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South Dakota Court Rules that State’s Economic Nexus Legislation is Unconstitutional


On March 6, 2017, the South Dakota Sixth Judicial Court ruled that the state’s economic nexus legislation is unconstitutional. The legislation – which became effective May 1, 2016 – requires remote sellers without a physical presence in the state to collect and remit South Dakota sales and use tax on sales in the state if the retailer makes in-state sales exceeding $100,000 or makes 200 or more separate sales transactions in the previous or current calendar year. In the ruling, the state acknowledged that under Quill Corp. v. North Dakota, the State of South Dakota is prohibited from imposing the sales tax collection and remittance obligations. The state agreed that the statute was unconstitutional and agreed with the summary judgement finding.  This was expected as the case progresses towards an appeal to the U.S. Supreme Court in an effort to overturn Quill. For our previous news item, see South Dakota Enacts Economic Nexus Legislation. (South Dakota v. Wayfair, Inc., S.D. Cir. Ct., No. 32 Civ. 16-000092, 3/6/17).


UPDATE: On August 29, 2017, the South Dakota Supreme Court heard oral arguments over South Dakota’s economic nexus legislation. We will monitor this situation and provide updates as more developments happen (South Dakota v. Wayfair, Inc., S.D., No. 28160, oral arguments 8/29/17).


UPDATE: On September 13, 2017, the South Dakota Supreme Court struck down the state’s economic nexus legislation, concurring with the South Dakota Sixth Judicial Court’s ruling that the legislation conflicts with Quill Corp. v. North Dakota and is unconstitutional. South Dakota Attorney General Marty Jackley has issued a statement confirming that the state will request the U.S. Supreme Court to review the case and reconsider the Quill decision. (South Dakota v. Wayfair, Inc., South Dakota Supreme Court, No. 28160, September 13, 2017)


UPDATE: On October 2, 2017, South Dakota filed a petition for certiorari with the U.S. Supreme Court to take up South Dakota v. Wayfair, Inc. in an effort to overturn Quill Corp. v. North Dakota. We will continue to monitor for updates. (South Dakota, Petitionerv. Wayfair, Inc.,, Inc.,and Newegg, Inc. Respondents. In The Supreme Court of the United States On Petition for a Writ of Certiorari to the Supreme Court of South Dakota)


UPDATE: On January 12, 2018, the U.S. Supreme Court agreed to take up South Dakota v. Wayfair, Inc. We will continue to monitor and provide updates on this very significant case. 

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