South Dakota eFairness - SCOTUS Overrules Quill and Bellas Hess

South Dakota's S.B. 106 (2016) requires sellers without a physical presence in the state to collect and remit sales tax if they transact more than $100,000 of business in the state or more than 200 sales.  Implementation of S.B. 106 has led to two separate lawsuits.

State of South Dakota v. Wayfair, Overstock, Newegg originated as a state complaint that these online retailers had failed to appropriately register, collect, and remit state sales tax.[1] The defendants removed the case to the federal district court where the parties fully briefed both the State's motion for remand and the defendants' motion for summary judgment.  The state's remand papers were especially notable because the state conceded in the briefing and later at oral argument that it could not prevail before the federal district court because of the Supreme Court's Quill decision.  Indeed, in response to questioning at oral argument, the state noted that it did not have a bias for either federal or state court but was concerned about clear U.S. Supreme Court precedent that held that the federal court did not have jurisdiction to hear the case, that such defect could not be waived, and that if the case proceeded in federal court, it could later be derailed and sent back to the state courts.

Federal District Judge Roberto Lange granted the State's motion to remand the case back to South Dakota circuit court on January 17, 2017, and, therefore, did not need to consider the defendants' motion for summary judgment.  South Dakota Circuit Court Judge Mark Barnett quickly ruled in favor of the defendants' motion for summary judgment that had been fully briefed before the federal court in light of the fact that the state had already conceded that S.B. 106 was unconstitutional under Quill and the only court that could grant the relief sought was the U.S. Supreme Court.

The state appealed and the case is now fully briefed and on the docket of the Supreme Court of South Dakota. Oral argument was held on August 29, 2017.

On September 14, 2017, the South Dakota Supreme Court issued its opinion affirming the lower court’s decision and holding the South Dakota statute unconstitutional (as expected) because – as the state itself – only the U.S. Supreme Court can reconsider its own precedents.  The decision accomplished the state’s goals because it was issued quickly (two weeks), affirmed the lower court’s decision, and did so in a written opinion that explained the challenges facing the state.

On October 2, 2017, the State of South Dakota filed a petition for certiorari with the U.S. Supreme Court. The question presented is whether the Court should overrule Quill's sales-tax-only, physical-presence requirement.  Briefing on the petition for certiorari was completed on December 20, 2017.

On January 12, 2018, the U.S. Supreme Court granted the State's petition. Oral arguments will be heard on April 17, 2018. 

ACMA, NetChoice v. South Dakota Department of Revenue. On April 28, 2016, the day after the State brought suit against the individual online retailers, the American Catalog Mailers Association (ACMA) and NetChoice filed suit in state circuit court against the state. These two trade associations, which respectively represent catalog retailers and large online-only retailers such as Overstock, which is a defendant in the state's case, challenged the validity of S.B. 106. The state filed an answer and the case remains on the docket of the South Dakota Circuit Court without further activity.

[1] Online retailer Systemax was also sued in the initial complaint but decided a day later to abide by the law and collect legally due sales taxes rather than rest on constitutional defenses.


State of South Dakota v. Wayfair, Overstock, Newegg

Circuit Court of South Dakota

Federal District Court of South Dakota

Circuit Court of South Dakota

South Dakota Supreme Court

U.S. Supreme Court - Oral Argument: April 17 2018

ACMA and Netchoice v. South Dakota Department of Revenue