Multi-State – The Fate Of The Physical Presence Nexus Standard

SALT SAVVY
by John Paek and Drew Hemmings
February 23, 2018

Just over a month ago, the U.S. Supreme Court surprised many in the state tax community when it announced that it granted certiorari in South Dakota v. Wayfair, Inc., Docket No. 17-494; appealed from 901 N.W.2d 754 (S.D. 2017).  Granting cert. in Wayfair means that the U.S. Supreme Court may be willing to overturn precedent that, for over fifty years, has provided and continues to provide a bright-line physical presence nexus standard applicable to states’ ability to impose sales and use taxes. See National Bellas Hess Inc. v. Illinois, 386 U.S. 753 (1967), affirmed in part by Quill Corp. v. North Dakota, 504 U.S. 298 (1992).  The U.S. retail economy and its transition from brick-and-mortar storefronts to e-commerce retailers have thus been shaped by the expectation that physical presence within a taxing state is required before that state may impose sales or use taxes on a retailer.


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