Washington, DC…JUSTICE KENNEDY delivered the opinion of the Court. When a consumer purchases goods or services, the consumer’s State often imposes a sales tax. This case requires the Court to determine when an out-of-state seller can be required to collect and remit that tax. All concede that taxing the sales in question here is lawful. The question is whether the out-of-state seller can be held responsible for its payment, and this turns on a proper interpretation of the Commerce Clause, U. S. Const., Art. I, §8, cl. 3.

Click on Image Above For Full Decision

In two earlier cases the Court held that an out-of-state seller’s liability to collect and remit the tax to the consumer’s State depended on whether the seller had a physical presence in that State, but that mere shipment of goods into the consumer’s State, following an order from a catalog, did not satisfy the physical presence requirement. National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753 (1967); Quill Corp. v. North Dakota, 504

U. S. 298 (1992). The Court granted certiorari here toreconsider the scope and validity of the physical presence rule mandated by those cases.

2 SOUTH DAKOTA v. WAYFAIR, INC.
Opinion of the Court

I Like most States, South Dakota has a sales tax. It taxes the retail sales of goods and services in the State. S. D. Codified Laws §§10–45–2, 10–45–4 (2010 and Supp. 2017).Sellers are generally required to collect and remit this taxto the Department of Revenue. §10–45–27.3. If for some reason the sales tax is not remitted by the seller, then instate consumers are separately responsible for paying a use tax at the same rate. See §§10–46–2, 10–46–4, 10–46–
6. Many States employ this kind of complementary sales and use tax regime.

Under this Court’s decisions in Bellas Hess and Quill, South Dakota may not require a business to collect its sales tax if the business lacks a physical presence in the State. Without that physical presence, South Dakota instead must rely on its residents to pay the use tax owedon their purchases from out-of-state sellers. “[T]he impracticability of [this] collection from the multitude of individual purchasers is obvious.” National Geographic Soc. v. California Bd. of Equalization, 430 U. S. 551, 555 (1977). And consumer compliance rates are notoriouslylow. See, e.g., GAO, Report to Congressional Requesters: Sales Taxes, States Could Gain Revenue from ExpandedAuthority, but Businesses Are Likely to Experience Compliance Costs 5 (GAO–18–114, Nov. 2017) (Sales TaxesReport); California State Bd. of Equalization, RevenueEstimate: Electronic Commerce and Mail Order Sales 7 (2013) (Table 3) (estimating a 4 percent collection rate). It is estimated that Bellas Hess and Quill cause the States to lose between $8 and $33 billion every year. See Sales Taxes Report, at 11–12 (estimating $8 to $13 billion); Brieffor Petitioner 34–35 (citing estimates of $23 and $33.9 billion). In South Dakota alone, the Department of Revenue estimates revenue loss at $48 to $58 million annually.App. 24. Particularly because South Dakota has no state income tax, it must put substantial reliance on its sales and use taxes for the revenue necessary to fund essentialservices. Those taxes account for over 60 percent of itsgeneral fund.

In 2016, South Dakota confronted the serious inequity Quill imposes by enacting S. 106—“An Act to provide forthe collection of sales taxes from certain remote sellers, to establish certain Legislative findings, and to declare anemergency.” S. 106, 2016 Leg. Assembly, 91st Sess. (S. D. 2016) (S. B. 106). The legislature found that the inability to collect sales tax from remote sellers was “seriously eroding the sales tax base” and “causing revenue losses and imminent harm . . . through the loss of critical funding for state and local services.” §8(1). The legislaturealso declared an emergency: “Whereas, this Act is necessary for the support of the state government and its existing public institutions, an emergency is hereby declared toexist.” §9. Fearing further erosion of the tax base, the legislature expressed its intention to “apply SouthDakota’s sales and use tax obligations to the limit offederal and state constitutional doctrines” and noted the urgent need for this Court to reconsider its precedents.§§8(11), (8).

To that end, the Act requires out-of-state sellers tocollect and remit sales tax “as if the seller had a physicalpresence in the state.” §1. The Act applies only to sellersthat, on an annual basis, deliver more than $100,000 of goods or services into the State or engage in 200 or more separate transactions for the delivery of goods or servicesinto the State. Ibid. The Act also forecloses the retroactive application of this requirement and provides means for the Act to be appropriately stayed until the constitutionality of the law has been clearly established. §§5, 3,8(10).

Respondents Wayfair, Inc., Overstock.com, Inc., and Newegg, Inc., are merchants with no employees or real estate in South Dakota. Wayfair, Inc., is a leading online retailer of home goods and furniture and had net revenues of over $4.7 billion last year. Overstock.com, Inc., is one of the top online retailers in the United States, selling a widevariety of products from home goods and furniture to clothing and jewelry; and it had net revenues of over $1.7billion last year. Newegg, Inc., is a major online retailer of consumer electronics in the United States. Each of these three companies ships its goods directly to purchasers throughout the United States, including South Dakota.Each easily meets the minimum sales or transactions requirement of the Act, but none collects South Dakotasales tax. 2017 S. D. 56, ¶¶ 10–11, 901 N. W. 2d 754, 759–
760.

Pursuant to the Act’s provisions for expeditious judicialreview, South Dakota filed a declaratory judgment actionagainst respondents in state court, seeking a declarationthat the requirements of the Act are valid and applicableto respondents and an injunction requiring respondents toregister for licenses to collect and remit sales tax. App. 11,
30. Respondents moved for summary judgment, arguing that the Act is unconstitutional. 901 N. W. 2d, at 759–
760. South Dakota conceded that the Act cannot survive under Bellas Hess and Quill but asserted the importance, indeed the necessity, of asking this Court to review thoseearlier decisions in light of current economic realities. 901
N. W. 2d, at 760; see also S. B. 106, §8. The trial court granted summary judgment to respondents. App. to Pet. for Cert. 17a.

The South Dakota Supreme Court affirmed. It stated: “However persuasive the State’s arguments on the meritsof revisiting the issue, Quill has not been overruled [and] remains the controlling precedent on the issue of Commerce Clause limitations on interstate collection of sales and use taxes.” 901 N. W. 2d, at 761. This Court granted certiorari. 583 U. S. ___ (2018).