What was the Quill Decision?

October 02, 2018


The Quill decision was the 1992 US Supreme Court decision out of North Dakota which held that some type of physical presence was required in order to create nexus with a state for sales tax purposes.  It differentiated between the nexus requirements under the Commerce Clause and the Due Process Clause of the US Constitution.  This physical presence requirement was often misinterpreted, and states began attacking chipping away at it almost immediately.


Tim Schuster: So Gary, what was the Quill Decision?

Gary Bingel: The Quill Decision was a 1992 case out of North Dakota, which held that physical presence was required in order to be subject to a state sales tax. Now, it wasn't just limited to sales tax originally, although it did seem to evolve that way. States started to chip away at it immediately and as a result, the physical presence requirement was often very misunderstood. You could establish physical presence through things like agents or affiliates or even intangibles.

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As a result of the Wayfair decision, states will be emboldened to enforce economic nexus not just in sales tax, but income tax and net worth taxes as well, and companies should prepare for additional audit activity and investment in their IT systems.

How Many States Does Wayfair Apply To? When Does it Kick In?

Currently approximately 30 states will adhere to Wayfair in some way. While some states enacted specific nexus statutes, others felt their current provisions were broad enough to include wayfair’s economic nexus thresholds.

What Should My Business be Doing in Light of Wayfair?

Businesses need to determine how Wayfair may apply to them by evaluating their nexus footprint, as well as where they should be filing based on any threshold (dollar threshold or transaction threshold) that is met.

What Types of Businesses does Wayfair Apply To?

While many view Wayfair as applying only to internet retailers, Wayfair extends beyond e-commerce to service companies and software companies with nexus in more than one jurisdiction, increasing record keeping and exemption certificates.

What Does Wayfair Mean to Businesses in General?

According to Wayfair, since a nexus footprint can now be established through economic contacts alone, businesses need to evaluate their nexus footprint in each state and evaluate their tax filing requirements and audit requirements.

What is the Wayfair Decision?

The wayfair decision is the recent US Supreme Court decision out of South Dakota which overturned the physical presence requirement of Quill, and held that physical presence is not required to create nexus for sales tax purposes.