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SCOTUS in SD v. Wayfair: Taxes Make American Dream Possible

Among the interesting passages in the majority opinion in South Dakota v. Wayfair, last week’s monumental U.S. Supreme Court ruling overturning the 1992 Quill decision and allowing states to demand sales tax from remote online vendors, I find this paragraph rebuffing both tax dodgers and Libertarians who cry “Taxation Is Theft!”

In essence, respondents ask this Court to retain a rule that allows their customers to escape payment of sales taxes—taxes that are essential to create and secure the active market they supply with goods and services. An example may suffice. Wayfair offers to sell a vast selection of furnishings. Its advertising seeks to create an image of beautiful, peaceful homes, but it also says that “‘[o]ne of the best things about buying through Wayfair is that we do not have to charge sales tax.’” Brief for Petitioner 55. What Wayfair ignores in its subtle offer to assist in tax evasion is that creating a dream home assumes solvent state and local governments. State taxes fund the police and fire departments that protect the homes containing their customers’ furniture and ensure goods are safely delivered; maintain the public roads and municipal services that allow communication with and access to customers; support the “sound local banking institutions to support credit transactions [and] courts to ensure collection of the purchase price,” Quill, 504 U. S., at 328 (opinion of White, J.); and help create the “climate of consumer confidence” that facilitates sales, see ibid. According to respondents, it is unfair to stymie their tax-free solicitation of customers. But there is nothing unfair about requiring companies that avail themselves of the States’ benefits to bear an equal share of the burden of tax collection. Fairness dictates quite the opposite result. Helping respondents’ customers evade a lawful tax unfairly shifts to those consumers who buy from their competitors with a physical presence that satisfies Quill—even one warehouse or one salesperson—an increased share of the taxes. It is essential to public confidence in the tax system that the Court avoid creating inequitable exceptions. This is also essential to the confidence placed in this Court’s Commerce Clause decisions. Yet the physical presence rule undermines that necessary confidence by giving some online retailers an arbitrary advantage over their competitors who collect state sales taxes [U.S. Supreme Court, South Dakota v. Wayfair, Inc. et al., majority opinion, 2018.06.21, pp. 16–17].

Taxation is not theft; it is the price of civil society. The real thieves are those who dodge their fair share of that price while still availing themselves of the great merits of civil society.


  1. Porter Lansing 2018-06-24 18:45

    That political party that demands low taxation in a state that takes federal money every month are the thieves. Raise your taxes and pay your own way. Democrat states are sending more money to Washington than we get back.

  2. John Kennedy Claussen, Sr. 2018-06-24 18:59

    But why is it the duty of out-of-state businesses to collect for the sake of those, or that, that they benefit from, if the plaintiff state is failing itself in adequately and honestly collecting a tax, (which is design to support the betterment of society as a whole as well) which is on the books and known as an user tax?

    Perhaps the Wayfair decision fix is more practical to support society as a whole, than an enhanced use tax. But doesn’t the Wayfair decision represent taxation without representation and tolerate a use tax system that is merely taxes via a honor system, and in so doing, inequitable in its own right as well?……

    But then, I guess no one is stopping these out-of-state businesses from buying a RV and then voting in our State, right? ;-)

    And how does all of this still make the Wayfair decision more just for the payer of a use tax in this State, whose payment is quietly used for the betterment of the whole, even if others or the many are not following suit in payment?

  3. Greg 2018-06-24 19:08

    I sure do not have a problem paying state sales tax on online sales but if you have a rural address and they charge municipal sales tax where does that tax go.

  4. Porter Lansing 2018-06-24 19:11

    Taxation w/out representation? The payers of the tax live in South Dakota. Wayfair is just doing what businesses are required to do for the opportunity to be in the South Dakota marketplace. Collect sales tax and remit it.

  5. Nick Nemec 2018-06-24 19:30

    Chief Justice Roberts certainly hit the nail on the head with this reasoning. Expect some of the far right cranks to begin calling for his impeachment.

  6. Porter Lansing 2018-06-24 19:31

    You could always demand the majority party in Pierre eliminate ALL sales taxes and raise property taxes. Problem solved. No online tax at all.

  7. grudznick 2018-06-24 20:14

    A good blogging, Mr. H. Tax dodgers must be punished to the maximum. Mr. Howie is a tax dodger.

  8. John Kennedy Claussen, Sr. 2018-06-24 20:45

    Porter, I am glad you raised that question, because perhaps the proper word is not “tax” but a “taking” for some. Because if you subscribed to the State’s claim that Wayfair is a win for Main Street, then it is a loss for out-of-state businesses, which is a taking without just compensation and or representation.

    Taxes are found in many forms. I have always been of the position, for instance, that we already have a state income, because the inherent low wages in this state (which state policy promotes through its leadership tactics and or the rewarding of economic development money to corporations that do not pay enough to its workers) tax the working people, while not filling the coffers of the state, but rather the coffers of the wealth class, who do not necessary feed that profit back into the society as a whole.

  9. Porter Lansing 2018-06-24 20:56

    I see your points, JKC. I do agree.

  10. Curt 2018-06-24 22:08

    Thanks for the link to the old ‘taxation is theft’ post from Madville. It had been too long since my old eyes saw that familiar masthead. And why is it that I agree w/ ‘Grudznick’ more often these days? I’m kinda worried and maybe he should be too.

  11. mike from iowa 2018-06-25 06:59

    Did online businesses with a presence in-state get special tax considerations to set up shop there?

    Isn’t Drumpf, with his businesses off shore guilty of evading/avoiding taxes?

  12. Francis Schaffer 2018-06-25 10:23

    Someone straighten this out for me, please. This does not just apply to internet sales? It would also, apply to catalog sales? Sales by fax? Sales by phone? Auction bids(sales) by phone? What if all companies taxed the sale using the location of the company making the sale? Is this a point of sale system? It seems to me that the winner in all this will be Amazon.

  13. mike from iowa 2018-06-25 11:05

    Wired said the $100 grand or 200 limit in South Dakota is not applicable everywhere else, so they could theoretically tax every sale.

  14. Cory Allen Heidelberger Post author | 2018-06-25 11:44

    Greg, I’m not sure, but I assume that if Amazon assesses the full 6.5% on a rural resident in the 57401 ZIP, South Dakota will remit the 2.0% portion to the City of Aberdeen.

  15. Porter Lansing 2018-06-25 11:45

    Yes, Francis. It includes catalogs, ordering by fax or phone and auction bids. But, it’s not point of sale. It’s point of purchase.
    Only five states do not have a sales tax:
    New Hampshire.

  16. Cory Allen Heidelberger Post author | 2018-06-25 11:46

    Francis, the statute in question, SDCL 10-64-2, does not appear to distinguish between online sales and other forms of remote sales. It appears to impose the tax collection requirement on any seller “of tangible personal property, any product transferred electronically, or services delivered into South Dakota” who meets either the $100K or 200-sale criterion.

  17. Cory Allen Heidelberger Post author | 2018-06-25 11:48

    Correction, Nick: Justice Kennedy wrote the majority opinion; Chief Justice Roberts wrote the dissent. Right-wingers Gorsuch, Thomas, and Alito joined Ginsburg in the majority opinion; maybe Trumpists will try impeaching those three!

  18. Porter Lansing 2018-06-25 11:51

    i.e. – Small retailers, who sell on eBay will not face the requirement to collect sales tax.

  19. Cory Allen Heidelberger Post author | 2018-06-25 11:52

    I’m thinking about JKC’s question about duty… who has the greater obligation to collect taxes on behalf of South Dakota: the Minnesota or New York vendor whose only intersection with South Dakota is its occasional online (or catalog!) commerce, or the South Dakota customers who live here and enjoy the fruits of those expended tax dollars year-round?

    Similarly, should an online vendor pay sales tax to the state that provides its customers or to the state where the vendor maintains its physical presence and builds, warehouses, and sets its goods off on their journeys to customers?

  20. mike from iowa 2018-06-25 11:56

    Gonna take litigation, lawsuits and many years to straighten this mess out.

  21. Porter Lansing 2018-06-25 12:14

    IMO … a vendor should collect sales tax from customers and remit it back to that customer’s state (no stipulation said that the vendor can’t charge a paperwork surcharge for collection costs) and a vendor should pay property tax, income tax etc. to the state where it maintains a presence.
    (In Colorado, no matter where you buy a car the sales tax is paid when you buy the first set of license plates, at the rate that county and city charge. It stops rural car dealers from stealing customers from other parts of the state.) We have enough RV’s that we don’t cater to registration bargain seekers. :0)

  22. Francis Schaffer 2018-06-25 12:32

    Thank you for the information. So now vendors in those 5 states have a duty to collect a tax for which they currently have no duty nor mechanism to collect?

  23. Porter Lansing 2018-06-25 13:19

    Excellent extrapolation, Francis. It looks like that would be the case. Online and catalog sellers in those states now have a duty to collect the sales tax due in states they sell to. (not wholesale sales, of course)

  24. Cory Allen Heidelberger Post author | 2018-06-25 15:17

    Francis, you mentioned auctions. In 2011, we passed a separate sales tax chapter dealing with online auction websites, SDCL 10-63. Interestingly, in that case, instead of pressing a court challenge, we declared that online auction websites are “noncollecting retailers” and required them to notify customers on the company website, catalog, and invoices that customers have to pay South Dakota sales and use tax. That chapter exempts any seller doing or anticipating less than $100K of SD business.

  25. Cory Allen Heidelberger Post author | 2018-06-25 15:21

    I don’t know if we allow retailers to charge customers a tax-collection fee; it seems like there ought to be a law against that (although I can see the point). However, online vendors collecting tax for South Dakota can also avail themselves of SDCL 10-45-27.2, which allows retailers to claim up to $70 a month in refunds for doing all this hard tax collection work for the State of South Dakota. This retailer collection refund is the same provision that out-of-state pro-Dusty PACkers beat up Shantel Krebs this spring for sponsoring in 2006.

  26. John 2018-06-25 20:07

    Rural, smural. If your address includes a community it imputes you use the services provided by that community. Turn your head and cough (pay up). Rural receives plenty of tax breaks (fuel, inputs, vehicle registrations, etc.). Stop whining with your mouth full.

  27. Francis Schaffer 2018-06-25 20:21

    OK if someone from a state which does not have a sales tax purchases an online auction item from an auction in South Dakota, what then? I would say no sales tax as the law says non collecting retailer.

  28. Debbie 2018-06-25 20:29

    Mike from iowa,
    Jackley is a hero forTrump, Republicans, and the Tea Party.
    This will create a monopoly for big business.They deliberately held up two bills that would have addressed the definition of exactly what constituted Physical nexus- For those of you who seem to think you know that Physical nexus is what it implies , it’s not exactly, it implies more than brick and mortar.
    Jackley did not go after Physical nexus because it was already established in North Dakota V Quill, that Quill met the definition of Physical nexus.
    What Jackley went after was economic nexus- and the reason North Dakota lost the ruling.
    This far exceeded the two nasty bills in Congress- Even Noem’s bill could not have outdone the gift that Jackely gave to the Republicans, Amazon, Wayfair, etc . Small retailers cannot buy the $80,000 to $270,000 dollar software plus yearly updating maintenance fees needed to keep up with 12,000 tax districts that run tens of thousands of dollars each year.
    If you want to go to a concert out of state , don’t plan on buying a ticket online anymore- There is a lot of venues saying that they won’t pre-sell tickets anymore if you are out of state.

  29. Cory Allen Heidelberger Post author | 2018-06-25 22:02

    John, that’s probably the next logical step from Wayfair: if South Dakota can exert its tax collecting authority outside of its borders, then surely Aberdeen, Sioux Falls, and every other municipality in the state can exert their tax collecting powers beyond their city limits.

  30. Cory Allen Heidelberger Post author | 2018-06-25 22:05

    Francis, the rule appears to be that sales tax is tied to the buyer’s location, not the seller’s. Auction in South Dakota, remote buyer in Minnesota—no South Dakota sales tax, and only Minnesota sales tax if Minnesota starts demanding it and doesn’t have a comparable “noncollecting retailer” exception for online auction websites.

    Is this more complicated than a nice simple income tax yet?

  31. Cory Allen Heidelberger Post author | 2018-06-25 22:08

    Online tickets fouled up—interesting. Everybody buys at the door?

    I’m still wondering: why don’t retailers just charge their home state’s sales tax on every order? That would be much simpler than trying to figure out all the different rates and write checks to all the different state revenue departments, right? Or are the online retailers really just determined to avoid paying as much tax as possible, and thus are willing to resist collecting tax on every sale as long as possible?

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