Legal Alert 6-26-18 States and Brick-and-Mortar Stores Benefit From Recent U.S. Supreme Court Decision Regarding Internet Sales Tax Rochester Chapter

LEGAL ADVISORY FROM RAC NYSCAR AFFILIATE MEMBER, HARRIS BEACH PLLC: States and Brick-and-Mortar Stores Benefit From Recent U.S. Supreme Court Decision Regarding Internet Sales Tax

Legal Backdrop:
In 1992, the U.S. Supreme Court determined in Quill Corporation v. North Dakota that the Constitution (specifically the Commerce Clause) barred states from mandating that businesses collect state sales taxes unless the business had a substantial connection to the state and established the "physical presence" rule.  On June 21, 2018, the Court in South Dakota v. Wayfair, Inc. et al. overruled Quill in a 5-4 decision, thus removing the physical presence rule and allowing states to collect sales tax from e-commerce.  Justice Kennedy, writing for the majority (joined by Justices Thomas, Ginsberg, Alito, and Gorsuch) said that states were losing upward of $33 billion annually in tax revenues as a result of Quill and the "physical presence rule as defined by Quill is no longer a clear and easily applicable standard.

In the time of Quill, less than 2 percent of Americans had internet access and mail-order sales totaled roughly $180 billion annually. Today, nearly 90 percent of Americans have internet access and mail-order sales have progressed to e-commerce and annual sales tallied a staggering $453.5 billion in 2017.  With more at stake, states like South Dakota that do not have an income tax and rely heavily on sales tax were bound to act.

Procedural HistoryContinue Reading ...