A number of parties have filed amicus curiae briefs in South Dakota v. Wayfair, a case that could substantially reshape the state sales tax landscape. See here. Perhaps one of the most interesting amicus briefs was filed by a group of U.S. Senators who support South Dakota in its urging the Supreme Court to overturn the Quill Corp. v. North Dakota physical presence standard. The Senators are Heidi Heitkamp from North Dakota, Lamar Alexander from Tennessee, Richard Durbin from Illinois, and Michael Enzi from Wyoming – two Democrats and two Republicans.
The Senators argued that, as of 2015, there were almost $26 billion in uncollected sales and use taxes because of Quill. Merchants with physical locations in the Senators’ states are at an economic disadvantage because they must charge higher prices than out-of-state retailers who need not collect tax. The Senators noted that their states –North Dakota, Tennessee, Illinois, and Wyoming – rely heavily on state sales taxes for revenue. As a result, when Wayfair makes sales in those states, the Senators argued, Wayfair has a significant price advantage over businesses with physical presences in those states because it is not required to collect those state taxes under Quill.
The Senators emphasized that Justice Kennedy has said that Quill was “questionable even when decided, [and] now harms States to a degree far greater than could have been anticipated earlier.” Direct Mktg. Ass’n v. Brohl, 135 S.Ct. 1124, 1135 (2015) (Kennedy, J., concurring).
The Senators also tried to persuade the Court that there would be no confusion if the Court overturned the bright-line rule in Quill. First, they argued that there is little evidence that states would pass burdensome use tax collection laws if Quill were overturned. According to the Senators, the same internet technologies that make Quill problematic—because they facilitate large scale remote sales that deprive states of sales tax revenue they would collect from brick-and-mortar retailers—have driven down compliance costs, which reduces the likelihood that state laws would impose significant costs on remote sellers. Second, the Senators argued that the overturn of Quill would not mean the Court could not protect interstate sellers though other doctrines, such as the balancing test in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). Third, Congress, the Senators argued, is standing by to act if states overstep by imposing harsh burdens on out-of-state retailers. This last point is interesting, but it is worth questioning whether it is persuasive, because Congress has yet to legislate Quill away, despite the fact that it has had many years to do so. As a result, it is worth considering whether Congress would get involved.
The Supreme Court will hear oral arguments April 17, 2018.