United States

South Dakota: South Dakota Asks the U.S. Supreme Court to Overturn Quill

Oct 09, 2017
From KPMG TaxWatch

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And so it begins. On October 3, 2017, the state of South Dakota filed a 70-page cert petition with the U.S. Supreme Court asking it to retire the Quill physical presence rule. In arguing that “Quill clearly needs to go,” the state reminded the Court of the technological advances that have “eliminated Quill’s sole animating concern—namely, the logistical burden national mail-order retailers might face in collecting sales tax in multiple jurisdictions.” In addition, the petition notes the revenue losses facing the states and the unfair advantages the Quill holding gives Internet retailers over their brick-and-mortar rivals.  Interestingly, the state also notes that this is but the first of many challenges to Quill coming the Court’s way. In the state’s view, by taking this case, the Court can “spare the States and numerous affected businesses the substantial expense of unnecessary audits and litigation by providing a definitive answer now on Quill’s continuing force.”

The background on this case has been much publicized. In 2016, South Dakota became the first state to enact economic nexus provisions for sales and use tax purposes. Specifically, effective May 1, 2016, all entities with annual sales in South Dakota exceeding $100,000 or with more than 200 separate transactions in the state were required to collect and remit South Dakota sales and use tax. Litigation commenced almost immediately and, after some back and forth, the case proceeded in state court. During the pendency of the litigation, the economic nexus standard is unenforceable against any retailer. Also, per the economic nexus statute, the litigation is to proceed as expeditiously as possible. On September 14, 2017, in South Dakota v. Wayfair, Inc., the South Dakota Supreme Court held that the state is bound to follow established U.S. Supreme Court precedent. Therefore a law imposing economic nexus standards on remote retailers was unenforceable in light of the physical presence standard most recently articulated in 1992 in Quill v. North Dakota.  In reaching this conclusion, the court rejected the state’s arguments that the Quill physical presence standard is outdated in light of advances in software and technology. Please stay tuned to TWIST for updates on the South Dakota cert petition.


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.