The Supreme Court of the United States Issues Its Wayfair Decision

June 2018

Summary

Today, June 21, 2018, the Supreme Court of the United States issued its widely anticipated decision in South Dakota v. Wayfair, et al. No. 17-494.  In a 5-4 decision, the Court held that the physical presence requirement for state tax jurisdiction is incorrect and not a requirement under the Commerce Clause of the U.S. Constitution. 
 

Details

South Dakota enacted an economic presence nexus statute for sales and use tax collection on March 22, 2016.  Under that statute, a remote seller is required to collect and remit sales tax if: (1) the seller’s South Dakota sales exceed $100,000; or (2) the seller has more than 200 separate sales transactions into South Dakota.
 
On January 12, 2018, the Court agreed to hear the case by granting South Dakota’s petition for a writ of certiorari.  On April 17, 2018, the Court held oral argument in the case.
 
Justice Kennedy authored the opinion for the five Justice majority (joined by Justices Thomas, Ginsburg, Alito, and Gorsuch).  In summary, the majority ruled that the “physical presence rule, both as first formulated and as applied today, is an incorrect interpretation of the Commerce Clause.”  Further, the majority ruled that South Dakota’s $100,000 of sales or 200 separate sales transactions statutory requirement satisfied the substantial nexus requirement.  However, the case was remanded to the South Dakota Supreme Court for further proceedings to determine if any other features of the South Dakota law discriminated against or unduly burdened interstate commerce.
 
Chief Justice Roberts authored the four Justice dissenting opinion (joined by Justices Breyer, Sotomayor, and Kagan).     
 

 BDO Insights

  • The U.S. Supreme Court’s Wayfair decision is most likely the most significant U.S. Supreme Court decision on state taxation issued in the last 50 years.
  • BDO will be issuing a follow-up Alert with an in-depth analysis of the Wayfair decision.
 

For more information, please contact one of the following practice leaders: 
 
Central:   Southeast:
Deborah Kovachick
Tax Partner
 
  Scott Smith
Tax Managing Director
 
Richard Spengler
Tax Managing Director
 
  Tony Manners
Tax Managing Director
 
Mariano Sori
Tax Partner
  Taryn Goldstein
Tax Managing Director

 
Northeast:   Southwest:
Janet Bernier
Tax Principal
 
  Laura Holmes
Tax Managing Director
 
Matthew Dyment
Tax Principal
  Gene Heatly
Tax Managing Director

 
West:   Atlantic:
Rocky Cummings
Tax Partner
 
  Angela Acosta
Tax Managing Director
Paul McGovern
Tax Managing Director