But we know better. We know Wayfair’s origin dates to (at least) 1967—and that use tax has been due on internet purchases all along. So, to the state tax community, Wayfair means so much more. For over fifty years, states and businesses have struggled to understand when a “substantial nexus” exists between a state and a taxpayer,4 leading to the unavoidable debate over two words: physical presence. The debate is best understood by asking two questions: what creates physical presence (an employee attending a tradeshow?) and who must be physically present (the taxpayer itself, or only a person with whom the taxpayer has a business relationship?). The Supreme Court’s final word on nexus for sales and use taxes came in 1992, leaving state judiciaries as the primary arbiters when states and businesses have disagreed Wayfair represents the culmination of this fifty-year debate by presenting the Court with a binary choice: affirm or reject the physical presence rule.for the past twenty-five years. Naturally, state judiciaries have resolved identical questions with contradictory answers, creating ambiguity, uncertainty, and unpredictability. These issues were (and continue to be) exacerbated by the evolution of technology and its impact on the national economy.
Download the PDF to read more!