Just over a month ago, the U.S. Supreme Court surprised many in the state tax community when it announced that it granted certiorari in South Dakota v. Wayfair, Inc., Docket No. 17-494; appealed from 901 N.W.2d 754 (S.D. 2017). Granting cert. in Wayfair means that the U.S. Supreme Court may be willing to overturn precedent that, for over fifty years, has provided and continues to provide a bright-line physical presence nexus standard applicable to statesâ ability to impose sales and use taxes. See National Bellas Hess Inc. v. Illinois, 386 U.S. 753 (1967), affirmed in part by Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The U.S. retail economy and its transition from brick-and-mortar storefronts to e-commerce retailers have thus been shaped by the expectation that physical presence within a taxing state is required before that state may impose sales or use taxes on a retailer.Â
On June 12, 2017, Congressman Jim Sensenbrenner (R-WI) reintroduced into Congress H.R. 2887, also known as the âNo Regulation Without Representation Act of 2017â (the âLegislationâ), which codifies the physical presence nexus requirement established by the U.S. Supreme Court in Quill v. North Dakota, 504 U.S. 298 (1992) (âQuillâ). The Legislation is interesting for several reasons: (1) it proposes to employ a result that is the exact opposite of the recent trend to overturn Quill; (2) it defines âtaxâ broadly to include net income and business activity taxes; and (3) it expands the law to require a physical presence for states to regulate a personâs activity in interstate commerce outside of the tax context.