In South Dakota v. Wayfair, 1 issued June 21, 2018, the US Supreme Court overturned both its prior rulings in Quill 2 and National Bellas Hess, 3 finding that the physical presence nexus standard articulated in the two earlier opinions “is [an] unsound and incorrect” interpretation of the Court’s dormant Commerce Clause jurisprudence. (See Tax Alert 2018-1269). In the wake of the Court’s decision, a number of states have issued guidance as to the impact on their sales and use tax laws, including application of existing economic nexus standards.

Below is a summary of official state announcements and guidance, as of July 19, 2018.


The Alabama Department of Revenue announced that its economic nexus rule 810-6-2-.90.03 (which was approved in 2015 and applied starting in 2016) will apply prospectively for sales made on or after October 1, 2018.4 Thus, sellers with more than $250,000 in sales should consider registering and collecting Alabama’s sales and use tax by October 1.


In revised Announcement 2018-10 issued July 10, 2018, the Hawaii Department of Revenue (HI DOR) discussed the recent expansion of the state’s “engaging in business” provision for General Excise Tax (GET) purposes under Act 41 (Hawaii Laws 2018) to include an economic or transaction threshold. Effective July 1, 2018, persons will have nexus with Hawaii if they have more than $100,000 in gross income from sales to Hawaii customers or engage in 200 or more separate transactions involving the sale of tangible personal property delivered in the state, services used or consumed in the state, or intangible property used in the state. The HI DOR made clear that it will not retroactively administer Act 41. The HI DOR further advised that taxpayers meeting the $100,000 or 200-transaction threshold in 2017 or 2018 are not required to remit GET for the period January 1, 2018 through June 30, 2018.


The Indiana Department of Revenue (IN DOR) indicated that it was reviewing the Court’s ruling in Wayfair and that it would update its webpage to provide additional guidance. Although Indiana has statutorily enacted economic nexus provisions, the IN DOR said that it “is currently prohibited from enforcing the obligation to collect sales tax from remote sellers until a declaratory judgment action currently pending in Indiana is resolved. Moreover, remote sellers are not obligated to register or collect Indiana sales tax until the declaratory judgment is resolved.” The IN DOR has indicated on its website that, pending the resolution of the declaratory judgment, it will begin enforcing the state’s economic nexus provisions October 1, 2018. Remote sellers, however, may voluntarily register and remit sales tax to Indiana.


The Iowa Department of Revenue (IA DOR) indicated on its website that the state’s new sales and use tax nexus provisions (i.e., economic nexus, marketplace provider, cookie nexus) enacted by the Legislature in May 2018 apply prospectively beginning January 1, 2019, and that the ruling in Wayfair does not change the effective date of this legislation. The IA DOR clarified that it “will not seek to impose sales tax liability for periods prior to January 1, 2019 for retailers and marketplaces whose only obligation to collect Iowa sales tax comes from these new laws.” For more on Iowa’s new provisions, see Tax Alert 2018-0987.


The Kentucky Department of Revenue explained that the Court’s ruling in Wayfair allows the state’s new economic nexus provisions, which are similar to those at issue in the Wayfair case and impose a $100,000 or 200-transaction threshold, to take effect. The department advised that “[r]emote sellers that meet the threshold transaction or receipt thresholds should prepare to begin the registration process for collection of Kentucky sales and use tax on a prospective basis.”


In its initial response to the ruling in Wayfair, the Louisiana Department of Revenue said that while the state “is in a good position having adopted a provision very similar to the South Dakota law, we are still some time away from a final decision and seeing the full impact.” On July 11, 2018, the Louisiana Sales and Use Tax Commission for Remote Sellers held a public meeting to discuss the Wayfair ruling and how states have responded, among other issues. The Commission indicated that the state is working on a collection and remittance system for remote retailers, with the goal of having it up and running by January 1, 2019 (Note: this date is subject to the Commission’s approval and may change; the Commission is scheduled to vote on the date during its August 9, 2018 meeting).


The Maryland Comptroller of the Treasury explained that its position in interpreting the state’s sales and use tax nexus provisions under Md. Tax-Gen. §11-701(b)(2) is “that the U.S. Constitution does not require an out-of-state vendor to have a substantial physical presence in the taxing state for the state to require that vendor to collect sales and use tax. All that is required is for the out-of-state vendor to demonstrate more than a “slightest presence” in the taxing state.” In a July 2018 update, the Comptroller further stated it will impose sales tax collection requirements as broadly as permitted under the U.S. Constitution and out-of-state vendors that sell or deliver tangible personal property or taxable services for use in Maryland should review Wayfair to see how it affects them. The Comptroller said it would provide additional guidance to address further developments in Wayfair.


In response to Wayfair, the Massachusetts Department of Revenue stated that Regulation 830 CMR 64H.1.7 — Vendors Making Internet Sales — which took effect in October 2017 — continues to apply and is not affected by the ruling in Wayfair.


On June 21, 2018, the Minnesota Department of Revenue (MN DOR) issued a statement following the Court’s ruling in Wayfair, that the state “can require certain retailers with no physical presence, such as online sellers, to collect and remit the applicable sales or use tax on sales delivered to locations within [Minnesota].” The MN DOR stated that it will issue additional guidance on July 25, 2018, to “provide remote sellers and marketplace providers with the date Minnesota will require them to collect and remit applicable sales or use tax on sales delivered into the state.” See the MN DOR’s FAQ page for streamlined sales tax information and the FAQ page discussing its marketplace provider provisions for additional information.

New Jersey

The New Jersey legislature responded to Wayfair by approving AB 4261, which, if enacted, will impose a sales tax collection requirement on remote sellers. The bill would adopt economic nexus provisions with a $100,000 sales or 200-separate-transaction threshold, trailing nexus, and marketplace provider provisions. If enacted, the provisions of AB 4261 will become effective on October 1, 2018.

North Dakota

The North Dakota Tax Commissioner announced that remote retailers not meeting the small-seller exception must register and start collecting North Dakota sales or use tax by the later of October 1, 2018 or 60 days after the remote retailer meets the small-seller exception threshold. The threshold is $100,000 or more, or 200 separate transactions, in taxable sales shipped to locations in North Dakota.

Rhode Island

The Rhode Island Department of Revenue, Division of Taxation (RI DOT), issued a reminder of the registration options available to remote sellers. Remote retailers can directly register with the RI DOT or through the Streamlined Sales Tax Registration System (or a certified service provider). In 2017, Rhode Island enacted various non-collecting retailer provisions (see Tax Alert 2017-1296 for more on these provisions).

South Carolina

The South Carolina Revenue Commissioner told state lawmakers in a July 9, 2018 letter, that South Carolina does not need to amend its statutes to require remote retailers to collect and remit tax. He said that such a law was already on the books, which the state can now enforce following the overturning of Quill. The Commissioner said the revenue department is working on draft guidance that will be issued in the near future, and the collection and remittance requirements will be imposed on a prospective basis.

South Dakota

In guidance posted to its website, the South Dakota Department of Revenue said that it “is currently unable to enforce 2016’s remote seller taxation law due to the State Circuit Court’s injunction that is still in place … ,” but that “[i]t is expected the injunction will soon be lifted, requiring sellers meeting certain thresholds of sales or transactions into South Dakota to get a sales tax license.”


The Texas Comptroller of Public Accounts said that it is reviewing the Court’s decision in Wayfair and will update its rules as necessary. The Comptroller, however, made clear that rule updates “would not include any retroactive application of the new law to remote sellers that have no physical presence in Texas.” The Comptroller has sent a memo to the legislature, outlining potential changes to the state’s sales and use tax laws that would allow the state to impose Texas sales and use tax collection obligations on remote retailers without imposing an undue burden. Further, in the July 2018 issue of Tax Policy News, the Comptroller said “[e]arly 2019 is the target effective date for rule amendments; however, that could change pending issues that arise during the rulemaking process. It is highly likely that the target effective dates for collection requirements by remote sellers will be later in 2019.”


On July 18, 2018, and in response to the ruling in Wayfair, the Utah legislature approved SB 2001 to establish economic nexus provisions for sales and use tax purposes. The bill, once approved by the governor, would adopt economic nexus provisions with a $100,000 sales or 200 separate transaction threshold. These provisions would apply starting January 1, 2019.


The Vermont Department of Taxes advised that, as a result of the Court’s decision in Wayfair, economic nexus provisions enacted in 2016 (under Act 134) are now effective. Consequently, remote retailers must register with the state and should begin collecting and remitting sales tax to the state starting July 1, 2018.


Following Wayfair, the Wisconsin Department of Revenue announced that remote retailers must collect and remit sales tax starting October 1, 2018. The department said that the remote retailer provisions will be administered through an administrative rule establishing a threshold of $100,000 or 200 separate transactions.


The Wyoming Department of Revenue said that it is currently reviewing the Wayfair opinion and that it will establish a date certain for a licensing deadline and “will only enforce collection requirements on a prospective basis.” Wyoming enacted economic nexus provisions similar to those in South Dakota, and also is a member of the Governing Board of the Streamlined Sales and Use Tax Agreement.

Other sales and use tax states

Other states, including California, Idaho, Mississippi, New York and Washington are currently reviewing the Court’s ruling and have indicated they will issue guidance if warranted.

In Nebraska, some members of the legislature are trying to garner enough support for a special session to consider legislation that would require remote sellers collect and remit tax. The governor, however, has indicated that his administration is reviewing the decision and that a special session may not be required in order for the state to begin taxing remote retailers. Arizona revised AZ DOR Publication 623 (revised, June 21, 2018)).

Non-sales and use tax states (Alaska, Delaware, Montana, New Hampshire and Oregon)

Of the states that do not impose a sales and use tax (Alaska, Delaware, Montana, New Hampshire and Oregon), the Montana Department of Revenue (MT DOR) advised that the decision in Wayfair does not impact in-state residents’ purchases of goods or services on-line — they continue to be free of sales tax liability since the state does not impose a sales or use tax. The MT DOR, however, also advised that a Montana online retailers selling their taxable goods or services to customers outside the state may be obligated to collect and remit sales or use tax to the states in which they meet the state’s nexus (or doing business) threshold.

Conversely, New Hampshire’s Governor has announced plans to call a special legislative session to consider legislation to “protect” its residents and business from the Wayfair ruling.

Federal government

On June 28, 2018, the “Stop Taxing Our Potential Act of 2018” (STOP) (S. 3180) was introduced in the US Senate. This bill would prohibit a state from imposing sales, use or similar tax collection and reporting obligations or from assessing such taxes on a person or treating a person as doing business in the state for purposes of collecting such tax, unless that person has a physical presence in the state. Physical presence would be created by: (1) maintaining a commercial or legal domicile in the state; (2) owning, holding a leasehold interest in, or maintaining real property in the state; (3) leasing or owning tangible personal property in the state; (4) having one or more employees, agents or independent contractors in the state providing on-site design, installation or repair services on behalf of the remote retailer; (5) having one or more employees, exclusive agents or exclusive independent contractors present in the state who help the remote retailer establish and maintain a marketplace in the state; or (6) maintaining an office in the state at which it regularly employs three or more employees. The bill sets de minimis physical presence, defines key terms, and includes dispute resolution provisions. If enacted, these provisions would apply starting in 2019.

Further, House Judiciary Committee Chairman Goodlatte will hold a hearing to discuss the Court’s ruling in Wayfair and its implications for consumers and small businesses. The hearing is scheduled for July 24, 2018, at 10:00 a.m. and can be lived-streamed from here.


As states review their sales and use tax nexus rules in light of the Court’s ruling in Wayfair, they will likely continue issuing and updating guidance on this issue over next few months. We will issue updates as states issue new guidance.

Affected taxpayers should monitor the states in which they are selling taxable goods and services.

If you have any questions or if you would like more information, contact Fred Schutz at (856) 722-5300 ext. 201 or Dave Gill at ext. 210.