A new analysis of the Supreme Court ruling in South Dakota vs Wayfair offers a ray of hope for small online sellers who are worried about the burden of collecting and remitting sales tax across the United States. But it also highlights the uncertainty left in its wake.
Tax attorneys with Jones Walker examined what the end of Quill‘s standard of physical nexus would mean for a single state – Louisiana – and what it described as it that state’s 63 autonomous parish taxing jurisdictions that levy, administer and collect local sales and use tax on behalf of numerous cities, towns, districts and other local jurisdictions(!).
While the “physical presence” rule is gone, the “substantial nexus” test remains – as we had pointed out, the Supreme Court didn’t define it, but provided some hints and guidelines. In addition, there are three other factors besides the substantial nexus rule, which we described in this article.
In their post on the Jones Walker tax-blog “Cooking with Salt,” the attorneys pointed to the third factor in that four-prong test that now applies to remote sellers: that a state “does not discriminate against interstate commerce.”
They wrote, “The Supreme Court’s decision, however, similarly leaves no doubt that Louisiana’s complex state and local sales tax systems are presently lacking those features that would prevent undue burdens upon, or discrimination against, interstate commerce.”
But the attorneys also said the Supreme Court ruling “has undoubtedly provided various states with an additional opportunity to require remote sellers to collect and remit sales tax.”
The Cooking with Salt blog post about Louisiana serves to highlight the extreme burdens some states and locales place on in-state and out-of-state sellers. The authors, like everyone else, will be monitoring developments as things shake out after the Supreme Court overruled its 1992 Quill ruling.