Internet Sales Tax (IST) Legislation and Litigation Hit The States

June 1, 2016

Recently, South Dakota (SD) enacted sales tax legislation that violates the Supreme Court–established standard of nexus by requiring out-of-state retailers selling more than $100,000 annually into the state, or engaging in 200+ transactions with South Dakotans, to collect and remit SD sales taxes.  SD sued four online retailers who do not operate in the state (Newegg, Overstock, Systemax, and Wayfair) for non-collection, prompting the American Catalogue Mailers Association and NetChoice to file suit to block the law prior to it taking effect on May 1. 

SD is just one of a handful of states attempting to enact state laws violating current federal law in the hope that the Supreme Court accepts a sales tax case and overturns the 1992 Quill v. North Dakota decision which required that a business have a physical presence in a state for that state to require it to collect sales taxes. This year alone, 30+ bills have been introduced at the state level attempting to collect sales taxes from remote retailers.  While the large majority of those have failed, proponents will likely continue to push legislation at the state level.  A patchwork of different state Internet sales tax laws is clearly problematic for small Internet-enabled businesses, so eBay has been engaged in multiple states to eliminate or mitigate impact to sellers.

Although there have been no significant changes recently at the federal level on the subject of an Internet sales tax, we expect more activity on this subject in Congress later this year.  As always, the eBay Government Relations team will continue to monitor and engage in U.S. Internet sales tax legislation and keep you informed via the eBay Main Street website.