Last month we discussed how two states, Louisiana and Alabama, are taking matters into their own hands regarding the online sales tax debate. Now another state, South Dakota, is forcing the issue.
South Dakota’s Case Regarding Online Sales Tax
If you recall from our previous posts about the online sales tax debate, states are frustrated that they can’t collect the revenue from purchases made via the internet, and retailers claim it’s too difficult to keep track of the wide variety of tax codes for every single state, county and municipality – especially for small internet retailers.
Instead of waiting for Congress to come to some sort of agreement, South Dakota has taken matters into their own hands by passing Senate Bill 106, allowing the state to collect taxes from sales made from online retailers – even if they don’t have nexus within South Dakota itself. This challenges the 1992 ruling in Quill Corp. v. North Dakota, in which the U.S. Supreme Court ruled that only businesses with an actual physical presence in the state (or nexus) needed to collect sales tax from residents.
Passing the law isn’t all South Dakota did. Now it’s suing four internet retailers (Wayfair, Systemax, Overstock.com and Newegg) to try to force a judicial decision in their favor.
But that’s not all; NetChoice and the American Catalog Mailers Association sued South Dakota as well, claiming the new law violates the Quill decision.
What Do We Think?
While we do disagree with the laws states like South Dakota, Louisiana and Alabama are writing in order to circumvent the Quill decision, we are open to seeing how this case plays out in the U.S. Supreme Court (if it makes it there).
Stay tuned for more news surrounding the online sales tax debate as it continues!
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects, including the new California Partial Manufacturer’s Exemption for Sales Tax. To learn more, contact us today at www.MilesConsultingGroup.com.