A&M Tax Advisor Weekly
On June 21, 2018, the U.S. Supreme Court issued an opinion (South Dakota v. Wayfair Inc., et al, 585 U.S. (2018)) holding that a physical presence in a state is no longer necessary for a state to require an out-of-state retailer to collect sales tax within the state. This decision overturns decades of precedent.
As a result, interstate sellers will have to collect sales tax on sales to jurisdictions, regardless of whether or not the sellers have any physical presence (property or personnel) in the state. Previously, such physical presence was required in order for a state to impose a collection responsibility upon a taxpayer.
In Wayfair, the Court held that the taxpayers in question had “substantial nexus” with South Dakota due to the volume of sales made into the state. The Court noted that the South Dakota statute exempted sellers with less than $100,000 in sales and less than 200 separate transactions in the state in explaining that the taxpayers’ level of activity in South Dakota was substantial. Further, the statute in question bars a retroactive application of the collection responsibility.