South Dakota compels Amazon to collect sales tax
Starting today, the retail giant Amazon.com will begin collecting sales tax on its sales in South Dakota.
This change was brought on by South Dakota’s newly enacted economic nexus legislation Senate Bill 106 requiring certain out-of-state businesses without a physical presence in the state to collect and remit tax on South Dakota transactions. This is a significant move by the state and seen as a direct challenge to Quill Corp v North Dakota, the 1992 US Supreme Court case. Quill Corp v North Dakota specifically states that businesses must have a substantial physical presence in a state for the state to impose a tax obligation, which Amazon.com does not in South Dakota.
Per the Argus Leader (a South Dakota newspaper), only about half of the large-scale vendors that do business in the state, 101 of 200, have complied so far, and federal law is on the side of those opting not to collect sales tax. Amazon’s early adoption compliance with the new state law is significant since by legal standards, they have a basis not to collect.
Deon Harmon, Partner at Davis & Davis LLC – Sales Tax Experts, said, “Amazon’s volunteering to collect under the SB106 is not supported under Quill Corp v North Dakota. Compliance will not set a new precedence and cause the overturning of the 1992 Supreme Court case. This case was settled when the Internet was in its infancy and did not consider E-commerce. “
Amazon is not the only large retailer facing this conundrum, but they are by far the largest. It’s too early to tell if Amazon’s compliance will have an impact on other large retailers such as Overstock.com, Wayfair and Newegg.
About Davis & Davis LLC – Sales Tax Experts: Headquartered in Dallas, Texas, Davis & Davis LLC specializes in sales/use tax audit consulting and audit defense. Our team of consultants is comprised of former Big 4 sales tax consultants and state sales tax auditors. Each of our consultants has 15 to 20 years of experience, providing our clients with access to a highly specialized team of sales/use tax professionals.