The Lawyer’s Desk–By Peter J. Glantz, Esq.
In a narrow 5-4 ruling, the Supreme Court of the United States overturned a landmark precedent in the e-commerce sales tax debate, thereby striking down a law that previously only mandated that companies with a physical presence in a state must collect and remit sales tax.
The Supreme Court’s opinion, given by Justice Anthony Kennedy, ruled that the physical presence rules upheld in the 1992 Quill Corp. v. North Dakota and 1968 National Bellas Hess Inc. v. Department of Revenue of Ill. cases were “unsound and incorrect.” The judgment of the Supreme Court of South Dakota was vacated, and the case was remanded for further proceedings consistent with the Court’s opinion. That means the case will be sent back to South Dakota for a final decision. Unless the South Dakota court finds another reason why the 2016 law should be held invalid, which it previously did not, it is likely to uphold the law. If upheld, South Dakota’s law will implement an economic standard that in South Dakota would require state sales tax collection and remittance only if an online seller does more than $100,000 worth of business, or processes more than 200 transactions in the state.
While the implications are not entirely clear yet, this is broadly a win for states and brick-and-mortar retailers that have aligned with them and a loss for e-commerce companies like Wayfair and Overstock, which argued that the complexity and cost of collecting and remitting the new tax will put many small digital sellers out of business.
This article is written by a member of the Oxman Law Group, PLLC (www.oxmanlaw.com).
Any comments or inquiries are welcome and can be directed to Marc Oxman at 914-422-3900 or moxman@oxmanlaw.com
