Has Quill (and Tax-Free Internet Shopping) Passed its Expiration Date?

How is it that you can buy stuff online and not have to pay sales tax? Those who follow state/local tax--and even some who don't--will recall that this legal rule derives from two important Supreme Court decisions: National Bellas Hess (1967) and Quill (1992). The rule in these cases-- i.e., that a state cannot impose a use tax collection obligation on a vendor without a physical presence in the taxing state-- has resulted in a meaningful revenue loss for the states and put bricks & mortar firms at a competitive disadvantage. Understandably, many states have sought to avoid the limitations of these decisions. One such state is Colorado, which enacted an information reporting regime for firms that, by virtue of Quill, are excused from collecting the tax. The Direct Marketing Association challenged this rule, contending that it violates Quill and the dormant commerce clause.  Now this morning comes the 10th Circuit decision on the merits, which concludes (correctly in my view) that "the Colorado Law does not discriminate against nor does it unduly burden interstate commerce."

This is an important victory for the states and for bricks and mortar retailers.

I found especially interesting the concurring opinion by Judge Neil Gorsuch, a George W. Bush appointee.  Gorsuch's opinion is an extended discussion on the proper role of precedent in our legal order. Among other things, Gorsuch concludes that "Quill might be said to have attached a sort of expiration date for mail order and internet vendors' reliance interests on Bellas Hess's rule by perpetuating its rule for the time being while also encouraging states over time to find ways of achieving comparable results through different means."

It bears noting that Gorsuch clerked for both Justices Byron White and Anthony Kennedy.  White authored a strong dissenting opinion in Quill arguing that National Bellas Hess should be overruled. More recently, when the DMA case was before the Supreme Court (on a jurisdictional question relating to the Tax Injunction Act), Kennedy wrote that Quill should have overruled National Bellas Hess and that "the legal system should find an appropriate case for this Court to reexamine Quill and Bellas Hess."

It seems likely that DMA will appeal the 10th Circuit's ruling to the U.S. Supreme Court, though Kennedy's concurring opinion in the first DMA case suggests that they already have one vote against them.

For those interested in more in-depth legal analysis of these issues, you can find the definitive DMA amicus brief available here.