WASHINGTON (June 21, 2018) – The R Street Institute today expressed deep concern that the U.S. Supreme Court’s majority opinion in South Dakota v. Wayfair sets dangerous precedent that could further empower states to tax and regulate out-of-state businesses.
Authored by Associate Justice Anthony Kennedy, the 5-4 decision partly overturns the court’s quarter-century-old Quill decision, which invoked the dormant Commerce Clause to circumscribe states’ authority to collect taxes to those businesses with a physical presence within the state’s borders. In the Wayfair case, the court upheld a South Dakota law requiring internet retailers, even those with no physical presence, to collect and remit sales taxes from South Dakota residents.
“While we are heartened by Justice Kennedy’s finding that state taxing authority can only be applied to people, property and transactions to which the state is closely related, we are nonetheless concerned that the Wayfair decision could create great uncertainty and throw open the floodgates for states to test the limits of their new powers with a profusion of taxes on out-of-state people and businesses,” said R Street Director of Finance, Insurance and Trade R.J. Lehmann. “We concur with the sentiment expressed in Chief Justice John Roberts’ dissent that this is an issue best left to Congress.”