Sales Tax – Expanded Exposure

For more than 25 years, we have relied on the Quill Corporation v. North Dakota decision which stated that businesses could not be required to collect and remit sales tax unless they had physical presence in a state.

On Thursday, June 21, 2018, in a 5-4 ruling on South Dakota v. Wayfair, Inc., the U.S. Supreme Court overturned the 1992 Quill Corporation v. North Dakota decision. The majority held that a physical presence standard as defined in Quill is “unsound and incorrect.” This will allow states to use an economic nexus rule to require sales tax compliance.

As a result, state and local governments may now require businesses to collect and remit sales taxes if they have substantial sales or transactions into their jurisdictions, even without having physical presence. Several states had passed legislation in disregard for Quill which until now have been sitting on the books waiting for Quill to be overturned. Many states copied from South Dakota’s law. South Dakota’s law requires all businesses with either 200 or more separate transactions or $100,000 of sales to collect and remit sales tax on all taxable sales.

All businesses will need to evaluate and determine in which additional states and localities they now have sales tax exposure and collection requirements.

For more information, please contact your Yeo & Yeo advisor or a member of Yeo & Yeo’s State and Local Tax (SALT) Services Group.