State and Local Tax Partner Comments on Wayfair Decision

The June 21 ruling on South Dakota v. Wayfair, Inc., et al.— which tossed out Quill Corp. v. North Dakota, the Supreme Court’s 1992 physical presence threshold for when states could tax remote sales—has many states looking to expand their authority over online sales taxation, according to Bloomberg Tax.

Legislation isn’t likely unless California Department of Tax and Fee Administration officials believe they need more authority, for example to adopt the South Dakota thresholds, said Carley Roberts, a State and Local Tax partner with Pillsbury in Sacramento.

California’s lack of membership in the Streamlined Sales and Use Tax Agreement may complicate California’s path, Roberts said. In its ruling, the court said South Dakota’s membership in the SSUTA, with its simplified tax structures and access to sales tax administration software for sellers, strengthened the fairness of its law.

“If a state like California wants to adopt something without belonging to the SSUTA, are they imposing an undue burden?” Roberts said.

The CDTFA could continue under its current regime, which isn’t as broad as the South Dakota statute, Roberts said. Or, the department could issue regulations setting thresholds and applying those rules prospectively.

“At a minimum, the CDTFA should give retailers some guidance,” she said. “They should say if they are not changing, or if they are making distinctions they should state them up front.”