The Dormant Commerce Clause of the Constitution prohibits states from imposing excessive burdens on interstate commerce without congressional approval. Consistent with this doctrine, in 1967, the Supreme Court held that a state cannot require an out-of-state seller with no physical presence in that state to collect and revoke taxes for goods sold or shipped into the state. The Court affirmed this holding in 1992 and 2015. However, in 2015, Justice Kennedy wrote a concurring opinion asking whether the Court should continue following precedent in light of additional dormant Commerce Clause cases and the recent significant technological and social changes that affect interstate commerce.
In 2016, the South Dakota Legislature passed a law requiring sellers of “tangible personal property” who do not have a physical presence in the state to remit sales tax according to the same procedures as sellers who do have a physical presence. The act limited the obligation to sellers with gross revenue from sales in South Dakota over $100,000, or 200 or more separate transactions, within one year.
The legislation's stated purpose was to help the state maintain revenue in the face of growing internet sales and a decrease in sales tax collections.
Following the passage of the law, South Dakota sued many retailers who failed to comply. The state courts of South Dakota ruled for the retailers, considering themselves “duty bound to follow” the previous Supreme Court rulings. On June 21, the Supreme Court ruled in favor of South Dakota in a 5-4 decision authored by Justice Kennedy.
Featuring:
Dr. John S. Baker, Jr., Visiting Professor, Georgetown Law

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