In the most anticipated sales tax cases in many years, the Supreme Court of the United States has ruled that an out-of-state retailer with no physical presence in the state could be subjected to that state’s sales/use tax laws under an “economic” nexus standard. In South Dakota v. Wayfair, Inc. et al. Docket 17-494, the Supreme Court decided that the physical presence standard established in the 1992 Supreme Court decision Quill Corp. v. North Dakota should no longer be the nexus standard in today’s economy dominated by the Internet. Instead the Supreme Court ruled in a 5-4 decision, the South Dakota’s economic nexus statute did not violate the provisions of the United States Constitution.

While this decision allows for South Dakota law to stand, there remains many unknowns as to whether South Dakota and other states will apply their economic nexus standards retroactively or whether they will provide a time frame for prospective registration, or even refine existing rules to become more stringent on the application of the law. The high court’s decision simply validates that the precedence set forth by Quill no longer applies, opening the door for taxable nexus statutes creating an economic footprint instead of a physical presence standard for businesses to follow.

Thompson Tax & Associates, LLC as your trusted tax advisor can assist your company through this material change in this sales and use tax standard that prevailed for so many years.