Supreme Court’s Online Sales Tax Ruling on Wayfair

The U.S. Supreme Court plans to mark Tax Day by hearing oral arguments in a case that could dramatically change how, and where, many companies collect and remit sales tax.

On April 17, the court will hear arguments in the South Dakota v. Wayfair case. A ruling, which has the potential to affect how states can tax sales by e-commerce sellers and other out-of-state merchants, is expected by mid-June.

As my colleague Peggi Rockefeller noted in her January Tax Matters post, South Dakota in 2016 passed economic nexus legislation to require online merchants with no physical presence in the state to collect and remit sales taxes if:

  • certain in-state sales reach more than $100,000 and/or
  • more than 200 transactions are met.

South Dakota courts subsequently struck down the law because they were bound by precedent, including the Supreme Court’s 1992 ruling in Quill v. North Dakota.

Of course, retail sales business models have changed dramatically since 1992, thanks to the massive growth of online selling. Although many states have enacted legislation requiring the collection of sales and use tax on e-commerce transactions, presently, they cannot legally enforce these requirements. A reversal of Quill’s physical presence requirement would allow states to enforce these regulations.

This would significantly alter the sales and use tax nexus landscape. After all, many companies have physical nexus in only a few states. If the Supreme Court overturns Quill, companies could be required to collect and remit sales and use tax in up to 45 states. As a result, some companies would need to make substantive changes to current technology and processes.

Regardless of how the Wayfair decision plays out, companies should prepare by reviewing their current compliance practices and evaluating supporting technology to collect and remit sales tax before the Supreme Court rules in June.

We’ll keep you posted as the court’s potentially momentous sales and use tax decision unfolds.

Explore more Resources from our Industry Influencers:

Michael J. Bernard, Chief Tax Officer – Transaction Tax at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Michael J. Bernard

Vice President of Tax Content and Chief Tax Officer

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Michael Bernard is the Chief Tax Officer of Transaction Tax. In his role, he provides insight and thought leadership around tax department operations, U.S. indirect tax, tax risk management, and tax policy, as well as emerging tax trends. He is an executive-level tax attorney with a diverse portfolio of experience in corporate tax, administration, and finance, including a substantive knowledge of U.S. and international tax laws.

Prior to joining Vertex, Michael was in various tax leadership roles at Microsoft Corporation for 28 years, the most recent being Senior Director – Tax Counsel. Michael led teams in the following functional areas: direct and indirect tax controversy, sales and use, business license, property, tax IT, SOX, and telecommunications. He also co-led a corporate taxpayer advocacy group with the Washington Department of Revenue and was a Director on the Board of the Washington Research Council. Michael has also testified before administrative and lawmakers at both the federal and state level.

Michael earned both a J.D. and a Bachelor of Science in Business Administration from Creighton University. He is a part-time lecturer of Law in the LLM program at the University of Washington School of Law. Michael also served on the board of directors, executive committee, and chaired committees for The Tax Executives Institute (TEI) for nearly 25 years.

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