South Dakota Supreme Court Follows Quill and Physical Presence Standard for Sales and Use Taxes

On September 13, 2017, the South Dakota Supreme Court struck down a South Dakota law that imposed an economic presence standard for sales and use tax nexus. See South Dakota v. Wayfair, Inc. The Court stated that the state was bound to follow quill, as established by the U.S. Supreme Court.

By way of background, in 2016, South Dakota was the first state to enact an economic nexus standard for sales and use tax purposes. Under South Dakota’s law, effective May 1, 2016, all entities with annual sales in South Dakota exceeding $100,000 or with more than 200 separate transactions in the state were required to collect and remit South Dakota sales and use taxes. 

The South Dakota Supreme Court ruled in favor of the taxpayer and stated that the Court was bound to the precedent set forth by the U.S. Supreme Court’s decision in quill. South Dakota will likely appeal the decision to the U.S. Supreme Court. Stay tuned for further developments. 

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