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  • Writer's pictureRichard C. Farrin, JD – Member

SD Challenge to Quill Inches Closer to Review by US Supreme Court; WY Throws Hat Into the Ring

South Dakota Challenge to Quill Inches Closer to Review by US Supreme Court; Wyoming Throws Hat Into the Ring


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As discussed in an earlier Buzz, South Dakota Latest State to Challenge Quill, South Dakota was the first state to mount a legislative challenge to the holding in Quill Corp. v. North Dakota, 504 U.S. 298 (1992) that physical presence is required to meet the nexus prong of the Commerce Clause. The South Dakota legislation provides that an out-of-state seller has nexus in the state for sales and use tax collection purposes if it has either gross sales of more than $100,000 or more than 200 separate sales transactions delivered to South Dakota in a calendar year.

The South Dakota Sixth Judicial Circuit Court issued a summary judgment on March 6, 2017, holding that the law was unconstitutional under the decision in Quill. This was the expected result, because the ultimate goal of the state is to get the issue to the US Supreme Court, with the hope that the Court will reconsider and overrule Quill. To expedite the potential review, the law provides for a direct appeal to the South Dakota Supreme Court from the circuit court decision. From that court’s decision, which will presumably affirm the circuit court decision, South Dakota can seek review by the US Supreme Court. Of course, review by the US Supreme Court is discretionary and that Court has been reluctant to accept jurisdiction to review state nexus cases.

Wyoming is the newest state to throw their hat into the ring of states challenging the physical presence requirements set forth in Quill. Earlier this month, Governor Mead signed into law House Bill 19 which becomes effective July 1, 2017. The law will require remote sellers that do not have physical presence in the state to register to collect and remit sales and use taxes provided certain thresholds are met.

The thresholds Wyoming is using to determine if a remote seller will be required to register for sales and use tax collection are seemingly identical to South Dakota's economic nexus thresholds:

  • More than $100,000 in gross revenue generated from sales of tangible personal property, admissions, or services into the state, or;

  • Two hundred (200) or more separate transactions where the seller sold tangible personal property, admissions or services into the state.

Under the new law, if either of these thresholds is met in a calendar year, or the immediately preceding calendar year, a remote seller would be required to register to collect and remit the state's sales and use taxes.

Wyoming has included particular language, however, in House Bill 19 that makes it markedly different than South Dakota's remote-seller laws enacted in May 2016. Wyoming's new law states that only sellers of tangible personal property (TPP), admissions, or services which are subject to taxation (sales or use) must register with the state provided they meet the thresholds defined above. Whether the state intentionally meant to exclude sellers who only sell items not subject to taxation (e.g., wholesalers of TPP) from their remote seller laws is open to debate. Regardless, it may be wise for businesses to consider this portion of the statute when determining if they are in fact, by state law, required to register with the state of Wyoming as a remote seller.

Additionally, though South Dakota, Wyoming, and other states have launched an all-out assault on Quill, keep in mind that until the holding in that case is overruled by the US Supreme Court, requiring a business to register for sales tax collection in a state in which that business has no physical presence will remain unconstitutional.

If you would like to discuss Quill, nexus, or any other state and local tax matters, please contact Richard Farrin or any other ZHF Professional.

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