Quill Corp. v. North Dakota, 504 U.S. 298 (1992), was a United States Supreme Court ruling concerning use tax. It effectively prevented states from collecting any sales tax from retail purchases made over the Internet or other e-Commerce route unless the seller had a physical presence in the state. The ruling was based on the Dormant Commerce Clause, preventing states from interfering with interstate commerce unless authorized by the United States Congress. The case resulted from an attempt by North Dakota seeking to collect sales tax on licensed computer software offered by the Quill Corporation, an office supply retailer with no North Dakota presence, that allowed users to place orders directly with Quill.
The decision in Quill has been a point of contention for states as e-Commerce had grown greatly during the 21st century. Spurred by Justice Anthony Kennedy's concurrency in Direct Marketing Ass'n v. Brohl, 575 U.S. ___ (2015), that spoke to a review of Quill, several states passed "kill Quill" laws to bring such a review to the Supreme Court; the first such challenge being South Dakota v. Wayfair, Inc., to be heard in the 2018 term.
Video Quill Corp. v. North Dakota
Background
The North Dakota Office of State Tax Commissioner attempted to require Quill to collect and pay use tax on sales shipped into the state. The North Dakota Supreme Court upheld the statute.
Quill, incorporated in Delaware, did not have a physical location in North Dakota. None of its workers were located there. Quill sold office equipment and stationery in North Dakota by using catalogs, flyers, advertisements in national periodicals, and telephone calls. Deliveries were made by post and common carrier from out-state-locations.
Maps Quill Corp. v. North Dakota
Opinion of the Court
North Dakota argued that under due process, Quill had established a presence, as the floppy disks holding Quill's software provided to in-state customers were physically located in their state. The Supreme Court based its reasoning on analysis of the Commerce Clause rather than due process.
The Commerce Clause gives the federal government power to regulate interstate commerce and prohibits certain state actions, such as applying duties that interfere with trade among the states. In National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967), it was held that a business whose only contacts with the taxing state are by mail or by common carrier lacks the "substantial nexus" required under the Dormant Commerce Clause.
The Court determined that Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), did not limit or undo the Bellas Hess rule. A corporation, the court ruled, may have the minimum contacts required by the due process clause and still fall short of the substantial nexus required by the Dormant Commerce Clause. The court noted that the bright-line rule of National Bellas Hess "furthers the ends" of the Dormant Commerce Clause. The Court thus reversed the decision of the North Dakota Supreme Court that required Quill to collect and remit "use" taxes on purchases made by customers from that state.
Effect on taxation of online sales
In Quill Corp. v. North Dakota, the Supreme Court ruled that a business must have a physical presence in a state for that state to require it to collect sales taxes. However, the Court explicitly stated that Congress can overrule the decision through legislation.
Amazon.com used this ruling in order to justify not charging sales tax on its online sales, which give it a competitive advantage over retailers from 1995 until 2012, when pressure from states made Amazon collect sales tax in some of the states.
The soundness of the Quill decision has been questioned by legal scholars and judges in the twenty-first century as online sales have largely escaped taxation to the detriment of brick-and-mortar stores and state and local treasuries. In a related 2015 Supreme Court case Direct Marketing Ass'n v. Brohl, 575 U.S. ___ (2015), Justice Anthony Kennedy wrote in his concurrence that the Quill decision had a "tenuous nature", that there was "serious, continuing injustice faced by Colorado and many other States" of being able to only collect sales taxes from brick-and-mortar stores, and offered "it is unwise to delay any longer a reconsideration of the Court's holding in Quill". Kennedy's opinion suggested urgency for a case for the Supreme Court to review the Quill decision according to analysts. This led to several states to draft and purposely enact "kill Quill" laws to collect sales taxes for out-of-state purchases as to create the necessary legal vehicle to take to the Supreme Court.
South Dakota was the first state to complete its bill and establish the need for a Supreme Court judicial review. In October 2017, the state of South Dakota filed a petition for certiorari in the U.S. Supreme Court urging it to "abrogate Quill's sales-tax-only, physical-presence requirement". In the petition for certiorari, under the case name South Dakota v. Wayfair, Inc., South Dakota noted that advances in computer technology have made it easier to determine appropriate sales tax based on the purchaser's location and requiring such "poses a minimal obstacle" in an era where retailers can easily tailor their online marketing based on customers' IP addresses. South Dakota argued that Quill should be overturned and that the case satisfied the Supreme Court's criteria for declining to overturn its previous ruling under the doctrine of stare decisis. The Court agreed to hear the case in January 2018, with arguments to be heard in April 2018 and a ruling expected by June at the end of the current term.
See also
- Dormant Commerce Clause
- Sales taxes in the United States
- List of United States Supreme Court cases, volume 504
- List of United States Supreme Court cases
- Lists of United States Supreme Court cases by volume
- List of United States Supreme Court cases by the Rehnquist Court
- Streamlined Sales Tax Project
References
External links
- Full text opinion from Cornell Law School
- Full text opinion from Findlaw.com
- Full Text of Volume 504 of the United States Reports at www.supremecourt.gov
- Full Text of Opinion as Cited in United States Reports
Source of the article : Wikipedia
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