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US Supreme Court To Begin Review Of Quill Decision April 17

by Mike Godfrey, Tax-News.com, Washington

12 April 2018


The US Supreme Court is to hear arguments on whether states should be allowed to tax online retailers not based within a state's borders, in South Dakota v. Wayfair, on April 17, 2018.

Specifically, South Dakota v. Wayfair, Inc. will discuss the constitutionality of a South Dakota law requiring collection of the state's sales tax by internet vendors with at least 200 transactions or USD100,000 in sales to South Dakota residents. A ruling in favor of the state would lead to many other states following suit.

South Dakota is seeking to reverse the Quill decision of 1992, which held that states cannot force sales tax collection by vendors who do not have personnel or property in the state (the "physical presence" standard). Respondents Wayfair, Inc., et al., seek to retain the Quill decision.

Recently, ahead of the hearing, US Senators Ted Cruz (R-TX), Steve Daines (Montana Republican Party-MT), and Mike Lee (R-UT) filed a writ of certiorari, in support of the respondents and the retention of the physical presence test.

They said: "It has been clear for many years that, to overturn Quill, Congress needed to act. All of the states knew this. Rather than lobbying Congress, however, South Dakota in March 2016 enacted 'An act to provide for the collection of sales taxes from certain remote sellers.'"

They put forward the argument that "Congress alone has the constitutional expertise and authority to address changes to the national economy of the last 25 years. During that period, Congress has undertaken substantial efforts to respond to these changes. Indeed, it is currently considering three bills that would respond to these changes. By contrast, allowing States like South Dakota to tax sales from out-of-state vendors would hinder Congress's attempts to find a workable solution to the changing economy. Overturning Quill now would chill Congress's efforts to avoid the rival regulations that the Commerce Clause sought to prevent."

"Principles of stare decisis weigh in favor of maintaining the 'physical presence' requirement reaffirmed in Quill, which has been the law for over fifty years. When this Court decided Quill, it relied explicitly on Congress's silence on this question. It would thus be highly inappropriate for this Court to now take the same silence as a reason to overturn that long-settled precedent."

"Reliance concerns also weigh in favor of a congressional solution to our changing economy. Under the Quill regime, businesses have developed in tax-advantaged states, thereby fostering growth and expansion not only in those states, but throughout the national economy."

"In any event, Quill was a correct interpretation of the Commerce Clause. Drafted to prevent conflict among the States, that Clause was a direct response to jealous and catastrophic regulations and taxes that created an internal trade war among the newly independent states. The states thus universally recognized that the power to regulate interstate commerce should necessarily belong to the federal government. To that end, in the Constitution, the Framers delegated that power to Congress, with almost no substantive debate."

"South Dakota's statute mirrors the kinds of regulations to which the Framers were responding when they adopted the Commerce Clause. Because Quill recognized that reality, it was correctly decided, and therefore should be preserved for that reason as well," they said.

TAGS: tax | business | sales tax | commerce | law | internet | United States | regulation | retail | trade

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