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Another Superseded Quill: The End of the Physical-Presence Rule for Requiring Out-of-State Businesses to Collect Use Taxes  


Author:  Jonathan L. Entin.


Source: Volume 36, Number 01, Fall 2018 , pp.15-30(16)




Journal of Taxation of Investments

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Abstract: 

May states require out-of-state businesses to collect sales taxes from state residents? This question has more than theoretical importance. Almost every state imposes a sales tax. Purchasers of goods in those states who are not charged sales tax generally are required to pay an equivalent use tax. But compliance with use taxes is notoriously low, so states have reason to demand that sellers collect sales taxes from customers who most likely would not pay required use taxes on their purchases. The Supreme Court’s recent decision in South Dakota v. Wayfair, Inc. rejected the physical-presence requirement for states to compel out-of-state businesses to collect sales taxes on purchases by state residents. In doing so, the Court overruled National Bellas Hess, Inc. v. Department of Revenue and Quill Corp. v. North Dakota, both of which had held that physical presence was required under the Dormant Commerce Clause. This article analyzes Wayfair and discusses issues that this high-profile decision left open.

Keywords: state taxation, sales and use taxes, Dormant Commerce Clause, physical presence, Quill Corp. v. North Dakota, South Dakota v. Wayfair, Inc.

Affiliations:  1: Case Western Reserve University.

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