The Wayfair Decision – Heightened Risk of Successor Liability in Asset Transactions
The recent Supreme Court Decision - South Dakota v. Wayfair, Inc., – has dramatically impacted online retailers and increased possible successor liability risks in terms of Merger and Acquisition (M&A) transactions. Prior to the Wayfair ruling, the “physical presence” standard set out in Bellas Hess and Quill controlled online retailers’ necessity to pay South Dakota sales tax. National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753 (1967) and Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The Physical Presence rule allowed out of state retailers who sell their products or services online to avoid the states sales and use taxes due to a lack of actual, physical presence of the business in the state. However, under the South Dakota Statute affirmed by the Supreme Court, online retailers are now required to pay South Dakota sales tax if their business has a “substantial nexus” with the state. South Dakota v. Wayfair, Inc., 138 S. Ct. 2080, 2099 (2018). This is reached when the retailer has sold over $100,000 in in-state sales or completed over 200 transactions in the state on an annual basis. Id. at 2084.
