In the recent landmark South Dakota v. Wayfair, Inc. case, the U.S. Supreme Court struck down the physical presence nexus standard established in the 1992 decision Quill Corp. v. North Dakota. This means states can require certain retailers, with no physical presence, to collect and remit the applicable sales or use tax on sales delivered in locations within their state.

The decision removes a major barrier to online sales taxation, but the U.S. Supreme Court stopped short of formally declaring South Dakota’s law, which many states have mimicked, is valid in the absence of Quill. The U.S. Supreme Court made clear Quill is no longer a required part of any commerce clause test to determine when states may impose taxes. 

Approximately 20 states have economic nexus laws like South Dakota’s disputed law, which require sellers to collect and remit sales and use taxes if they meet certain sales thresholds within the state. The U.S. Supreme Court only upheld the South Dakota’s law (with its threshold of 200 transactions and $100,000 in sales).

This case gives little guidance on how aggressive state laws may get, and still be considered constitutional. It is expected all other states administering a sales tax will copy South Dakota’s model, and it may be advisable to begin planning for the changes to come.


The new U.S. Supreme Court ruling is expected to have a significant impact on state imposition of sales tax. If you have questions about how to prepare for a new nexus standard or tax planning in light of the reform, Smith Schafer can help. For additional information, contact a Smith Schafer professional. We look forward to speaking with you soon.

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