The following excerpt is from Maria Koklanaris’ article, “Uncertainty Clouds Wayfair’s Impact On Other State Tax Cases,” published by Law 360 on May 26, 2023. Read the full article on Law 360’s website here.
States and businesses have frequently cited South Dakota v. Wayfair in high-profile state tax cases in the five years since the U.S. Supreme Court’s decision. The ruling upheld South Dakota's sales tax law, which requires businesses to collect and remit taxes regardless of physical presence. In some litigation, courts have recognized the case as an appropriate precedent, but other courts have been less accepting, particularly in non-sales and use tax matters.
That does not surprise Jordan M. Goodman, Partner in HMB’s State and Local Tax Group. "Eager litigants may forget the Wayfair opinion established that a physical presence standard was no longer necessary for the sales and use tax but did not speak to much else," said Jordan. He added that this is consistent with the court's general inclination to limit decisions to the facts before it and not to search for hypotheticals. Moreover, Jordan noted, the court in Wayfair was evaluating an existing law, not a theory.
"The question was, 'Is this constitutionally permissible?' And the court said yes," Jordan said. "I would distinguish between what the courts have said and what people argue. I think what people are doing is trying to stretch the parameters of that very limited decision."