Delivering for Best-in-Class Wholesaler-Distributors
January 10, 2020

Twenty-five years ago in Quill v. North Dakota, the U.S. Supreme Court ruled that the lack of a physical presence (“substantial nexus”) in a State by an out-of-state seller prevents that State from compelling the remote seller to collect and remit that State’s sales tax. In its 1992 decision in Quill, the Court invited Congress to resolve this issue, stating, “The underlying issue here is one that Congress may be better qualified to resolve and one that it has the ultimate power to resolve.”

The issue has been the subject of Congressional attention for several years. In 2013, the U.S. Senate passed the NAW-supported Marketplace Fairness Act (“MFA”), however, the House consideration of the MFA was successfully blocked due to the opposition of then Chairman of the House Judiciary Committee, Rep. Bob Goodlatte (R-VA-6) and several House conservatives. A modified version of the MFA authored by former Rep. Jason Chaffetz (R-UT-3) and supported by NAW (the Remote Transactions Parity Act (“RTPA”) also failed to advance.


South Dakota v. Wayfair: At issue was the validity of a South Dakota statute requiring sellers with “economic nexus” to collect and remit state sales tax regardless of physical nexus. South Dakota acknowledged the statute in question runs afoul of the standard enunciated in Quill. (A parallel case challenges the validity of the South Dakota statute on the grounds that it violates the Federal Constitution’s Commerce Clause and due process guarantees.) In 2017, a Federal District Court rejected the companies’ request that the case be heard in Federal court, and in early March of that year the State court ruled as expected against the South Dakota law on the basis of Quill. The South Dakota Supreme Court found the statute invalid on September 14, 2017, and the State filed a petition seeking U.S. Supreme Court review on October 2, 2017. On October 23, 2017, NAW filed an amicus curiae brief in support of South Dakota’s petition which was subsequently granted. Oral argument was heard in the Supreme Court on April 17, 2018. NAW was one of 23 parties to an amicus curiae brief in support of South Dakota’s position in this case.

On June 21, 2018, the Supreme Court handed down a decision in the Wayfair case overturning the Quill decision allowing states to require out-of-state/on-line sellers to collect state sales taxes. This was a huge victory for our brick-and-mortar businesses.

Some 20 months after the Supreme Court decision, most states have passed laws that would require online merchants to collect sales taxes if they make a requisite amount of sales within the state.

To date, only Florida and Missouri have yet to pass laws. In fact, these two states and 10 others don’t require companies to collect taxes when they act as a third party between buyers and sellers, as eBay and Amazon’s marketplace do.

These states include Georgia, Hawaii, Illinois, Kansas, Louisiana, Michigan, Mississippi, North Carolina, Tennessee, and Wisconsin on top of Florida and Missouri. Still, change is on the way in at least some of those states. Hawaii, Illinois, North Carolina and Wisconsin are all slated to start requiring online marketplaces to collect taxes early in 2020. The Kansas legislature passed a bill last year that was vetoed, while Georgia, Louisiana and Missouri both had measures that failed to make it through their legislatures in 2019. Florida already has bills pre-filed for the 2020 legislative session.

So far, no legislation has been introduced in the 116th Congress to address this issue and Rep. Jerry Nadler (NY-19), the Chairman of the House Judiciary Committee, has indicated that he will not intervene in the Supreme Court’s decision.

For more information, see NAW’s Legal Update.