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Kill Quill? South Dakota Awaits Supreme Court Answer

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On March 22, 2016, the South Dakota legislature passed S.B. 106. Generally, South Dakota retailers selling tangible personal property in the state have an obligation to collect and remit sales tax to the Department of Revenue. S.B. 106 attempted to take this a step further, as the law imposed an economic nexus standard on out of state retailers, requiring them to collect and remit sales tax on sales made to South Dakota purchasers. The South Dakota legislature drafted this law to purposely conflict with the U.S. Supreme Court’s longstanding precedent in Quill Corp. v. North Dakota and National Bellas Hess v. Illinois. Those holdings require retailers to be physically present in a state to have an obligation to collect and remit sales and use tax on sales to customers in the state. South Dakota agreed that the law was unconstitutional and requested the court to issue a decision striking the law down. The state also requested that the court issue a decision advising the United States Supreme Court to grant certiorari of the case. (Certiorari is a writ or order seeking a higher court, usually the Supreme Court, to review a decision of a lower court.)

The South Dakota Supreme Court held that S.B. 106 violated the United States Supreme Court’s decisions in National Bellas Hess v. Illinois and Quill Corp. v. North Dakota, ultimately violating the Dormant Commerce Clause as the law imposed sales tax obligations on retailers not physically present in the state. However, the court’s decision did not address whether the United States Supreme Court should grant certiorari. South Dakota filed for Petition for writ of certiorari on October 2, 2017. A response was due in the beginning of November, but the Supreme Court has not made its decision yet.

South Dakota is one of the few states that does not have a state income tax, which means it relies heavily on revenue from sales tax. This case was the first of many that have followed, challenging a “kill-Quill” statute. South Dakota and other states have argued that the internet has revolutionized the retail system and outdated Supreme Court precedent on the issue, as these cases were heard before the internet even existed. Additionally, the booming tech world makes it easier for retailers to collect sales taxes as there is now software that automatically collects the tax for retailers.

States are not the only ones frustrated with this outdated precedent as two Supreme Court Justices have expressed their willingness to review the physical presence requirement laid out in Quill. Justice Kennedy stated in his concurring opinion in Direct Marketing Ass’n v. Brohl, that the Supreme Court should reconsider its decision in Quill and is only waiting for an appropriate case to do so. Neil Gorsuch, the newly appointed Justice, has also expressed his opinion in that the cases requiring physical presence are outdated. Whether the Supreme Court will grant certiorari and consider the South Dakota case is a matter of discretion. Although we can all agree the world has changed significantly since these cases were heard, the Court faces the issue of stare decisis and states face the fact that the Supreme Court rarely hears cases on tax issues. This means states and taxpayers must brace themselves for the possibility that the Supreme Court may not review Wayfair or similar cases. For now, states are left with no answer and as a result, taxpayers will remain subject to varying and ambiguous tax collection obligations in states in which they do business.State of South Dakota v Wayfair Inc, Inc & Newegg, Inc, 2017 SD 56 (2017).

About the Author: Mr. Donnini is a multi-state sales and use tax attorney and a shareholder in the law firm Moffa, Sutton & Donnini, PA, based in Fort Lauderdale, Florida. Mr. Donnini’s primary practice is multi-state sales and use tax as well as state corporate income tax controversy. Mr. Donnini also practices in the areas of federal tax controversy, federal estate planning, Florida probate, and all other state taxes including communication service tax, cigarette & tobacco tax, motor fuel tax, and Native American taxation. Mr. Donnini earned his LL.M. in Taxation at NYU. He is also a co-author of the CCH Expert Treatise Library: State Sales and Use Taxation. Please feel free to visit his firm’s web-site or his blog .

Questions? If you have any questions please do not hesitate to contact him via email at or call 954-642-9390.

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