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The Dakota's Supreme Court Cases

The Dakota's Supreme Court Cases

To understand South Dakota vs. Wayfair, we have to go back to 1992 and look at Quill Corporation vs. North Dakota case.

Quill Corporation vs. North Dakota

So what is Quill Corporation vs. North Dakota? Through its Tax Commissioner, the state of North Dakota filed an action in state court to force the Quill Corporation, a mail-order office equipment retailer, to charge a North Dakota use tax on Quill product to be used within the state. The supreme court ruled in favor of Quill Corporation, setting the precedent that sales tax can only be applied to a transaction in which a company has a physical presence. Physical presence generally is an office building or employee residing in that state. The outcome effectively prevented states from collecting any sales tax from retail purchases made over the internet or other e-commerce routes.

South Dakota vs. Wayfair

What is South Dakota v. Wayfair? In this case, Wayfair is challenging South Dakota’s application of its sales tax to internet retailers who sell into South Dakota but have no property or employees in the state. This time the Supreme Court ruled in favor of South Dakota. This ruling meant that across state line transaction made on the internet are now subject to sales tax. If not collected by the seller, the consumer is subject to use tax. 

Initially with Quill Corporation vs. North Dakota a purchase made over the internet was not subject to sales tax/use tax unless it shipped from within your state. With South Dakota vs. Wayfair, the decision overturned Quill corporation vs. North Dakota, meaning product shipped from other states was subject to sales tax/use tax. Since South Dakota Vs. Wayfair ruled in favor of South Dakota; the landscape has been very fluid. Every month multiple states come forward with their legislation following the suit, cracking down on internet sellers and consumers dodging sales/use tax.

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