On Thursday, April 28, 2016, South Dakota filed a lawsuit against Wayfair Inc., Overstock.com Inc., Newegg Inc. and Systemax Inc. — all large, online retailers — to enforce its new law, Senate Bill 106, imposing sales tax collection requirements on out-of-state retailers that transact certain levels of business in the state. Pursuant to Senate Bill 106, the filing of a declaratory judgment action operates as an injunction during the pendency of the action, prohibiting South Dakota from enforcing the collection obligation against any taxpayer that does not collect and remit the tax voluntarily. The law took effect on May 1, 2016.

Meanwhile, trade associations for catalog and online retailers have sued South Dakota, challenging the constitutionality of the new law. The trade associations ask that the new law be set aside due to its violation of constitutional principles — namely, the holding in Quill Corp. v. North Dakota, 504 U.S. 298 (1992) — that only a seller with a physical presence in a state can be required to collect and remit that state’s sales tax on sales to customers in that state.