Document Type



Taxation-State and Local


In this article, Professor Pomp questions whether South Dakota made a strategic error in drafting its Wayfair statute.

South Dakota, in preparation for its attack on Quill, passed S. 106. The law allows South Dakota to collect its sales tax from certain remote sellers. Pomp notes that Bellas Hess and Quill, in contrast, involved the collection of use taxes.

To aid in his analysis, Pomp considers a hypothetical case: a couple from South Dakota travels to New York City and purchases art from a gallery. The gallery packs and ships the art back to South Dakota. Must the gallery collect the South Dakota sales tax on this transaction?

To answer this question, Pomp reflects on two U.S. Supreme Court cases, Dilworth and General Trading, both decided in 1944 by Justice Frankfurter. In Dilworth, Arkansas tried to impose its sales tax on Tennessee corporations which sold machinery and mill supplies. The corporations were not qualified to do business in Arkansas and lacked sales offices, branch plant, and any place of business in Arkansas. Traveling salesmen, residents of Tennessee, provided orders to offices in Memphis via mail or telephone. Title to the goods passed upon delivery to the carrier in Memphis. The Court held that the sale took place in Tennessee, thus Arkansas could not impose its sales tax on the transaction.

Returning to the hypothetical, Pomp observes that the gallery would argue that, just like the businesses in Dilworth, it is not qualified to do business in South Dakota and has no sales office, branch plant, or any other place of business there. Lacking traveling salesmen, the gallery does not even solicit business in South Dakota. And title passes to the art in New York. Pomp argues that, under Dilworth, it does not seem that a remote vendor like the gallery is making a sale in South Dakota.

Whereas Dilworth involved the imposition of Arkansas's sales tax, General Trading involved the collection of Iowa’s use tax. The facts of General Trading were nearly identical to those in Dilworth, yet Frankfurter upheld the state’s capacity under the constitution to have out-of-state vendors collect its use tax. Frankfurter distinguished General Trading in Dilworth, arguing that while the use of the Arkansas sales tax exceeded the constitutional limitations on state power, the similar application of a use tax would not.

General Trading gave market states a strategy for avoiding the constitutional difficulties of making a remote vendor collect sales tax: states should instead require the collection of their use tax. Pomp questions South Dakota’s decision to invite challenges regarding whether or not a taxable sale has occurred. General Trading provides a safer alternative: draft the statute, like those involved in Bellas Hess and Quill, around the collection of a use tax.