The South Dakota v. Wayfair case in the Supreme Court could have a far-reaching effect on e-commerce companies. The case challenges the present rule that remote sellers are needed to collect sales tax only if they have a physical presence in the state where goods are sold. The Trump administration is particularly thorny about this issue. President Trump has made a number of unsupported accusations that Amazon has avoided paying taxes. The Supreme Court will deliver its order in June. Only a few states, however, will wait for that long.
The affected states have experience with such cases. The first case of this kind in the Supreme Court was in 1967 and it included a catalog company. The judgment was revisited many years later in 1992. Congress, within that time period, introduced a number of legislative proposals which would require the Internet retailers to collect the due sales tax made from transactions made out of state. None of the cases have been favorable for the states until now. The states are tired of waiting. They have already taken a few steps. The list of such steps includes directly challenging such precedents or by developing a few shrewd workarounds of the present law. All of them have Internet retailers worried.
South Dakota is a case in this context. Melissa A. Oaks of Thomson Reuters Checkpoint Catalyst explained that South Dakota lawmakers have hoped for exactly such a scenario when they crafted the tax law to be imposed on Internet sales. The managing editor of the company said that the law was made in such a way that it will have a greater chance of ending up at the Supreme Court. The state wanted the remote sellers to collect the due tax. The said law was written to directly confront the current precedent.
South Dakota laws
The 2016 state law instructs online retailers to collect the due sales taxes in case the business has in excess of $100,000 in yearly sales to residents of South Dakota. The law is also applicable if 200 distinct transactions are done with the state residents. This particular law directly contravenes the US Constitution's Commerce Clause. The latter stops states from any anti-interstate commerce bias. Other states like Ohio and Massachusetts were a little more creative. They have found methods to tax these transactions while well within the constitutional bounds.