Jenner & Block

The US Supreme Court Allows Collection of State Sales Tax From Remote Sellers

On June 21, 2018, the US Supreme Court issued its much-anticipated decision in South Dakota v. Wayfair, Inc., No. 17-494.  In a 5-4 opinion by Justice Kennedy, the Court held that the Dormant Commerce Clause does not bar a state from requiring an out-of-state seller lacking in-state physical presence to collect and remit sales tax.  In reaching this conclusion, the Court took the unusual step of overruling two of its own prior opinions: National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967), and Quill Corp. v. North Dakota, 504 U.S. 298 (1992).  The Court held that stare decisis was an insufficient basis to uphold a rule it viewed as anachronistic, particularly in light of the explosive growth of e-commerce.

Wayfair is a major victory for states, who can now collect tax from out-of-state sellers and brick-and-mortar retailers, subjecting the latter to the same tax burdens as their online competitors.  Wayfair, however, does not hold that all tax regimes will pass constitutional muster.  To the contrary, it holds that such regimes will be subject to traditional Dormant Commerce Clause doctrines designed to prevent undue burdens on interstate commerce.

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