Facts of the Case:
South Dakota v. Wayfair, Inc. involved a challenge to South Dakota’s law requiring out-of-state sellers to collect and remit sales tax on goods sold to South Dakota residents, even if the sellers had no physical presence in the state
The law applied to sellers with over $100,000 in annual sales or 200 transactions in the state
Wayfair, Inc., along with other online retailers, argued that this law violated the Dormant Commerce Clause of the U.S. Constitution, which prohibits states from imposing excessive burdens on interstate commerce without congressional approval2
Overview of the Case:
The case centered on whether states could require out-of-state sellers to collect and remit sales tax without a physical presence in the state
. South Dakota enacted the law to address the loss of tax revenue due to the rise of e-commerce
. The Supreme Court’s decision would determine the extent to which states could regulate and tax interstate commerce in the digital age
Background of the Case:
Prior to this case, the Supreme Court had ruled in Quill Corp. v. North Dakota (1992) that states could not require out-of-state sellers to collect sales tax unless they had a physical presence in the state
. This ruling was based on the Dormant Commerce Clause, which aims to prevent states from creating barriers to interstate commerce
. However, the rise of e-commerce and the significant loss of tax revenue led many states, including South Dakota, to challenge the Quill decision
Judgment of the Case:
On June 21, 2018, the Supreme Court ruled in a 5-4 decision that states could require out-of-state sellers to collect and remit sales tax, even without a physical presence in the state
. The Court found that the physical presence rule established in Quill was “unsound and incorrect” in the modern economy
. The decision overturned Quill and allowed states to collect sales tax from online retailers, significantly expanding their ability to tax e-commerce transactions
Changes After the Case:
The ruling in South Dakota v. Wayfair, Inc. led to significant changes in the taxation of e-commerce
. States began implementing laws to require out-of-state sellers to collect sales tax, resulting in increased tax revenue from online sales
. The decision also prompted many businesses to reevaluate their sales tax compliance strategies and adjust their operations to meet the new requirements
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