South Dakota v. Wayfair

Questions presented

SCOTUS records, cert granted 12 Jan 2018

In 1967, this Court held that the dormant commerce clause prohibits a State from requiring catalog retailers to collect sales taxes on sales into the State unless the retailer is "physically present" there. Nat'l Bellas Hess v. Dep't of Rev. of Ill., 386 U.S. 753 (1967). That rule, questionable even then, became an isolated outlier when Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279 (1977), held that only a "substantial nexus" was needed for other state taxes affecting interstate commerce. In Quill Corp. v. North Dakota, 504 U.S. 298 (1992), this Court was asked to correct that aberration. But despite a vigorous dissent-and the lack of a similar, "physical presence" rule for any other type of tax, id. at 317-this Court tentatively retained the requirement on stare decisis grounds. The legal and practical developments of the past 25 years strongly recommend revisiting that judgment. Quill has grown only more doctrinally aberrant, and has been roundly criticized by members of this Court, including Justices Kennedy, Thomas, and Gorsuch. But while its legal rationales have imploded with experience, its practical impacts have exploded with the rapid growth of online commerce. Today, States' inability to effectively collect sales tax from internet sellers imposes crushing harm on state treasuries and brick-and-mortar retailers alike. "Given these changes ... , it is unwise to delay any longer a reconsideration of the Court's holding in Quill." Direct Mktg. Ass'n v. Brohl, 135 S. Ct. 1124, 1135 (2015) (Kennedy J., concurring). The question presented is: Should this Court abrogate Quill's sales-tax-only, physical-presence requirement?

Opinion summary

Etalia.ai summary of the majority opinion

In the case of South Dakota v. Wayfair, 2017, the U.S Supreme Court ruled in favor of South Dakota allowing it to require out-of-state online retailers to collect sales tax on purchases made by residents within its jurisdiction. The decision overturned two previous rulings: National Bellas Hess v. Department of Revenue (1967) and Quill Corp v. North Dakota (1992), which had established that states could only impose taxes on businesses with a physical presence or "nexus" within their borders. In a 5-4 ruling, the court found these precedents outdated in an era dominated by e-commerce and digital retailing where many transactions occur beyond traditional brick-and-mortar establishments. This landmark decision has significant implications for online retailers as they may now be required to collect sales taxes even if they do not have a physical location in every state where they sell goods or services.

Dissent summary

Etalia.ai summary of the dissenting opinions

In the dissenting opinion for South Dakota v. Wayfair, Chief Justice Roberts, joined by Justices Breyer, Sotomayor and Kagan argued that it was not the Court's role to overturn precedent in this case. The justices believed that any change to sales tax collection rules should come from Congress rather than the courts due to its complexity and far-reaching effects on commerce. They noted that Congress has more flexibility in crafting rules and exceptions tailored to different businesses sizes and situations while considering potential burdens on interstate commerce. Furthermore, they pointed out that overruling a longstanding decision like Quill Corp v North Dakota could lead to extensive litigation as lower courts attempt to apply new standards without clear guidance. Finally, they emphasized how e-commerce has thrived under existing laws which suggests there is no urgent need for judicial intervention.