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State of South Dakota Reaches Settlement In Remote Seller Law Litigation

PIERRE, S.D. – Governor Dennis Daugaard and Attorney General Marty Jackley announced today that the State of South Dakota has entered into a settlement agreement and stipulation of dismissal in State of South Dakota v. Wayfair, Overstock and Newegg.


The litigation, which was the result of South Dakota’s remote seller law, had been remanded to the South Dakota State Circuit Court after South Dakota received a favorable decision from the Supreme Court of the United States. This final settlement agreement brings a conclusion to all remaining issues not addressed by the United States Supreme Court.


The settlement removes the injunction that prevented South Dakota from requiring the defendants to comply with the remote seller law. Under the terms of the settlement, Wayfair, Overstock and Newegg comply with the law beginning Jan. 1, 2019.


“I look forward to the state’s full enforcement of its remote seller law. The work done during the September 2018 special legislative session allowed us to set a collection date of Nov. 1, 2018 for all remote sellers except for the parties to this lawsuit, who will begin collecting on Jan. 1 2019,” said Governor Daugaard.


“Today’s settlement agreement is the final step in bringing sales tax fairness to our main street businesses across South Dakota by creating a level playing field with out-of-state retailers,” said Attorney General Jackley.


The State of South Dakota also reached a settlement in American Catalog Mailers Association and Netchoice vs. Andy Gerlach, in his capacity as the Secretary of the Department of Revenue, a related lawsuit regarding the remote seller law. This litigation had been on hold until the South Dakota v. Wayfair case had been decided. The parties have agreed to dismiss this case.


In 2016, the South Dakota State Legislature passed Senate Bill 106, which required out-of-state retailers to collect and remit sales tax similar to in-state retailers.  The law applies to out-of-state retailers if they have more than $100,000 in sales or complete more than 200 transactions per year within South Dakota. Given the controlling precedent of Quill, on October 2, 2017, the Attorney General’s Office filed a petition for certiorari asking the U.S. Supreme Court to review the South Dakota Supreme Court decision in State of South Dakota v. Wayfair, Overstock and Newegg. In Quill, the U.S. Supreme Court had required that a retailer have a “physical presence” within a state before a seller can be obligated to collect and remit that state’s sales taxes on purchases delivered into the state. On June 21, 2018, the United States Supreme Court overruled the physical presence requirement.


In September 2018, Governor Dennis Daugaard convened a special session of the Legislature to consider bills addressing the implementation of the sales tax collection. Governor Daugaard signed into law a measure which removed the imposition of an injunction against collection of sales tax on remote sales, except in regard to the Wayfair litigants. This bill, which goes in effect on November 1, 2018, will allow the State of South Dakota to enforce sales tax collections from those who meet the $100,000 in sales or 200 transaction thresholds.  A second bill created a new sales tax license for online marketplaces.


The Wayfair settlement agreement and dismissals from both cases await final approval by the State Circuit Court.


For more information on South Dakota’s remote seller law, visit http://sd.gov/remoteseller.