Paul L. Caron

Monday, November 6, 2017

37 Tax Professors Urge Supreme Court To Overrule Quill v. North Dakota

Debra Greenberg (Emery Celli) filed an amicus brief at the Supreme Court yesterday on behalf of 37 tax professors supporting the petitioner in South Dakota v. Wayfair. The brief calls on the Court to grant South Dakota's petition and overrule its 1992 decision in Quill v. North Dakota, which prohibits states from collecting sales taxes from out-of-state retailers. From the summary of the brief:

While the Supreme Court is rightly reluctant to overrule its own precedents under any circumstances, the force of stare decisis is less powerful in some contexts than in others. Specifically, stare decisis exerts a weaker pull when judicial doctrine in the relevant area is based not on statutory interpretation but on changing competitive circumstances and evolving economic understandings.

Antitrust law is a paradigmatic example of an area in which these conditions are met, but the argument for a flexible application of precedent is similarly strong with respect to dormant Commerce Clause tax cases such as this one. In Quill Corp. v. North Dakota, the Court emphasized that its dormant Commerce Clause analysis was based on “structural concerns about the effect of state regulation on the national economy.” 504 U.S. 298, 312 (1992). The Court was especially concerned about the effect of taxation on the mail-order industry, and it believed that maintaining the physical presence rule would “foster[] investment by businesses and individuals.” Id. at 315-18. It also believed that its rule would reduce compliance costs for businesses and individuals engaged in commerce across state lines. See id. at 313 n.6. For those reasons, the Court reaffirmed the physical presence rule first announced in National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967).

The Court’s decision in Quill was predicated on then-current competitive circumstances and economic understandings. And in the quarter century since Quill, those circumstances and understandings have evolved. While the Quill Court was focused on the mail-order industry, it could not and did not foresee the meteoric rise of online retail, which has magnified the revenue losses that result from the physical presence rule. In the age of online retail, the physical presence rule has become a drag on economic efficiency and a potential impediment to investment across state lines. Meanwhile, the development of tax automation software over the past quarter century has led to a dramatic reduction in sales tax compliance costs for multistate retailers—so much so that overruling Quill would likely reduce aggregate compliance costs for individuals and firms seeking to abide by state tax laws.

Thus, to overrule Quill now based on changed competitive circumstances and evolving economic understandings would be to take it on its “own terms.” See Kimble v. Marvel Entm't, LLC, 135 S. Ct. 2401, 2413 (2015). It would be to acknowledge that — regardless of whether Quill was rightly decided at the time — the factual assumptions upon which it was based do not apply to the Internet age. The Court should grant South Dakota’s petition so it can revisit those assumptions and update its dormant Commerce Clause jurisprudence to a new technological and economic environment.

Tax profs who joined the brief are:

  • Reuven Avi-Yonah (Michigan)
  • Joseph Bankman (Stanford)
  • Jordan Barry (San Diego)
  • Lily Batchelder (NYU)
  • Jake Brooks (Georgetown)
  • Sam Brunson (Loyola-Chicago)
  • Cliff Fleming (BYU)
  • David Gamage (Indiana)
  • Ari Glogower (Ohio State)
  • Jacob Goldin (Stanford)
  • Andy Haile (Elon)
  • Daniel Hemel (Chicago)
  • David Herzig (Valparaiso)
  • Hayes Holderness (Richmond)
  • Cal Johnson (Texas)
  • Richard Kaplan (Illinois)
  • Michael Knoll (Penn)
  • Zachary Liscow (Yale)
  • Yair Listokin (Yale)
  • Ruth Mason (Virginia)
  • Goldburn Maynard (Louisville)
  • Orly Mazur (SMU)
  • Susan Morse (Texas)
  • Richard Pomp (Connecticut)
  • James Repetti (Boston College)
  • Julie Roin (Chicago)
  • Daniel Schaffa (Richmond)
  • Erin Scharff (Arizona State)
  • Daniel Shaviro (NYU)
  • Jay Soled (Rutgers)
  • Sloan Speck (Colorado)
  • Kirk Stark (UCLA)
  • John Swain (Arizona)
  • Adam Thimmesch (Nebraska)
  • Manoj Viswanathan (Hastings)
  • Ed Zelinsky (Cardozo)
  • Eric Zolt (UCLA)

New Cases, Tax | Permalink


@Anon I think you are behind the times. Amazon already collects sales taxes from customers in every state (other than the five that don't have such taxes). You might be thinking of the Amazon Marketplace, which is for third party vendors not Amazon itself.

Posted by: Random Tax Person | Nov 7, 2017 7:04:46 AM

Own much stock in Amazon? Trying to start a recession as part of the idiotic “resistance”?

Posted by: Anon | Nov 6, 2017 1:26:57 PM