SCOTUS Weighs Overturning Physical-Presence Rule for Sales Tax

The U.S. Supreme Court heard oral arguments on April 17, 2018, in South Dakota v. Wayfair, Inc., a case that could fundamentally alter the landscape of e-commerce taxation. The court is considering whether to overturn its 1992 precedent in Quill Corp. v. North Dakota, which requires a business to have a physical presence in a state to be compelled to collect and remit its sales and use taxes. South Dakota argues the rise of internet retail has rendered the Quill standard obsolete, depriving states of significant tax revenue and disadvantaging local businesses. For companies selling online, abandoning the physical presence test would trigger complex and costly compliance obligations across thousands of state and local tax jurisdictions nationwide. During arguments, the justices weighed the principles of stare decisis against the evolution of commerce, also raising concerns about the potential burden on small businesses. A decision is expected by late June 2018, and businesses engaged in remote selling should monitor the outcome closely to prepare for a potentially seismic shift in their tax responsibilities.