Top Political Stories of 2018: #2 – South Dakota v Wayfair
On January 12, 2018, the US Supreme Court announced that that they’ve granted certiorari to hear South Dakota’s sales tax case and look at whether the Supreme Court should abrogate Quill Corp. v. North Dakota‘s sales-tax-only, physical-presence requirement.
This wasn’t your run of the mill court case, it was breaking new ground in how states would be allowed to tax organizations that did not have a brick and mortar presence in their state. The Quill decision in 1992 was still being used to regulate e-commerce which had grown to be a considerable portion of national commerce in the intervening years, and the Wayfair decision threatened to up-end how retailers were going to be held responsible.
The Wayfair decision overruled the prior Quill interpretation and stated that the “the physical presence rule of Quill is unsound and incorrect,” upending 25+ years of sales tax regulations nationally, and opening the door for changes in sales tax legislation in most all states.
In other words, South Dakota’s court case managed to upend the Internet’s perceived sales tax harbor and opened a path for states to more freely tax sales over the internet.
The decision immediately sent South Dakota on a path for a special legislative session to work out the immediate changes in state law that needed to be made for sales tax collection, initiate projections as to how much the new revenue would add to the state’s coffers, as well as to foster discussions about how the laws needed to further change in the upcoming 2019 session.
It doesn’t just stop there, as it may spur Congress to action, with some calling for legislation to make Internet taxes consistent, and calls to exempt small business from Internet sales taxes. The only inevitability is that they will move to act in some manner.
Locally, it has also triggered one prominent group – Americans for Prosperity South Dakota – to file an initiated measure proposal to reduce the sales tax rate in conjunction with the Wayfair Supreme Court case decision, vowing to bring a measure before South Dakota residents to reduce their own sales taxes based on this decision.
Any way you slice it – it was a huge, huge story with state and national reverberations that will continue for some time to come.
As an interesting aside, the very significant Supreme Court win for South Dakota’s Attorney General Marty Jackley came about 2 ½ weeks after Jackley had lost the Republican election for Governor to now Governor-elect Kristi Noem.
Had the win been announced three or four weeks earlier, might it have affected the results of that contest?
We can only guess.