Tomorrow the Supreme Court will hear oral argument in South Dakota v. Wayfair, Inc., Overstock.com, Inc., and Newegg, Inc., a case in which the state of South Dakota seeks to assess sales tax on e-commerce retailers with no physical presence in the state. In what is unlikely to have been a coincidence, the case that may alter the future of e-commerce will be heard on “Tax Day,” April 17, 2018, when Americans must file their personal federal income taxes.
Long-standing Supreme Court precedent, including 1992 Supreme Court case Quill Corp. v. North Dakota, has held that businesses are taxed based on where they are physically present. In search of more tax revenue (despite states seeing “significant increases” in tax revenue in Q4 of 2017, according to recently-released U.S. Census Bureau data), South Dakota and other states seek to instead assess taxes based on where merchandise is received, even if that means taxing businesses from out-of-state, or abroad. The consequence is that small businesses, particularly Internet retailers, would be exposed to the obligation to pay sales taxes in jurisdictions across the country. A figure reported by the U.S. Government Accountability Office estimates the number of taxing jurisdictions, conservatively, at 10,000 — a quantity which may put one’s annual Tax Day blues into perspective. MORE »