Scott Peterson was just settling into a large conference room in the Seattle headquarters of tax automation vendor Avalara on the morning of June 21 when he got an email ping that changed
everything. The email was a news alert that reported the U.S. Supreme Court had decided the South Dakota v. Wayfair Inc. case. The court’s opinion stated that, for the first time, states and local governments could require online retailers to collect sales tax even if they don’t have a physical presence, or nexus, in the state or local tax jurisdiction.
For a moment, Peterson, who has spent nearly his entire career working on the sales tax issue—first as state tax director for South Dakota’s department of revenue and then as executive director of the Streamlined Sales Tax Governing Board before joining Avalara as its vice president of U.S. tax policy and government relations—sat frozen, astonished at the seismic shift in e-commerce tax law.
“I couldn’t believe that the state had won its case,” he says. “States never win their cases before the court.”
After the initial shock, he quickly collected his things, left the meeting and found a work space. He then set about rewriting the now-inaccurate marketing materials he had drafted in preparation for the court’s decision. The day was a whirlwind, he says, as his writing was frequently interrupted by the 14 media interviews he gave throughout the day.
More than 2,000 miles away, it was a chaotic scene at the Chicago headquarters of men’s skincare retailer Tiege Hanley. The startup’s controller, Kathleen Stark, hadn’t paid much attention to the case until the decision came down, and she read that South Dakota’s law requires retailers to collect and remit sales tax if they sell more than $100,000 in the state or complete at least 200 transactions with South Dakota residents. Given that Tiege Hanley is a subscription service that bills its customers monthly, that meant if the retailer had 17 customers in the state, it would have to comply with the law.
Roughly 1,000 miles from Chicago, Danny Gavin, vice president and director of marketing at Houston-based Brian Gavin Diamonds, an e-retailer of custom jewelry, got an uneasy feeling since the decision left it up to Congress to pass legislation to streamline the process. In the absence of Congressional action, every state would be on its own to try to collect taxes and some, he feared, might be overly aggressive. “That could put people out of business,” he thought.