On April 17, the US Supreme Court heard arguments in South Dakota v. Wayfair, a case involving the states’ authority to tax online purchases. This is the first sales tax jurisdiction case heard by the US Supreme Court in 25 years and may have a significant impact on online sales across the country.


About the Case

  • Title:   South Dakota v. Wayfair, Inc., et al.
  • Docket No. 17-494
  • Decision Below: State v. Wayfair Inc., 901 N.W.2d 754 (2018) (PDF)

The Wayfair case re-examines the Supreme Court’s 1992 holding of Quill v. North Dakota, in which the court ruled that states could not require mail order retailers that lack a physical presence in the state to collect sales tax from their customers. The Quill decision protects Internet retailers that lack physical presence from being forced to collect tax on online sales.


Post-Wayfair Webcast

On April 18, 2018, the Tax Executives Institute (TEI) and Thomson Reuters hosted a two-hour webcast entitled “South Dakota v. Wayfair – Insights on the Oral Argument.”  Eversheds Sutherland Partner Jeff Friedman was among the panelists who addressed the issues raised by Wayfair and provided commentary on the oral arguments.

View Details and listen to the webcast replay now.


Wayfair Case Background

Prior Cases

In 1967, the US Supreme Court held that the Commerce Clause prohibits a state from requiring catalog retailers to collect sales taxes on sales unless the retailer has a physical presence there. Nat’l Bellas Hess v. Dep’t of Rev. of Ill., 386 U.S. 753 (1967).

In 1992, the US Supreme Court declined to overrule the physical presence requirement of Bellas Hess in a state sales tax case involving a  mail-order catalog seller. Quill Corp. v. North Dakota, 504 U.S. 298 (1992). In Wayfair, South Dakota has brought a similar case against three online sellers – Wayfair Inc., Overstock.com, Inc., and Newegg Inc.

More: See the Supreme Court docket for complete case filings.


Photos from Oral Arguments

Eversheds Sutherland partners in the Supreme Court Bar line ahead of the Wayfair oral arguments.
Eversheds Sutherland partners in the Supreme Court Bar line ahead of the Wayfair oral arguments.
Eversheds Sutherland partner Todd Lard and others in the Supreme Court Bar line.
Eversheds Sutherland partner Todd Lard and others in the Supreme Court Bar line.
The Supreme Court Bar line inside ahead of the Wayfair oral arguments.
The Supreme Court Bar line inside ahead of the Wayfair oral arguments.
Eversheds Sutherland partners Jeffrey A. Friedman and Michele Borens in the Supreme Court Bar line ahead of the Wayfair oral arguments.
Eversheds Sutherland partners Michele Borens and Jeffrey A. Friedman in the Supreme Court Bar line ahead of the Wayfair oral arguments.
The public line in front of the Supreme Court around 6 a.m.
The public line in front of the Supreme Court around 6 a.m.
The public line in front of the Supreme Court around 6 a.m.
The public line in front of the Supreme Court around 4:30 a.m.
The public line in front of the Supreme Court around 7 a.m.
The public line in front of the Supreme Court around 7 a.m.
This reporter did two newscasts from the Supreme Court before the South Dakota v. Wayfair oral argument.
This reporter did two newscasts from the Supreme Court before the South Dakota v. Wayfair oral argument.
The public line in front of the Supreme Court around 7 a.m.
The public line in front of the Supreme Court around 7 a.m.
Spectrum News NY1 reporter Samantha-Jo Roth reporting live from the line in front of the Supreme Court.
Spectrum News NY1 reporter Samantha-Jo Roth reporting live from the line in front of the Supreme Court.
The public line in front of the Supreme Court waiting to get into the Wayfair oral arguments.
The public line in front of the Supreme Court waiting to get into the Wayfair oral arguments.
The Supreme Court Bar line walking inside for the South Dakota v. Wayfair oral arguments.
The Supreme Court Bar line walking inside for the South Dakota v. Wayfair oral arguments.
The Supreme Court Bar line walking inside for the South Dakota v. Wayfair oral arguments.
The Supreme Court Bar line walking inside for the South Dakota v. Wayfair oral arguments.
The Supreme Court Bar line waiting for the South Dakota v. Wayfair oral arguments.
The Supreme Court Bar line waiting for the South Dakota v. Wayfair oral arguments.
Long lines around 10:30 a.m. in front of the Supreme Court.
Long lines around 10:30 a.m. in front of the Supreme Court.

Media Coverage:


About Eversheds Sutherland SALT:

As state and local jurisdictions in the US evolve their tax systems and engage in increasingly sophisticated enforcement and litigation strategies, businesses need sound state and local tax (SALT) advice more than ever before. Eversheds Sutherland’s SALT practice is committed to delivering innovative solutions that meet the needs of your business. Read more.

On April 17, 2018, the US Supreme Court is poised to hear oral arguments in the case of South Dakota v. Wayfair. The Wayfair case will re-examine the 1992 holding of Quill v. North Dakota, in which the US Supreme Court ruled that states could not compel mail order retailers that lack a physical presence in the state to collect sales tax from their customers. The Quill decision now protects Internet retailers that lack physical presence in states from collecting tax on online sales.

Please join the Tax Executives Institute (TEI) and Thomson Reuters for a two-hour complimentary webcast, on April 18, 2018, entitled “South Dakota v. Wayfair – Insights on the Oral Argument.”  Eversheds Sutherland (US) Partner Jeff Friedman will be among the panelists who will address the issues raised by Wayfair, provide commentary on the oral arguments and predict the outcome of the case.

View details and register now!

Many states require or permit affiliated businesses to report their income to the state in a combined group return. In their article for Bloomberg Tax, Eversheds Sutherland attorneys Maria Todorova, Justin Brown and Samantha Trencs discuss some of the complexities of combined reporting related to the inclusion of foreign entities in a combined group, including trends among states intended to expand the combined group to include additional foreign affiliates.

View the full article.

The state and local tax (SALT) impact of the recently enacted federal tax reform is still being assessed. Because of states’ broad conformity to the federal income tax laws, many of these changes will have an impact on taxpayers’ SALT liabilities.

In their article for Bloomberg Tax, Eversheds Sutherland attorneys Jeff Friedman, Todd Betor and Michael Spencer focus on the SALT consequences stemming from the following international provisions of the Tax Cuts and Jobs Act:

• a one-time “transition tax” on untaxed accumulated earnings and profits of controlled foreign corporations and certain other foreign corporations.

• 100% dividends received deduction for certain foreign source dividends.

• current taxation of certain US taxpayer’s global intangible low-taxed income.

• deduction allowed to certain US taxpayers for foreign derived intangible income.

• a base erosion and anti-abuse tax imposed on certain US taxpayers.

View the full article.

WASHINGTONEversheds Sutherland is pleased to announce that Associate DeAndre R. Morrow has been selected as one of The National Black Lawyers Top 40 Under 40. He joins an elite group of attorneys from Washington DC and across the country as members of the organization composed of outstanding black attorneys under the age of 40 who exemplify superior leadership and achievements in the legal industry and within their communities.

View the full press release

SACRAMENTO—Eversheds Sutherland (US) LLP is pleased to announce that state and local tax (SALT) attorneys Carley A. Roberts and Eric J. Coffill were selected as top Northern California attorneys by Super Lawyers. The designations are the result of an annual survey conducted by the publication, which focuses on professional achievement and peer recognition.

View the full press release

By Charles Capouet and Andrew Appleby

The Florida Department of Revenue determined that a reinsurer did not have nexus with Florida for corporate income tax purposes.  The Department first asserted that an insurer or reinsurer would have nexus with Florida if it was authorized to transact business in the state.  The Department also stated that nexus would exist if an approved reinsurer reinsured policies from an insurer domiciled in Florida.  In this case, the reinsurer did not have nexus with Florida because: (1) it was not an approved reinsurer and was not registered with the Florida Office of Insurance Regulation; and (2) the ceding companies were not domiciled in Florida.  The Department also addressed an insurance company’s apportionment factor, which depends on whether the ceding insurance companies are resident, or have a regional home office, in Florida.  Fla. Technical Assistance Advisement No. 17C1-001, Fla. Dep’t of Rev., Jan. 13, 2017.

We are pleased to announce that Sutherland has been named Tax Practice Group of the Year for the third consecutive year by Law360, a nationwide legal news service. The award is given annually to firms that had the biggest wins and worked on the most important deals over a one-year period.

Sutherland’s Tax Practice Group has received numerous awards for client service, most recently being named Tax Advisory Firm of the Year for the fourth consecutive year by Captive Review, the leading trade publication focused on risk management and captive insurance. The group’s attorneys are also regularly featured in a range of “best of” and “who’s who” lists, including The Best Lawyers in America, Chambers USA: Guide to Leading Business Lawyers, The Legal 500: United States and Super Lawyers.

A group of Law360 editors reviewed 619 submissions, of which 80 firms covering 34 practice areas were recognized. Sutherland was one of just five firms selected by Law360 for recognition in the Tax category.

View the full press release.

By Zack Atkins and Tim Gustafson

The Washington State Department of Revenue ruled that an out-of-state baker whose only in-state “presence” was its use of in-state independent commissioned sales representatives to solicit orders had substantial nexus with Washington and therefore was subject to the state’s business and occupation (B&O) tax. The taxpayer contracted with the in-state representatives to solicit orders in a territory that included Washington. All orders were sent to the taxpayer outside of Washington for approval. Relying on the state statute and administrative rules in effect at the time and case law standing for the proposition that substantial nexus for B&O tax purposes can be established through the use of independent agents contracted to perform in-state activities, the Department concluded that the independent commissioned sales representatives provided significant services that enabled the taxpayer to establish and maintain a market in Washington. The Department also found that, even though shipment was made by common carrier and title passed to the customers outside of Washington, the taxpayer’s sales to Washington customers occurred in Washington because the baked goods were received there. Commercial law and UCC “delivery” terms, the Department said, are not dispositive for B&O tax purposes. Det. No. 16-0149, 35 WTD 613 (2016).

By Zack Atkins and Marc Simonetti

A federal district court denied a taxpayer’s motion to dismiss a lawsuit brought under the New York False Claims Act (FCA) for lack of subject matter jurisdiction and remanded the action to state court. The relator, an Indiana University professor, alleges that Citigroup violated the FCA by deducting net operating losses on its New York franchise tax returns while knowing that it was not entitled to such deductions under the New York Tax Law. The federal government acquired a substantial interest in Citigroup under its Troubled Asset Relief Program. While IRC § 382 generally limits net operating loss carryforwards that can be deducted after an “ownership change,” the IRS issued multiple notices indicating that it would not treat such acquisitions as ownership changes. The relator claims that Citigroup underpaid its tax liability because the IRS’s notices are invalid and therefore cannot be relied upon or, alternatively, that the notices were never incorporated into the New York Tax Law. The federal district court observed that while Citigroup’s arguments for dismissal—all of which were grounded in state law—were “potentially meritorious,” the lawsuit “does not truly present a federal question.” The lawsuit calls into question the validity of the IRS’s notices but the court held that the relator lacks standing to challenge the validity of the notices. Because it could conceivably resolve the relator’s FCA claim without deciding whether the IRS’s interpretation of IRC § 382 was arbitrary and capricious, the court concluded that the relator’s complaint did not necessarily raise a federal issue and therefore remanded the case to state court. State ex rel. Rasmusen v. Citigroup, Inc.