Are Online Retailers Immune from Collecting Sales Tax?

Munger, Tolles & Olson litigators Mark R. Yohalem and C. Hunter Hayes published an article in the May 7, 2018 issue of the Daily Journal analyzing a case before the U.S. Supreme Court that could reverse a 25-year-old ruling allowing online-only retailers to avoid collecting sales taxes in states in which the retailers have no physical presence.

Mr. Yohalem and Mr. Hayes describe the issues at play in South Dakota v. Wayfair, a case brought before the Supreme Court by South Dakota, supported by amici including federal, state, and local governments, the retail industry, and others, challenging the notion that absentee retailers are constitutionally immune from collecting state sales tax on their customers’ purchases. Wayfair challenges the High Court’s 1992 decision in Quill Corp. v. North Dakota, which online-only retailers have used to argue that they are exempted from collecting sales tax.

The authors also describe the profound impact of Quill on state and local governments, which miss out on an estimated $8.5 billion in tax revenue, and argue that it is time for the law to change. Mr. Yohalem and Mr. Hayes write, “In simple terms, when may the Supreme Court say enough is enough and correct its own mistake?”

Mr. Yohalem focuses his practice on complex litigation and appeals. Mr. Hayes focuses his practice on complex civil litigation and business dispute resolution. Both attorneys, along with Donald B. Verrilli, Jr., represent the Retail Litigation Center, a trade organization that includes the country’s leading retailers, as an amicus curiae in South Dakota v. Wayfair.