State v. Wayfair Inc.
2017 SD 56
| S.D. | 2017Background
- South Dakota relied on sales and use taxes; prior U.S. Supreme Court Commerce Clause decisions (Bellas Hess, Quill) prevent states from requiring out-of-state sellers with no physical presence to collect sales tax.
- 2016 S.D. Legislature passed S.B. 106 to require certain remote sellers (those with > $100,000 in South Dakota sales or ≥200 transactions/year) to collect and remit sales tax; the law included an emergency clause and authorized declaratory-judgment suits to test applicability.
- The Department of Revenue notified several remote sellers (Wayfair, Overstock, Newegg, and Systemax) to register; three sellers (Wayfair, Overstock, Newegg) did not register and were sued by the State; Systemax registered and was dismissed.
- Sellers admitted for summary judgment that they lacked physical presence in South Dakota and met the statute’s numeric thresholds; they asserted the statute violated the Commerce Clause.
- The circuit court granted summary judgment for Sellers and enjoined enforcement, concluding Bellas Hess and Quill control; South Dakota appealed to the state supreme court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether S.B. 106 validly requires out-of-state sellers without physical presence to collect South Dakota sales tax | State: Quill and Bellas Hess should be reconsidered; modern commerce, technology, and administrative tools justify upholding S.B. 106 | Sellers: Bellas Hess and Quill bar state collection duties for sellers lacking physical presence; S.B. 106 is unconstitutional under the Commerce Clause | Court: Granted summary judgment to Sellers — Quill and Bellas Hess remain controlling; S.B. 106 unenforceable against these sellers |
Key Cases Cited
- Nat’l Bellas Hess, Inc. v. Dep’t of Rev. of Ill., 386 U.S. 753 (1967) (Commerce Clause precludes requiring out-of-state mail-order seller with no physical presence to collect use tax)
- Quill Corp. v. North Dakota, 504 U.S. 298 (1992) (reaffirmed Bellas Hess physical-presence rule for state tax-collection obligations)
- Nw. States Portland Cement Co. v. Minnesota, 358 U.S. 450 (1959) (Commerce Clause prohibits laws that unduly burden or discriminate against interstate commerce)
- Rodriguez de Quijas v. Shearson/American Exp., Inc., 490 U.S. 477 (1989) (lower courts must follow Supreme Court precedent and leave overruling to the Supreme Court)