Terry Barrett, tax senior manager and leader in Keiter’s state and local tax team, shared an op-ed featured in Virginia Business titled, “Supreme Court’s Wayfair case will impact Virginia businesses.” This includes a look at the impact the South Dakota v. Wayfair, Inc. case will have on Virginia businesses with multistate operations and what these businesses should consider in light of these upcoming sales tax changes.
Virginia businesses selling in a multistate environment may find that they have additional sales-tax requirements in the near future. On April 17, the U.S. Supreme Court heard oral arguments in the case South Dakota v. Wayfair, Inc., et. al. (Docket No. 17-494). At issue is whether South Dakota (or any other state) may impose sales-tax collection requirements on out-of-state sellers that have no physical presence in the state but merely are selling via the internet (or mail-order) to customers in the state.1 The court ruled in 1992 in Quill v. North Dakota that a seller must have a physical presence in a state in order to be required to collect and remit sales/use tax on sales to instate users. Much has changed since 1992 in the way businesses sell products, and many states felt that the physical presence requirements are no longer relevant.
The fact the court agreed to hear the case was viewed by many as a clear sign the physical presence requirements of Quill would be overturned. However, the oral arguments and line of questioning by the justices on April 17 suggested the outcome of the case is uncertain and too close to call. What was clear, though, were concerns by the justices over the potential retroactive application of their ruling, sales-tax compliance costs for small businesses, and the real magnitude of the revenues lost due to the physical requirement limitation. The court’s decision is expected by the end of June.
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