Last Friday, the US Supreme Court agreed to take up the case of South Dakota v. Wayfair et al. Depending on how the Court rules, the compliance impact on the digital economy could be enormous. Below are five things eCommerce companies should know about the case and what could happen next.
1. The current rule which restricts states from imposing sales tax collection requirements on remote companies is the product of a balancing act made by the Court in 1992. Essentially, the Court (in the Quill v. ND case) said that sales tax is so complex its too burdensome to require companies to collect unless they enjoy the benefit of being physically located in the state. The Court is free to re-balance the scales and decide differently today.
2. In the years since Quill, new technologies have made it far easier for businesses to build a national presence without a significant physical presence. Likewise, third-party software solutions have made tax compliance far less burdensome.
3. As e-commerce has grown, states have worked tirelessly to enact rules that nibble at the fringes of the Quill doctrine (e.g. notice rules, affiliate and click-through nexus, cookie rules, etc.). Some states have even enacted rules which outright disobey Quill and pose tax obligations on sellers based on how much business they do or how many sales they make. Regardless – as things stand at the moment, Quill remains the law of the land. Any law that completely violates the standard has not been enforced.
4. The Court may hear oral arguments from the lawyers as soon as April and may make a decision as soon as June. They could re-affirm their previous decision and maintain the physical presence standard or they could overturn Quill. If they choose the latter, what happens next is a mystery to everybody. For example:
a. Would the rules in states such as AL, IN, ME, MS, ND, OH, RI, SD, TN, VT, WY that directly disobeyed Quill become immediately effective?
b. Could states immediately (through statute, rule, or regulation) amend their existing nexus standards to capture remote sales?
c. Would the Court ask Congress to articulate a set of requirements? Would states have to enact certain minimum simplifications? Would the smallest sellers be excluded?
5. Businesses with significant e-commerce sales need to start considering their options. Do you have a path towards staying compliant in a world where you have expanded sales tax collection and remittance responsibilities? Have you considered adopting a technology solution that allows you to collect, file, and remit sales tax across the country?
Get ahead of the Supreme Court’s decision – start your 30-day free trial with Taxify by Sovos to see how we help businesses navigate complex state rates and requirements.