On Thursday, June 21, 2018, in South Dakota v. Wayfair, 585 U.S. __ (2018), the U.S. Supreme Court upheld a South Dakota law that requires vendors without a physical presence in the state to collect and remit sales taxes if the seller, on an annual basis, either delivers into South Dakota goods or services valued at more than $100,000 or engages in 200 or more separate transactions delivering goods or services into the state. This decision reverses decades-old precedent that required a physical presence within a state before the state could impose sales tax collection and remittance obligations on sellers of goods or services. The U.S. Supreme Court today held that this physical presence test was unsound and incorrect.

Following this decision, it is expected that other states will enact similar far-reaching sales tax laws. Businesses that ship products to various states will be forced to comply with an increasing number of sales tax provisions as more states enact laws following South Dakota's model. E-commerce companies and internet-dependent sellers will likely be the most affected businesses.

This ruling is expected to affect many large and small businesses. As additional states enact new sales tax laws, many online businesses could be forced to collect and remit taxes across the country. Companies should be mindful of new laws in states in which they conduct business or deliver products or services. Eventually, a review or audit of a business's sales tax collection practices may be beneficial to assess the company's level of risk as a result of the expanded reach given to state taxing authorities under today's Supreme Court decision.


Nicole Bouchard

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Barbara J. Kelly

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Harris Cornell

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