Published on Jun 21, 2018

U.S. Supreme Court issues long-awaited opinion on collecting remote sales tax

Contact: Andrew Pittelkau

Overturning Quill v. North Dakota has been a long-standing federal priority for AWC. It happened. This was needed to level the playing field for internet retailers and brick-and-mortar retailers in our communities, and bring important revenues to state and local governments.

On June 21, the Supreme Court of the United States (SCOTUS) released a 5-4 opinion in the case of South Dakota v. Wayfair. The court's opinion favoring South Dakota allows states to collect sales tax on goods sold from remote out-of-state sellers. The opinion reverses the physical presence standard set in the prior cases of Quill (1992) and Bellas Hess (1967) stating, "sellers who engage in a significant quantity of business in the State, and respondents are large, national companies that undoubtedly maintain an extensive virtual presence."

The decision will likely have limited impact in the State of Washington. However, this ruling affirms the Washington State Legislature's bipartisan actions in 2017 that resulted in more than $400 million to state and local governments thus far.

EHB 2163 directed the Department of Revenue (DOR) to work with remote out-of-state companies to comply with remitting sales tax or provide information on purchasers for remitting use tax. DOR began collecting sales tax from remote out-of-state sellers in 2018. Sellers who do not meet the threshold of $10,000 are not required to collect sales tax.

The Supreme Court remanded the case to the lower court to determine if some other principle under interstate commerce might invalidate the law, but noted that South Dakota law included "several features that appear designed to prevent discrimination against or undue burdens upon interstate commerce." The decision upholds South Dakota's law of collecting sales tax from remote out-of-state sellers that deliver more than $100,000 of goods or services or engage in more than 200 transactions per year.

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