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BREAKING NEWS: US Supreme Court Overrules Quill

Moments ago, the US Supreme Court issued its highly-anticipated decision in South Dakota v. Wayfair, Inc., et al., No. 17-494. The 5-4 opinion was authored by Justice Kennedy and concluded that the physical presence requirement established by the Court in its 1967 National Bellas Hess decision and reaffirmed in 1992 in Quill is “unsound and incorrect” and that “stare decisis can no longer support the Court’s prohibition of a valid exercise of the States’ sovereign power.” This opinion will have an immediate and significant impact on sales and use tax collection obligations across the country and is something every company and state must immediately and carefully evaluate within the context of existing state and local collection authority. Summary of Opinions The majority opinion was authored by Justice Kennedy and was joined by Justices Thomas, Ginsburg, Alito and Gorsuch. In reaching the conclusion that the physical presence rule is an incorrect...

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South Dakota Petitions US Supreme Court for Opportunity to Overturn Quill

On October 2, 2017, the State of South Dakota (State) filed its petition for a writ of certiorari with the United States Supreme Court (Court). A copy of the cert petition is available here and the case, South Dakota v. Wayfair, Inc. et al., is expected to be docketed on October 3, 2017. The State is asking the Court to overturn its physical presence standard used to determine whether an entity has substantial nexus under the dormant Commerce Clause. This comes only a few weeks after the South Dakota Supreme Court ruled against the State in favor of the online retailer defendants, citing the Court’s physical presence standard upheld in Quill on stare decisis grounds. Practice Note This development comes as no surprise to the state and local tax community, and begins what is likely to be one of the most closely watched cert petitions in years. Going forward, the online retailers have three options: (1) acquiesce that the Court should grant cert; (2) waive...

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BREAKING NEWS: Sales Tax Battle Breaks Out in South Dakota; Quill’s Last Stand?

This post is a follow-up to a previous post from April 21, 2016. Introduction On March 22, 2016, South Dakota Governor Dennis Daugaard signed into law Senate Bill 106, which requires any person making more than $100,000 of South Dakota sales or more than 200 separate South Dakota sales transactions to collect and remit sales tax. The requirement applies to sales made on or after May 1, 2016. The law clearly challenges the physical presence requirement under Quill, and that’s precisely what the legislature intended. The law seeks to force a challenge to the physical presence rule as soon as possible and speed that challenge through the courts. As we discussed in our earlier post, the big question in response to the legislation was whether taxpayers should register to collect tax.  For those who did not register, an injunction is now in place barring enforcement of the provisions until the litigation is resolved. Last night and this morning two different...

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Illinois Department of Revenue Issues Post-Wayfair Guidance Implementing October 1 Economic Nexus Law

In June 2018, just before the US Supreme Court ruling in Wayfair, Illinois enacted an economic nexus standard modeled after South Dakota’s law (see our prior coverage). The new Illinois standard takes effect on October 1, 2018. On September 11, the Illinois Department of Revenue (Department) issued an emergency rule (Regulation 150.803), together with other guidance found on its website, intended to assist remote retailers with compliance with the new law. The Regulation was effective immediately. Retailers should note the following key features of the Regulation. *          No retroactivity: The Regulation explicitly states that the economic nexus standard will not have retroactive effect. For time periods prior to October 1, the Regulation provides that “remote retailers must have a physical presence in Illinois before they can be required to collect Use Tax.” It goes on to clarify that the types of activities constituting a physical presence will be those...

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Finishing SALT: June Wrap-Up & Looking at July

Top June Hits You May Have Missed BREAKING NEWS: US Supreme Court Overrules Quill Illinois Budget Bill Makes Few Tax Changes except the Adoption of an Economic Nexus Standard Circuit Court of Cook County Upholds City of Chicago’s Imposition of Amusement Tax on Internet-Based Streaming Services Looking Forward to July July 16, 2018: Alysse McLoughlin is presenting “Federal Tax Changes & Implications to States” at the Southeastern Association of Tax Administrators Conference in Nashville, TN. July 18, 2018: Alysse McLoughlin is presenting on state and local tax considerations for the Tax Executives Webinar “Practical Tax Reform Implementation – What Corporate Tax Professionals Need to Know Now”. July 23, 2018: Alysse McLoughlin is speaking on a state panel about the “State Reactions to Tax Reform” for the Tax Reform portion of the New York University Summer Institute in Taxation in New York, NY.  July 28, 2018:  Stephen Kranz is speaking at the National...

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News of Wayfair Decision Breaks during Tax in the City® New York

The first New York meeting of McDermott’s Tax in the City® initiative in 2018 coincided with the June 21 issuance of the US Supreme Court’s (SCOTUS) highly anticipated Wayfair decision. Just before our meeting, SCOTUS issued its opinion determining that remote sellers that do not have a physical presence in a state can be required to collect sales tax on sales to customers in that state. McDermott SALT partner Diann Smith relayed the decision and its impact on online retailers to a captivated audience. Click here to read McDermott’s insight about the decision. The event also featured a CLE/CPE presentation on the ethical considerations relative to tax reform by Kristen Hazel, Jane May and Maureen O’Brien, followed by a roundtable discussion on recent tax reform insights led by Britt Haxton, Sandra McGill, Kathleen Quinn and Diann Smith. Below are a few takeaways from last week’s Tax in the City® New York: Supreme Court Update: Wayfair – Jurisdiction to Tax –...

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Illinois Budget Bill Makes Few Tax Changes except the Adoption of an Economic Nexus Standard

On June 4, Illinois Governor Bruce Rauner signed into law the state’s fiscal year (FY) 2019 budget implementation bill, Public Act 100-0587 (the Act). The Act makes a significant change to the Illinois sales/use tax nexus standard by adopting an “economic nexus” standard for a sales/use tax collection obligation. The economic nexus language was added to the budget bill one day before it was passed by the General Assembly. The standard is contrary to the physical presence nexus standard established by the United States Supreme Court in Quill Corp. v. North Dakota, 504 US 298 (1992), the validity of which is currently pending before the Court in South Dakota v. Wayfair, Docket 17-494. The Court is expected to rule on Wayfair by the end of this month (see here for our prior coverage of the Wayfair case). The Act amends Section 2 of the Use Tax Act to impose a tax collection and remission obligation on an out-of-state retailer making sales of tangible personal...

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Circuit Court of Cook County Upholds City of Chicago’s Imposition of Amusement Tax on Internet-Based Streaming Services

On May 24, 2018, the Circuit Court of Cook County granted the City of Chicago’s Motion for Summary Judgment in the case captioned Labell v. City of Chicago, No. 15 CH 13399 (Ruling), affirming the City’s imposition of its amusement tax on internet-based streaming services. City’s Amusement Tax and Amusement Tax Ruling #5 The City imposes a 9 percent tax on “admission fees or other charges paid for the privilege to enter, to witness, to view or to participate in such amusement. …” Mun. Code of Chi., tit. 4, ch. 4-156 (Code), § 4-156-020(A); see also id. § 4-156-010 (defining “amusement” in part as a performance or show for entertainment purposes, an entertainment or recreational activity offered for public participation and paid television programming). On June 9, 2015, the City Department of Finance (Department) issued Amusement Tax Ruling #5, taking the position that the amusement tax is imposed “not only [on] charges paid for the privilege to witness, view...

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Finishing SALT: May State Focus & April Wrap-Up

A Grain of SALT: May State Focus – Georgia Georgia was one of the first states to enact comprehensive legislation in response to the federal tax reform bill, known as the Tax Cuts and Jobs Act (TCJA).  As a preliminary matter, the Georgia bill provides conformity to the IRC as of February 9, 2018, with certain exceptions.  Before the bill’s enactment, the Georgia Code had conformed to the IRC as of January 1, 2017, and, in turn, did not conform to the TCJA. The new legislation contains numerous exceptions to Georgia’s conformity with the current IRC. For example, the tax bill explicitly provides that Georgia will decouple from the new interest expense limitations in IRC § 163(j) and also from the new provisions in IRC § 118 that provide inclusion in gross income of certain capital contributions. With respect to the international provisions of the TCJA, Georgia’s dividend-received deduction for dividends received from foreign corporations seems to  apply to...

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Finishing SALT: April State Focus & March Wrap-Up

A Grain of SALT: April State Focus – South Dakota On April 17, the United States Supreme Court will hear oral argument in South Dakota’s case challenging the Court’s physical presence requirement for sales tax nexus. South Dakota v. Wayfair, Docket 17-494. 50 years ago, in National Bellas Hess v. Department of Revenue, 386 U.S. 753 (1967), the Supreme Court held that the Due Process and Commerce Clauses of the United States Constitution barred states from requiring remote retailers with no physical presence in a State to collect and remit sales tax. In 1992, the Court affirmed its prior ruling under the Commerce Clause. Quill v. North Dakota, 504 U.S. 298 (1992). Quill has been at the center of state tax nexus controversy since the time of its issuance, as states have worked to restrict, and taxpayers have worked to expand the scope of the ruling. States and taxpayers have been continually tied up in disputes regarding the meaning of “physical presence”...

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