For over half a century, states were unjustly deprived access to a significant portion of their tax bases due to Supreme Court precedent that was dated since its very inception. South Dakota v. Wayfair, Inc. righted this wrong by granting states the power to lay taxes on out-of-state businesses that actively solicit sales from in-state customers. For decades the judicially-created physical presence rule prevented states from collecting sales taxes on these transactions, moving tens of billions of tax dollars out of reach. The rule lead to exploitation by businesses at states’ expense.
Aside from its detrimental effect, this rule has always been bad law. The constitutional principles and jurisprudence applied to adopt this rule were taken from outdated and rejected Supreme Court opinions that had no place at the physical presence rule’s inception, and certainly have no place today. The Court’s focus on this rule’s effect represents a return to constitutional form through its rejection of hyper-formal distinctions and embrace of practical considerations.
South Dakota v. Wayfair: Erasing a Dull Bright-Line,
Loy. U. Chi. L. J.
Available at: https://lawecommons.luc.edu/luclj/vol51/iss2/10