Today the Supreme Court issued its decision in South Dakota v. Wayfair, ending the long-standing black and white Quill physical presence sales tax collection standard. Ending the Quill standard allows a state to impose sales tax burdens on large retail businesses who do not have employees or facilities inside the state’s borders.
The South Dakota sales tax law that led to the end of the Quill standard targeted larger Internet retailers. Each of the three retailers in the case – Wayfair, Overstock and Newegg – sells more than $1 billion per year, and in some cases much more. The Court’s decision states that the South Dakota law “applies only to sellers who engage in a significant quantity of business in the State, and respondents are large, national companies that undoubtedly maintain an extensive virtual presence.”
As expressed in both the Supreme Court’s decision and throughout oral arguments, the operations of small businesses are different than large retailers, and state tax actions targeting them raise additional legal questions that are not addressed by this decision.
The Court was very clear about the importance of protecting small businesses from unfair burdens. If state tax authorities attempt to subject remote small businesses to audits and lawsuits, there will be increased litigation across the country to protect small business from unfair burdens.
Now is the time for Congress to step in and provide clear tax rules, with a strong small business exemption, to help small businesses take advantage of the Internet to grow and create local jobs.