On June 21, 2018, the U.S. Supreme Court issued its much-awaited decision in South Dakota v. Wayfair. In its ruling, the court overturned the precedent set in its 1992 Quill Corp. v. North Dakota ruling that prevented states from requiring online and other “remote” sellers to collect their sales tax unless the seller had a physical presence in the state.




Technically, the issue before the Supreme Court in Wayfair was the constitutionality of South Dakota’s sales tax collection law. Under that law, only remote sellers with at least $100,000 in sales to South Dakota customers or 200 or more sales transactions to South Dakota customers in a year are required to collect tax. The law prohibits retroactive liability. In addition, South Dakota is a member of the Streamlined Sales and Use Tax Agreement, which is an agreement among 24 states to provide simplified and uniform methods to collect sales tax.

The Supreme Court held that physical presence is no longer required before a state can force a remote seller to collect its tax. However, the court also said that states cannot require a remote seller to collect their tax unless the seller has “substantial nexus” with the state and the tax collection does not place “undue burdens” on the remote seller.

While the court did not define “substantial nexus” or “undue burdens,” it said the threshold of $100,000 in sales or 200 in transactions was sufficient to establish “substantial nexus” in South Dakota and was sufficient protection for small sellers. The court did not say if smaller thresholds would be sufficient, or if $100,000 in sales or 200 in transactions would be a sufficient threshold in a more populous state like California or New York.

The court also was satisfied that collecting and remitting tax under the simplifications offered by the SSUTA would not constitute an undue burden on remote sellers, and cited with approval the fact that South Dakota’s law prohibited retroactive liability. However, the court did not say if collecting tax for states that are not members of the SSUTA would constitute an “undue burden” or if states could seek retroactive liability.

Thus, while Wayfair eliminated the physical presence requirement, the court’s failure to provide bright-line rules leaves many questions unanswered. These questions include:

  1.  In which states will remote sellers be required to collect tax?
  2. When will remote sellers be required to begin collecting tax in each state?
  3. Is there an efficient way for sellers to register and collect tax in states where they are required and/or choose to do so?
  4. Will remote sellers that sell via a marketplace face different tax collection obligations than sellers that do not sell via a marketplace?
  5. Will any states seek retroactive liability for periods prior to the Wayfair decision?
  6. Is Congress now likely to enact federal legislation to address this issue?


In which states will remote sellers be required to collect tax?