Source: https://www.reedsmith.com/en/perspectives/2018/01/breaking-news-us-supreme-court-to-revisit-quill
Timestamp: 2019-04-22 04:34:03+00:00

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Breaking News: U.S. Supreme Court to Revisit Quill, Grants Cert in South Dakota v. Wayfair, et al.
Home Perspectives Breaking News: U.S. Supreme Court to Revisit Quill, Grants Cert in South Dakota v. Wayfair, et al.
Today the United States Supreme Court granted cert in South Dakota v. Wayfair, et al., the lead case challenging the Court’s “physical presence” nexus rule reaffirmed in Quill Corp. v. North Dakota (“Quill”).1 The Court’s eventual decision in South Dakota v. Wayfair will directly impact other states that have enacted “kill-Quill” legislation or regulations. But the impact of the Court’s decision on other state efforts to increase sales and use tax collection on remote sales, without directly challenging Quill, either by enacting reporting regimes or by imposing sales tax collection obligations based on contacts with the jurisdiction that can be distinguished from the contacts presented by the taxpayer in Quill (for example, by enacting, “cookie nexus”, or platform legislation), is unclear.
The case began when South Dakota brought an action seeking a judicial declaration that the requirements of S.B. 106 were valid and applicable to four out-of-state retailers: Overstock.com, Newegg, Systemax, and Wayfair (collectively, the “Retailers”). The Retailers filed a motion for summary judgment, arguing that there was no issue of material fact because the sales tax collection obligation of S.B. 106 directly contradicts the physical presence nexus rule of National Bellas Hess and Quill.5 The Sixth Judicial Circuit of South Dakota and the Supreme Court of South Dakota agreed and granted the Retailers’ motion.
Regardless of the Court’s eventual decision in South Dakota v. Wayfair, the decision will directly impact similar “kill-Quill” laws (for example, Indiana, Wyoming) and regulations (for example, Alabama). What is unclear, though, is what impact the Court’s decision will have on other state efforts to distinguish Quill, rather than directly overruling it.
Colorado’s reporting regime was upheld as constitutional by the U.S. Court of Appeals for the Tenth Circuit in Direct Marketing Association v. Brohl.7 After the Court denied cert in that case, several states enacted similar reporting regimes. If the Court ultimately affirms Quill’s physical presence rule in South Dakota v. Wayfair, will more states follow Colorado’s lead and enact similar reporting regimes?
Similarly, the Court’s eventual decision may not immediately impact state attempts to impose sales tax collection or reporting obligations on “platforms.” Minnesota, Pennsylvania, Rhode Island, and Washington have recently enacted regimes requiring companies that facilitate sales by providing an online marketplace to collect sales tax on sales certain remote sellers, or comply with burdensome reporting regimes.9 These regimes raise issues under the Due Process Clause of the United States Constitution and the Internet Tax Freedom Act.
Taxpayers and state revenue departments may be hoping that the Court’s decision in South Dakota v. Wayfair will provide much needed clarity regarding the constitutional limits on state taxing authority. But no such clarity is guaranteed. If the Court reaffirms Quill’s physical presence rule, questions may remain on the scope and reach of the physical presence rule. And if the Court announces a new bright-line rule, there is no certainty that the rule will prove any easier to administer than Quill’s physical presence rule. Taxpayers should closely monitor this litigation and new state efforts to enforce their sales and use tax laws in the future.
S.B. 106, § 1, 2016 Leg., 91st Sess. (S.D. 2016).
South Dakota agreed there were no disputes of material fact. South Dakota v. Wayfair, Inc., et al., No. 32CIV16-000092 (S.D. Cir. Mar. 6, 2017).
135 S. Ct. 1124, 1135 (Kennedy, J. concurring) (2015).
814 F.3d 1129 (10th Cir. 2015), cert. denied, 137 S.Ct. 591 (2016).
A challenge to Massachusetts’ regulation was filed in Virginia state court, and the Court’s decision to grant cert may not halt that litigation. Through legislation, Ohio has adopted a similar “cookie nexus” standard for purposes of its sales tax.
See, e.g. Jonathan Maddison, Walter Hellerstein & John Swain, Platforms, 86 STATE TAX NOTES 1165 (Dec. 18, 2017).

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