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Online Sales Tax Bill Defeated In SD Supreme Court



If you’ve been following the online sales tax debate on our blog, you know South Dakota recently passed, “Senate Bill 106, allowing the state to collect taxes from sales made from online retailers – even if they don’t have nexus within South Dakota itself.”

The 2016 law mandated a sales tax collection responsibility from sellers grossing over $100,000 in sales to South Dakota customers, or transactions numbering more than 200 in a year – even if the seller has no physical presence or other connection with the state. Then NetChoice and the American Catalog Mailers Association sued the state, claiming the law violates Quill Corp. v. North Dakota, a ruling which established businesses need a physical presence in the state to be responsible for sales tax and fees.

Online Sales Tax Bill Ruled Unconstitutional

Unsurprisingly, South Dakota’s Supreme Court ruled Senate Bill 106 to be unconstitutional. Supreme Court Justice Glenn Severson stated, “We see no distinction between the collection obligations invalidated in Quill and those imposed by Senate Bill 106…and hold that the circuit court correctly applied the law when it granted sellers’ motion for summary judgment.”

However, as Steve DelBianco, executive director of NetChoice, said in a statement, “This ruling gives the state what it wanted all along—a case they could appeal to the U.S. Supreme Court.” South Dakota was hoping for a quick decision so the matter would be eligible to take before the U.S. Supreme Court when its October 2017 docket opens up.

What Happens Next?

We’ll be watching, along with the rest of the state sales tax world, to see if the U.S. Supreme Court finally grants certiorari on a case that could overturn their 1992 ruling in Quill, or if they’ll choose not to take the case and send it back to Congress to legislate. We’ll keep you updated!

Have a question? Contact Monika Miles

Your comments are welcome!

Monika Miles

Monika founded Miles Consulting Group in 2002. The firm focuses on multi-state tax consulting—helping their clients navigate state tax issues such as sales tax and income tax in interstate commerce, including e-commerce.

Prior to forming the firm, Monika worked for over 11 years in Big 4 Public Accounting and 1 year in industry. Monika has provided such services as federal and state income/franchise tax compliance and consulting, sales/use tax consulting, audit support, and credits and incentives reviews. She has served clients in a variety of industries including manufacturing, technology, telecommunications, construction, utility, retail and financial institutions.

Monika graduated from the University of Texas at El Paso (UTEP) with a BBA in Accounting/Finance and has a Masters in Taxation from San Jose State University.

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