On Oct. 31, 2018, the three remote-seller taxpayers in the South Dakota v. Wayfair litigation reached a settlement agreement with the state to collect sales taxes on their sales to South Dakota customers beginning Jan. 1, 2019. Once approved by the court, the agreement will effectively end the Wayfair litigation. Recall that the U.S. Supreme Court issued the Wayfair decision on June 21, 2018, and the case was ultimately remanded to the Hughes County Circuit Court in early August. A second case involving South Dakota’s remote seller law, American Catalog Mailers Association and Netchoice vs. Andy Gerlach, was also in settlement discussions.
The settlement removes the injunction that prevented the state from requiring the taxpayers to comply with the remote seller nexus provisions enacted in 2016. Recently, South Dakota amended those provisions to require sales tax collection for all remote sellers that exceed $100,000 in sales or complete more than 200 transactions per year to purchasers in South Dakota, effective Nov. 1, 2018. Prior to the settlement, the amendments did not apply to the parties in the Wayfair litigation.
In addition to South Dakota, New Jersey, North Carolina and South Carolina began enforcing remote sales tax collection on Nov. 1, 2018.
Takeaways
The number of states that have addressed an enforcement date for sales tax economic nexus continues to grow. States not addressing economic sales tax nexus in 2018 will likely do so in the 2019 legislative sessions.
While the Wayfair litigation has come to a conclusion, it does not prohibit other taxpayers from challenging the U.S. Supreme Court’s ruling. A number of questions remain unanswered including whether the “$100,000 or 200 transaction” activity threshold is an appropriate minimum for every state and whether some state sales tax regimes may cause an undue burden on remote sellers.
Remote sellers are encouraged to contact their state and local tax advisers in preparation for the new and upcoming sales tax compliance requirements. To read more about Wayfair and the decision, please read our article Wayfair, sales tax, and economic presence laws.
