Today the SCOTUS will hear oral argument in South Dakota v Wayfair, a case intended to overturn Quill Corp. v North Dakota (1992). In Quill the Supreme Court ruled that out of state sellers did not have an obligation to collect sales taxes as long as they had no “physical-presence” in the state where the customer lived. A physical presence was defined as having sales representatives, a retail store or warehouse. At the time Quill upheld the 1967 case National Bellas Hess v Department of Revenue of Illinois. In Bellas Hess the Justices determined that if the only connection to a customer was through package delivery that it would be an unfair burden for mail-order sellers to keep up with the 6,000 different state and local sales tax schedules, collect the sales taxes and remit them correctly to all the state and local tax districts. While in ruling on Quill the Court recognized expanding Internet sales, and more automated sales tax software, they determined to follow stare decisis and keep Bellas Hess in place.
In 2016, based on a Colorado case, Direct Marketing Association v Brohl (2015), where Justice Anthony Kennedy invited a challenge to Quill in his opinion, the South Dakota legislature passed Senate Bill 106 that challenged “physical presence” and replaced it will an “economic presence”. Under the South Dakota law an out-of-state mail order or Internet seller would have to collect sales taxes if they had more than $100,000 of annual sales, or more than 200 transactions per year. Several Internet sellers challenged the law, including Wayfair, and it has made its way to the SCOTUS.
Court watchers believe that in addition to Kennedy, and based on opinions in previous cases, both Justices Neil Gorsuch and Clarence Thomas are likely to vote to overturn Quill. That makes it seem likely that Quill will be overturned. The case presented by South Dakota, and more than 20 states who have filed amicus briefs, outlines the explosive growth of Internet sales and the growing loss of sales tax revenues as retail moves from physical stores to online purchasing. In addition, sales tax software has become much more sophisticated allowing even small Internet sellers to more easily both calculate and collect sales tax. The plaintiffs argue that collecting out-of-state sales taxes is still an undue burden, particularly for small businesses.
As always scotusblog.com is your best place to follow all cases at the Supreme Court. A very good summary of this case, written for the lay reader, can be found here:
www.scotusblog.com/...
A very good article outlining the case for overturning Quill is presented by the State and Local Legal Center at Georgetown Law and can be found here:
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UPDATE
Very good summary of oral argument in the case from scotusblog.com. The outcome looks less clear to me as there was a lot of pushback from some of the Justices about the burden to small business, and any retroactive features that states might apply if Quill was overturned. Here is a link to the scotusblog summary:
www.scotusblog.com/...