'AS IF' the Seller Had A Physical Presence

The Governor of South Dakota signed SB 106 on March 22, 2016. The law requires any seller selling tangible personal property, products transferred electronically, or services for delivery into South Dakota, who does not have a physical presence in the state to remit sales tax 'as if the seller had a physical presence' in the state. For this new requirement to apply, the seller must meet one of two criteria in the previous calendar year or the current calendar year:

  1. The seller's gross revenue from sales into South Dakota exceeds $100,000; or
  2. The seller has 200 or more separate transactions in South Dakota;

The law applies to sales made on or after May 1, 2016.


If you disagree with South Dakota's new law, you can voluntary comply and request a refund. However, the law explicitly provides that no claim will be granted on the basis that the taxpayer lacked a physical presence in the state.


In the new law, South Dakota states that the inability to effectively collect sales or use tax from remote sellers is "seriously eroding the sales tax base," "causing revenue losses" and "imminent harm" through the "loss of critical funding for state and local services."

South Dakota asserts that their revenue loss is more problematic because the state has no income tax.


South Dakota also states in its new law that the U.S. Supreme Court has an urgent need to reconsider Quill and the physical presence requirement. The law provides that the legislature recognizes that the enactment of this law places remote sellers in a complicated position because existing constitutional doctrine calls this law into question. In other words, South Dakota is enacting an unconstitutional law to create a case to litigate with the hopes of overturning Quill.

The law states that the Legislature intends to clarify that the obligations created by this law would be stayed by the courts until the constitutionality of the law is clearly established by a binding judgment.


As the state tax group at McDermott Will & Emery reported in their INSIDE SALT blog, two declaratory judgment suits have been filed which now bars the enforcement of the provisions until the litigation is resolved. The plaintiffs are trade associations representing catalog marketers and e-commerce retailers.

The bottom line is that remote retailers can breathe easy for a moment and do not have to comply with this new law while we wait for the courts to decide. For more details, read the INSIDE SALT post.