Remote Sellers Stay Tuned: U.S. Supreme Court to Review South Dakota’s Sales Tax Economic Nexus Provision
Based on the United States Supreme Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), taxpayers selling taxable goods and services into a state are not required to collect state sales taxes unless the taxpayer (seller) has a physical presence in the state in which the buyer is based. In 2016, in direct conflict with Quill, South Dakota enacted an economic nexus provision, S.B. 106, for sales tax purposes, requiring taxpayers with no physical presence to collect South Dakota sales tax if the out-of-state seller amassed $100,000 of sales or 200 or more transactions over the prior 12 months.
The South Dakota economic presence nexus legislation was specifically designed to challenge Quill. Wayfair, Inc. and other taxpayers challenged S.B. 106, and, in 2017, the South Dakota Supreme Court held that the economic nexus provisions imposed on remote retailers was invalid in light of the United States Supreme Court’s physical presence rule set forth in Quill.
For more information, please contact Scott Smith, Director, State and Local Tax Services, Scott.Smith@CohnReznick.com or 845-544-3906
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