Supreme Court Decides Landmark Wayfair Case
A 5-4 decision was made on Thursday, June 21st deciding the fate of a sales tax collection requirement for online retailers. The court decision allows states to impose sales tax collection requirements on online retailers with no physical presence, which was previously prevented by the 1992 case Quill Corp v. North Dakota. In its Wayfair decision, the Court found Quill to be “unsound and incorrect.”
With the overturn of Quill, online retailers will no longer have an advantage over brick-and-mortar stores in not charging sales tax to their customers. Many large online retailers already collect state sales taxes, but smaller online retailers will likely be affected by the decision. Shares of Wayfair and several other large online retailers dropped with the announcement of the decision.
In the past few years, several states have begun to push the boundaries in attempts to collect sales tax from online retailers. South Dakota had imposed the requirement on any out-of-state seller that delivers more than $100,000 in goods or services to the state or has 200 or more transactions. This requirement led South Dakota to sue Wayfair and two other large online retailers, which is what led to the overturn of Quill.
It is likely now that a round of new states will begin to pursue an avenue to enforce collection requirements on online retailers selling into their state. There is potential that this leads to follow-up litigation as states decide where the line should be drawn for imposing such collection requirements.
Please join us for our annual State and Local Tax Update webinar on July 26th at 2 p.m. as we further discuss the effect of this monumental decision. You can learn more and register by clicking here.
For questions regarding this article, or our upcoming webinar, please contact McKonly & Asbury Senior Tax Manager and SALT Leader, Michael Eby at meby@macpas.com or Tax Supervisor, Lindsey Waltemyer at lwaltemyer@macpas.com.
