The Trump administration is supporting a bid to expand state power to collect internet sales tax, asking the U.S. Supreme Court to cabin a 1992 precedent limiting state sales taxes to companies with a physical presence in their jurisdiction.
The high court’s 1992 case, Quill v. North Dakota, found state governments cannot tax mail order products delivered from other states through common carriers or the U.S. Postal Service. On this basis, internet vendors like Amazon refuse to collect state sales taxes, since their positions are somewhat analogous. The decision did not foresee sprawling, placeless online markets, prompting states to argue the ruling is too antiquated to maintain.
“[T]he Quill Court did not and could not anticipate the development of modern e-commerce,” Solicitor General Noel Francisco wrote in the federal government’s brief. They say change is appropriate since commerce-related legal doctrines historically developed in conjunction with national economic conditions. A correction is warranted here, they argue, since current precedent does not reflect the pervasiveness of internet sales.
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The Justice Department stops short of urging the justices to overturn Quill. Rather, they say, the court should limit the decision to the specific facts of that case.
“This Court need not overrule Quill, but it should decline to extend them to the distinguishable context of e-commerce,” Francisco said.
Skepticism of Quill has grown with online retail, even among members of the court. Justice Anthony Kennedy wrote a concurring opinion in a 2015 case urging his colleagues to reconsider the ruling at an appropriate time. Kennedy voted with the majority in Quill, as did Justice Clarence Thomas, another latter-day Quill skeptic.
Thirty-five states led by Colorado filed an amicus (or “friend-of-the-court”) brief urging the justices to overturn Quill. The states say the decision gives a competitive advantage to e-commerce behemoths over brick and mortar shops, while straining their limited coffers.
“The net effect is that the states lose billions of dollars in tax revenue each year, requiring cuts to critical government programs, the brief reads. “And as the pace of e-commerce continues to accelerate, the states’ losses continue to compound at an ever-increasing rate.”
The high court will hear argument in the case, South Dakota v. Wayfair, in April. A decision will follow by late June.
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