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US Supreme Court To Revisit Quill E-Commerce Sales Tax Ruling

by Mike Godfrey, Tax-News.com, Washington

17 January 2018


The US Supreme Court has accepted a challenge from authorities in South Dakota to the court's earlier ruling in Quill Corp. v. North Dakota, concerning the ability of states to tax retailers not present within their physical borders.

Quill, a Supreme Court ruling delivered before the internet sales boom, established the "physical presence" test, whereby retailers are required to collect sales tax only in states in which they also have brick-and-mortar stores. It was also decided that only Congress has the authority to regulate interstate commerce under the Commerce Clause of the US Constitution.

To date, the Court has not taken up an opportunity to review Quill, even though, in the Appeals Court, Justice Anthony Kennedy had noted that "… there is a powerful case to be made that a retailer doing extensive business within a state has a sufficiently 'substantial nexus' to justify imposing some minor tax-collection duty, even if that business is done through mail or the internet," and recommended "it is unwise to delay any longer a reconsideration of the [Supreme] Court's holding in Quill."

Colorado and Ohio earlier sought to have the Supreme Court review the ruling, but such requests were rejected.

On January 12, 2018, after an earlier delay, the US Supreme Court granted South Dakota's petition for a writ of certiorari.

The Retail Industry Leaders Association (RILA) had earlier said the case would give the Court an opportunity to "end the unfair economic advantage that Quill gives to online-only retailers." RILA General Counsel and Retail Litigation Center President Deborah White said: "Retailers have supported this case since the beginning, and still believe it is the right case to correct the constitutional course set more than 50 years ago – well before the advent of e-commerce – that today gives online-only retailers an unfair commercial advantage at the expense of local retailers."

The case concerns the legality of South Dakota's Senate Bill 106 (SB 106), which was signed into law on March 22, 2016, by Governor Dennis Daugaard.

SB 106 requires remote sellers with no physical location in South Dakota to remit sales tax and follow all procedures of the law, as if they have a presence in the state, if they meet one of two criteria in the previous calendar year or the current calendar year:

  • The remote seller's gross revenue of sale of tangible property, any products transferred electronically, or services delivered into South Dakota exceeds USD100,000;
  • The remote seller has 200 or more separate transactions tangible property, any products transferred electronically, or services delivered into South Dakota.

South Dakota's Attorney General welcomed the Court's January 12 decision, stating:

"South Dakota is leading the nation to fight for main street America. As Attorney General, I will give main street businesses a strong and long awaited voice in our highest court," said Marty Jackley. "I want to extend my appreciation for the support we have received from the 35 Attorneys General, the National Governors Association, educational leaders, and the business community to bring tax fairness for our local retailers and to help support main street businesses."

Now that the United States Supreme Court has decided to hear the case, the parties will move forward with final briefing. The briefs provide each party with an opportunity to explain to the Court why they should win the case.

Jackley explained that the state will ask the US Supreme Court to overrule the physical-presence requirement, which currently prevents the State from requiring out-of-state retailers to remit taxes for sales made within South Dakota.

TAGS: tax | sales tax | law | enforcement | legislation | United States

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