The Supreme Court heard oral arguments last month in the case of Wayfair vs. South Dakota to determine if the physical presence standard for sales tax collection (nexus) that was last confirmed in the Quill case 26 years ago should stand, or should internet sales alone be sufficient to create nexus. There still appears to be conflicts over this issue among the justices. See Thomson Reuters article link Supreme Court.
During the hearing, Justice Elena Kagan said “Congress is capable of crafting compromises and trying to figure out how to balance the wide range of interests involved here,” I find this an interesting comment since the court said the same thing when they decided to continue the physical presence standard in the Quill case 26 years ago. Congress has not been able to pass a law reaching any compromise in all this time.
Chief Justice John Roberts cited court filings saying the problem South Dakota is seeking to resolve may be lessening because many of the biggest online retailers, like Amazon, now collect state sales taxes. “And if it is, in fact, a problem that is diminishing rather than expanding, why doesn’t that suggest that there (is) greater significance to the arguments that we should leave Quill in place?” Roberts asked.
The problem is diminishing, because Amazon and some other companies are voluntarily complying with South Dakota’s laws (as well as the laws of many other states requiring sales tax collection by out of state companies). Most companies are not voluntarily complying. Please note that the South Dakota law excludes small companies. Companies with less than $100,000 in sales into South Dakota, or less than 200 sales transactions into the state are exempt from sales tax collection responsibilities.
Leaving Quill in place does not cure any of the confusion surrounding nexus questions. Laws should not be optional. The Supreme Court should rule one way or the other. A decision is expected in June.