ILMA Compoundings June 2018 - 34

COUNSEL COMPOUND

Is a Big Change Coming
to Internet Sales?
By Jeff Leiter

T

he U.S. Supreme Court will
issue its decision this month in
South Dakota v. Wayfair, and
depending on the outcome, the decision could alter the manner in which
some ILMA members solicit orders and
sell their products over the internet, by
catalog or over the phone. As if you do
not already have enough on your plate
at work to worry about, you should pay
attention to Wayfair.
In Wayfair, South Dakota is
challenging a 1992 decision by the
high Court in Quill Corp. v. North
Dakota, which reaffirmed an earlier
ruling that a state could require only
a business with a physical presence
in that state to collect and remit sales
tax. Businesses without that physical
presence could not be required to
collect or remit these taxes. The Court
said it was up to Congress to change
the "physical presence" test.
Quill's 1992 physical presence test did
not foresee e-commerce and the explosion in online sales. Because of the states'
lack of authority to collect sales taxes
on e-commerce sales, estimates describe
a loss of $13.4 billion in tax revenues in
2017. States with no income tax, such as
South Dakota, rely heavily on sales taxes
and have been hard hit by the physical
presence test. At the same time, online
sellers resist sales tax collections because
the resulting lower total cost makes their
products more marketable against brickand-mortar sellers.
South Dakota decided to challenge
Quill's precedent by enacting an
economic nexus law that requires

34

JUNE 2018

| COMPOUNDINGS | ILMA.ORG

out-of-state sellers making either at
least 200 sales, or more than $100,000
from the sales in the state, to collect
and remit South Dakota sales and use
tax. Wayfair, a Boston-based online
retailer of furniture, home furnishings,
d├ęcor and goods, challenged the South
Dakota statute. The implications and
stakes from the Court's decision are so
high that dozens of groups and other
parties submitted "friend-of-the-court"
briefs to the high Court.
The Supreme Court heard oral
arguments in Wayfair on April 17

on the question of whether it should
abandon the Quill precedent or continue to leave the issue up to Congress.
During the oral arguments, the justices
recognized that their decision will
have a significant effect on interstate
commerce. Through their questions,
some of the justices hinted that Quill
was wrongly decided, while others cited
the cost of nationwide compliance with
a law change and its possible effect
on small businesses. Questions were
also asked about prospective versus
retroactive application of their decision


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Table of Contents for the Digital Edition of ILMA Compoundings June 2018

ILMA Compoundings June 2018 - Cover1
ILMA Compoundings June 2018 - Cover2
ILMA Compoundings June 2018 - 1
ILMA Compoundings June 2018 - 2
ILMA Compoundings June 2018 - 3
ILMA Compoundings June 2018 - 4
ILMA Compoundings June 2018 - 5
ILMA Compoundings June 2018 - 6
ILMA Compoundings June 2018 - 7
ILMA Compoundings June 2018 - 8
ILMA Compoundings June 2018 - 9
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ILMA Compoundings June 2018 - 17
ILMA Compoundings June 2018 - 18
ILMA Compoundings June 2018 - 19
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ILMA Compoundings June 2018 - 27
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ILMA Compoundings June 2018 - 35
ILMA Compoundings June 2018 - 36
ILMA Compoundings June 2018 - 37
ILMA Compoundings June 2018 - 38
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ILMA Compoundings June 2018 - 40
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ILMA Compoundings June 2018 - 43
ILMA Compoundings June 2018 - 44
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