Information from the Department of Revenue: South Dakota v. Wayfair

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South Dakota v. Wayfair

On June 21, 2018, the U.S. Supreme Court issued a decision in South Dakota v. Wayfair.  The Court overruled Quill Corp. v. North Dakota and the requirement that a retailer must have a physical presence in a state before the retailer can be required to collect sales tax in the state. The Court also noted several features of the South Dakota law that are designed to prevent unfair treatment for businesses who sell goods and services.  These features include South Dakota’s exceptions for small sellers, the prospective application of the sales tax collection requirement, and membership in the Streamlined Sales and Use Tax Agreement.


On May 30, 2018, Iowa Governor Kim Reynolds signed Senate File 2417, an extensive state tax reform bill to improve the tax structure in Iowa.  This legislation contains changes to Iowa income, corporate, sales and use, local option sales, hotel and motel, and vehicle rental excise taxes. This law modernizes and expands the types of businesses required to collect Iowa sales tax.  Specifically, marketplaces and remote sellers that exceed certain sales or transaction thresholds must charge sales tax the same as Iowa main street businesses.  Some of these provisions are identical to the South Dakota law at issue in the Wayfair case.  Under existing law, sellers that are not required to collect tax may voluntarily do so.  Otherwise, consumers owe use tax directly to the Iowa Department of Revenue.  


Exception for Small Sellers


Like South Dakota, Iowa includes an exception for small sellers, which will require only retailers to collect Iowa sales tax if the retailer sells $100,000 or more in products and/or services or makes 200 or more separate sales transactions.  The Iowa tax reform bill also requires marketplaces to collect Iowa sales tax on behalf of sellers using the marketplace.  


Iowa’s New Sales Tax Collection Laws Apply Prospectively


Importantly, the parts of the tax reform bill that expand Iowa sales tax collection to marketplaces and remote sellers take effect on January 1, 2019.  Remote sellers that made retail sales of tangible personal property, services, or specified digital products into Iowa in calendar year 2018 that exceed the smaller seller exception should begin collecting Iowa sales tax on January 1, 2019.  The recent changes to Iowa law expanding sales tax collection responsibilities to marketplaces and remote sellers will only apply prospectively.  The Wayfair ruling does not change the effective date of SF 2417 and the Iowa Department of Revenue will not seek to impose sales tax liability for periods prior to January 1, 2019 for retailers and marketplaces whose only obligation to collect Iowa sales tax comes from these new laws.  


If a retailer should have collected Iowa sales tax under the traditional physical presence rule of Quill Corp. v. North Dakota and Iowa law that existed prior to SF 2417, those retailers are encouraged to participate in Iowa’s voluntary disclosure program.  


Marketplace and Remote Sellers - Business Permit Registration


Retailers required to collect in Iowa due to SF 2417 must be registered by January 1, 2019.  Like South Dakota and more than 20 other states, Iowa is a member of the Streamlined Sales and Use Tax Agreement.  Retailers can register now by completing just one short and simple online application through the Streamlined Sales Tax Registration System (SSTRS) or may register to collect directly with the Iowa Department of Revenue through the Business Tax Registration System.  Retailers who sell through a marketplace should contact their marketplace to determine whether the seller needs to register and collect sales tax on sales made through the marketplace.


Additional Information


The Department is working to provide our customers with the information and services they need to meet their sales and use tax obligations under Iowa tax law in as smooth and efficient manner as possible.  The Department created a tax reform page on its website.  Information and resources regarding this topic and others, will be added as it becomes available.  To receive notifications of resources and guidance issued by the Department, subscribe to updates by selecting the tax topics of interest.



The statutory mission of the Iowa Department of Revenue is to serve Iowans and support state government by collecting all taxes required by law, but no more.