remote sellers based on their level of economic activity within a state. The South Dakota law imposes a collection obligation on any remote seller who has either $100,000 in sales or 200 separate transactions into South Dakota.

The term remote seller is often thought of as a company who sells good/services over the internet. However, it can apply to a company who makes sales into a state where it does not maintain a physical presence like online sales, purchase orders, telephone orders, automatic replenishment order systems - supply chain management. Wayfair does not only apply to internet sellers.

Justice Kennedy spoke favorably about its chances of South Dakota's law being upheld on remand for three reasons:

• It's numeric threshold (> $100,000 in sales or 200+ transactions) provided small sellers a "reasonable degree of protection"
• Its law prohibited retroactive collection.
• South Dakota is part of the Streamlined Sales and Use Tax Agreement.

Streamlined Sales Tax Project is a voluntary effort by a number of states to simplify collection and administration procedures of the sales tax for sellers so that sales tax can be collected on Internet and catalog purchases.