On October 24, 2018, the California Department of Tax and Fee Administration met for a discussion of how California can best implement Section 6203(c) of the California Revenue and Taxation Code in light of the U.S. Supreme Court’s recent ruling in South Dakota v. Wayfair.
Robert Tucker, Assistant Chief Counsel of the legal division of the CDTFA gave a brief overview of Wayfair and California’s Long Arm Statute, Revenue and Taxation Code 6203 Subdivision C.
We have include the transcript below:
CDTFA Wayfair Stakeholder’s Meeting – October 24, 2018
Time stamp 23:22 – 26:11
Robert Tucker – Assistant Chief Counsel, Legal Division, CDTFA
Brief overview of Wayfair and California’s Long Arm Statute
Good Morning, I’m sure you’re all aware on June 21st, 2018, the U.S. Supreme Court decided South Dakota v. Wayfair, Inc. In its decision, the Court overruled the physical presence requirement of Quill Corporation versus North Dakota, and upheld a South Dakota law that requires a seller that does not have a physical presence in South Dakota to collect South Dakota tax on all its sales into South Dakota provided that the seller meets either of the following criteria in the previous calendar year or the current calendar year: The seller’s gross revenue from the sale of tangible personal property, any product transferred electronically or services delivered into South Dakota exceeds $100,000, and, two the seller or the seller sold tangible personal property, any product transferred electronically or services delivered into South Dakota in 200 or more separate transactions. In its five to four decision, the U.S. Supreme Court overturned 50 years of precedent by holding that the physical presence rule of Quill was unsound and incorrect. The majority criticized the physical presence rule for becoming unworkable and creating an interstate tax shelter. But they failed to create a new bright line rule. Instead, the Court said a substantial nexus is established when the taxpayer avails itself of substantial privilege of carrying on business in a jurisdiction, and it determined that South Dakota’s economic nexus thresholds had satisfied the substantial nexus prong of Complete Audit Transit v. Brady. So, what does this mean for California? Revenue and Tax Code 6203, requires retailers who are engaged in business in this state to collect the California use tax owed on their sales to California consumers and remit the tax to CDTFA. Revenue and Taxation Code 6203 Subdivision C, expressly provides that the term “retailer engaged in business in this state” means any retailer that has substantial nexus in this state for the purposes of the Commerce Clause of the United States Constitution and any retailer upon whom federal law permits this state to impose a use tax collection duty. The legislature intended for this language to create a long arm statute and to clarify that California imposes a collection duty on retailers to the full extent permitted by federal law. Accordingly, we’re here today to listen to you and we’d like to hear your comments.