New: Online Sales Tax Bill Defeated in SD Supreme Court

Judge's supreme court gavel with law books

South Dakota’s online sales tax legislation could end up before the U.S. Supreme Court. Here are the details.

If you’ve been following the online sales tax debate on our blog, you know South Dakota recently passed, “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.”

The 2016 law mandated a sales tax collection responsibility from sellers grossing over $100,000 in sales to South Dakota customers, or transactions numbering more than 200 in a year – even if the seller has no physical presence or other connection with the state. Then NetChoice and the American Catalog Mailers Association sued the state, claiming the law violates Quill Corp. v. North Dakota, a ruling which established businesses need a physical presence in the state to be responsible for sales tax and fees.

Online Sales Tax Bill Ruled Unconstitutional

Unsurprisingly, South Dakota’s Supreme Court ruled Senate Bill 106 to be unconstitutional. Supreme Court Justice Glenn Severson stated, “We see no distinction between the collection obligations invalidated in Quill and those imposed by Senate Bill 106…and hold that the circuit court correctly applied the law when it granted sellers’ motion for summary judgment.”

However, as Steve DelBianco, executive director of NetChoice, said in a statement, “This ruling gives the state what it wanted all along—a case they could appeal to the U.S. Supreme Court.” South Dakota was hoping for a quick decision so the matter would be eligible to take before the U.S. Supreme Court when its October 2017 docket opens up.

What Happens Next?

We’ll be watching, along with the rest of the state sales tax world, to see if the U.S. Supreme Court finally grants certiorari on a case that could overturn their 1992 ruling in Quill, or if they’ll choose not to take the case and send it back to Congress to legislate. We’ll keep you updated!

In the meantime, do you want to know more about online sales tax, nexus and other multi-state tax issues? Contact us with your questions; we’re happy to help!

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. To learn more, contact us today at www.MilesConsultingGroup.com.

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