And now, for my next trick …
South Dakota, the state that successfully “killed Quill” and passed the economic nexus model that now leads the way for other states looking to collect taxes on remote sales, raised the curtain Aug. 30 on its next act: a pair of bills for lawmakers when they meet in special session Sept. 12.
The first bill (S.B. 1) takes aim at clearing the preliminary injunction blocking the state from enforcing its law requiring remote vendors to collect and remit South Dakota’s sales and use tax. If approved, the measure would apply to all out-of-state sellers except the litigants in the groundbreaking U.S. Supreme Court ruling in South Dakota v. Wayfair.
The June 21 ruling tossed out Quill Corp. v. North Dakota, the 1992 physical presence threshold for when states could tax remote sales, and suggested strongly that South Dakota’s law—which includes an annual triggering threshold of $100,000 in sales or 200 in transactions—would pass constitutional muster. The ruling has dozens of states considering whether to copy South Dakota’s law, if they haven’t already done so.
A circuit court in South Dakota has yet to consider lifting the injunction and blessing the state’s model. Meanwhile the parties to the case—which include Wayfair Inc., Newegg Inc., and Overstock.com Inc.—are negotiating a possible settlement with the state.
But the South Dakota Department of Revenue believes the Legislature will act first.S.B. 1 would set Nov. 1 as the deadline for remote sellers to get licensed and begin collecting and remitting taxes, in addition to tackling the injunction.
It would also nix the state’s ability to sue remote sellers for not collecting taxes based on a lack of physical presence—such a tool would no longer be necessary.
The second bill (S.B. 2) would address marketplace facilitators, which process payments and handle marketing and delivery for third-party sellers but often don’t collect the tax owed by buyers. The bill defines the key terms “marketplace,” “marketplace provider,” and “marketplace seller,” and makes it clear that marketplace providers have the collect-and-remit obligation—not sellers—as long as certain conditions are met. That requirement would kick in March 1, 2019.
DailyTax Report: State
by Tripp Baltz
August 30, 2018