In the News

Supreme Court Closes Online Sales Tax Loophole for Retail Sector, State Governments

Real Estate NJ

June 22, 2018

The U.S. Supreme Court ruled 5-4 in South Dakota v. Wayfair that online retailers must collect sales tax from customers even in states where they don’t have a physical presence.

“Experts say the Supreme Court’s action effectively levels the playing field by overturning another landmark decision, Quill Corp. v. North Dakota, which ruled in 1992 that states could not collect tax from online sellers unless they have a physical presence in the state.

“‘Despite the holding of Quill, the digital economy and the online marketplace drastically altered the way business and sales are transacted and therefore, states felt the need to change their policies as well to keep up with economic and commercial trends,’ Jaime Reichardt, an attorney with Sills Cummis & Gross P.C., wrote Thursday in its blog focused on tax issues. ‘As a result, states started getting creative with how they found physical presence.’

“‘This culminated in some states adopting rules which would impose nexus on an out-of-state seller for merely earning above a certain ‘bright-line’ amount of sales from the taxing state. More than a half dozen states have adopted these ‘bright-line’ receipts nexus rules for sales tax with more to come.’

“‘The major take-away from the case is that states can now force out of state sellers to collect sales tax if those sellers conduct above a de-minimis level of sales in the state, regardless of whether there is a physical presence in the taxing state,’ Reichardt wrote in the blog, The SALT Lawyer. ‘Additionally, the Court’s decision may have broader implications beyond sales tax which could open the door for more states to adopt even more expansive economic nexus and bright-line receipts nexus rules for income and other business activity taxes.’”