The Supreme Court today, in a 5-4 decision, came down on the side of the states and overturned the Quill Decision. This grants states greater power to require out-of-state retailers to collect sales tax on sales to in-state residents. This is a big deal for states.
At issue was the court 1992 Decision in Quill which established the physical presence for sales and use tax nexus. That was before the surge of online sales and states have been trying to find constitutional ways to collect sales tax from remote sellers to residents in those states. The Quill Decision stated that those retailers had to have a “physical presence” or “nexus” in the state to be forced to collect and remit sales tax to a state. The Supreme Court said Quill was “out of date”.
States like South Dakota will now be allowed to require sellers that are selling substantial amounts of product into the state to collect and remit sales tax. This may be good for states. However, the small “mom & pop” retailers would have to collect and remit sales to how many states? We may see litigation regarding these small online retailers about the amount of sales necessary to impose the collection obligation on them. It may even be on a case by case basis….we shall see!