On Sept. 14 the South Dakota Supreme Court ruled that the state cannot force out-of-state retailers to collect sales tax. This ruling is predicted to provide the United States Supreme Court with the opportunity to revisit Quill Corp v. North Dakota, a 1992 decision that has allowed retailers without a physical presence to enjoy a distinct price advantage over their brick and mortar competitors for more than 25 years.
ICSC issued a statement in response to the ruling that reads, in part, “In the face of Congressional delay, the Supreme Court has an opportunity to reinterpret and modernize the law to provide a level playing field for all retailers. ICSC believes merchants and the communities they serve across the country have waited long enough for fairness.”
The South Dakota case is a result of the statute passed in the state in 2016 designed to create this legal challenge to Quill. The law requires out-of-state retailers to collect and remit sales tax if they transact more than $100,000 of business in the state or more than 200 sales. The law was advanced one year after U.S. Supreme Court Justice Anthony Kennedy recognized that, “[t]he Internet has caused far-reaching systemic and structural changes in the economy” so that “a business may be present in a State in a meaningful way without that presence being physical in the traditional sense of the word.”
Justice Kennedy also noted the significant economic harm that the sales tax base erosion has caused for state budgets and local retailers, writing that “it is unwise [for the U.S. Supreme Court] to delay any longer a reconsideration of the Court’s holding in Quill” and asked the “legal system [to] find an appropriate case for this Court to reexamine Quill.”
A new study by the Marketplace Fairness Coalition released on Sept. 21 shows states stand to lose more than $211 billion in remote sales tax revenue through 2022 without a federal e-fairness solution. The analysis details the amount of sales tax revenue each state is estimated to lose over the next five years if the remote sales tax loophole remains unclosed. These projections were created using the National Conference of State Legislatures' 2015 national uncollected sales tax data.