Thursday 06/28/2018

Quill Case Overturned: Sales Tax for Online Retailers

James Kilgore explains how this new ruling may impact your business.

As online shopping becomes increasingly more popular, how will the recent South Dakota v. Wayfair ruling impact online retailers, local businesses and consumers?

South Dakota v. Wayfair

In mid-June, the U.S. Supreme Court made a decision in the South Dakota v. Wayfair case. The case argued that South Dakota can tax internet retailers who sell into the state, even if they do not have property or employees in the state, such as internet giant Wayfair.com.

The court ruled in South Dakota’s favor, which now gives states the ability to require internet retailers to collect and remit sales taxes to whatever state the end user resides in even in states where the internet retailers have no physical presence.

This is a huge win for brick-and-mortar businesses that face continually increasing competition with online retailers who were not required to charge sales tax in states where they did not have a physical presence in. This will also impact states that have missed out on billions of dollars in annual revenue, according to the New York Times.

Quill Corp. v. North

Back in 1992, Quill Corp. v. North Dakota “set the property or employees standard for sales taxes using the Court’s (debated) dormant commerce clause power to restrict state taxation of interstate commerce,” according to the Tax Foundation. The ruling barred states from requiring businesses to collect sales tax unless they had a substantial connection to the state. “The Quill decision helped pave the way for the growth of online retail by letting companies sell nationwide without navigating the complex patchwork of state and local tax codes.”

What’s Next

Now, it’s up to Congress and the states.

Here’s what the impact could be:

  • Consumers could pay more for products bought online
  • States could receive more annual revenue
  • Small local businesses will receive a more level playing field with online retailers
  • Online retailers will have to navigate the state compliance challenges that may occur and may be required to charge sales tax in states even when it has no property or employees in that state

Is your company reliant on online shopping and commerce in different states? Reach out to James to see how we can help navigate these new challenges.

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