By now, anyone who reads this post should be aware that the Supreme Court decided South Dakota v. Wayfair and overruled its physical presence rule last week. States now have expanded authority to require the collection of their consumption taxes by remote vendors like online retailers. Coverage of the case and its impact on states and vendors has been widespread, including my preliminary thoughts offered on this blog and with Darien Shanske and David Gamage elsewhere.
One aspect of the coverage that would usually drive state tax aficionados crazy is the continued reference to the case as involving sales tax.
For a long time, many of us have smugly corrected folks (often only in our own minds) and noted that it is the state use tax that is at issue when we are talking about online sales. That may be no more.
The South Dakota law that was challenged in Wayfair indeed requires remote vendors to collect the state’s sales tax rather than the state’s use tax. Historically, that would have been a big problem, but it didn’t trouble Justice Kennedy or the other members of the majority. This may require broader thinking than just analyzing what Wayfair means about states’ powers over remote vendors. The Court’s decision in Wayfair may have done much more than just overrule Quill; it may have unsettled some even longer-standing doctrine in this area.