A New Look at Remote Sales Taxation in The Aftermath of South Dakota v. Wayfair

A NEW LOOK AT REMOTE SALES TAXATION IN THE AFTERMATH OF
SOUTH DAKOTA V. WAYFAIR
Vincent Pelfrey*
*
LLM with distinction, 2018, Thomas Jefferson School of Law, San Diego, CA.
J.D., 1997, The University of South Dakota, Vermillion, SD.
BA (Political Science), 1989, Indiana University Northwest, Gary, IN.
© 2018 Vincent Pelfrey, All Rights Reserved

Vincent Pelfrey PO Box 491 Medora, ND 58645 (605)884-5674 vincent.pelfrey@gmail.com
Table of Contents
I. Abstract .................................................................................................................................... 4
II. Introduction ............................................................................................................................. 4
III. Methodology............................................................................................................................ 5
IV. A Brief Look into Sales Tax and Complimentary Use Tax. ................................................... 5
V. How did sales tax-free sales come to happen on the Internet? ................................................ 6
A. Freeman v. Hewit: The beginning of the road to tax-free shopping on line. ....................... 6
B. National Bellas Hess v. Department of Revenue: Shopping from a catalog becomes sales
tax-free, if the retailer and customer are not in the same state. ................................................... 7
C. Quill, Inc. v. North Dakota: The States attempt to end the “Physical Presence” Test. ...... 8
D. The Internet Tax Freedom Act of 1998: Congress makes the Internet a tax-free zone, or
did it? ........................................................................................................................................... 9
E. Direct Marketing Association v. Brohl, Justice Kennedy’s Invitation which the States
could not possibly refuse. .......................................................................................................... 11
F. Senate Bill 106: South Dakota answers Justice Kennedy’s Invitation. ............................ 12
VI. South Dakota v. Wayfair, Inc.-The End of Tax-Free Sales on the Internet ........................... 13
A. The State’s Case ................................................................................................................. 13
B. The State’s Brick and Mortar Allies---Rent Seeking in Every Way Possible ................... 17
C. Wayfair’s Case ................................................................................................................... 21
D. Others Who Stand to Lose in the Brave New World of Internet Taxation ........................ 25
E. Positions not Considered by Any Party ............................................................................. 32
F. The Court’s Decision: Justice Kennedy’s Farewell “Gift” to the American People ......... 35
G. The Aftermath: A Special Legislative Session So South Dakotans can enjoy Justice
Kennedy’s “Gift” in time for Christmas. .................................................................................. 38
VII. Analysis ................................................................................................................................. 38
A. Justice Kennedy’s Opinion ................................................................................................ 38
B. Chief Justice Roberts’s Opinion ........................................................................................ 39
C. Other Positions Under Debate in Congress ....................................................................... 39
1. Marketplace Fairness Act of 2017. ................................................................................ 39
2. Remote Transactions Parity Act of 2017 ....................................................................... 41
3. No Regulation Without Representation Act of 2017 ..................................................... 42
2
4. Another Idea From Representative Goodlatte ................................................................ 44
VIII. A Better Way Forward and How to Get There ................................................................... 44
IX. Conclusions ........................................................................................................................... 48
XI. Areas of Further Research ..................................................................................................... 48
XII. Appendix ........................................................................................................................ 50
State by State Sales/Use Tax Chart ........................................................................................... 50
XIII. Bibliography........................................................................................................................ 59
A. Cases .................................................................................................................................. 59
B. Statutes ............................................................................................................................... 59
C. Regulations ........................................................................................................................ 63
D. Other Authorities ............................................................................................................... 64
3
I. Abstract
On April 17, 2018 the State of South Dakota argued a case it had conjured up at the
invitation of Justice Anthony Kennedy before the United States Supreme Court. On June 21,
2018, the United States Supreme Court decided South Dakota v. Wayfair, Inc, which would
permit states to demand merchants not located in their states remit sales taxes on sales sent into
their state. The purpose of this paper is to examine the history of “tax-free” remote sales,
examine the arguments for and against the South Dakota’s case before the Court, examine ideas
about this issue that were being debated in Congress before the States short circuited Congress’s
work, and finally to offer a simple idea that would allow states to collect taxes on sales, while not
burdening merchants beyond their borders or harming the sovereignty of sister states that do not
have sales taxes.
II. Introduction
What does one get when a Supreme Court Justice issues an open invitation for litigation
on a subject for which there is settled judicial precedence; a State, one of many, that is ravenous
of the revenue it believes it can claim by overturning the precedent the Justice issued the
invitation to overturn; software developers, currently without a market for their product who
envision a big market for their product if its use is mandated by law; and finally brick and mortar
retail stores, shopping mall developers and real estate agents upset that on-line merchants are
taking their business and not renting or buying space from them? The answer in a nutshell is the
Supreme Court’s recent decision in South Dakota v. Wayfair, Inc.
In this paper, I will examine how the nation where sales tax was owed on remote sales,
that is sales from a catalog or over the Internet, only on those sales to customers in states where
the retailer maintained a “physical presence” to the retailer being mandated to calculate the sales
tax correctly everywhere in the United States and collect it for all of the states that impose a sales
tax. I will examine, briefly, the interests of those that joined with the States to assert that
interstate commerce was being impeded by not making remote sellers calculate sales taxes
everywhere. I will also look at the States; which, led by South Dakota, was able to convince the
Supreme Court to mandate its taxes be collected everywhere, possibly around the world. In
conclusion, an alternative proposal will be presented, which will be easier for merchants to
comply with, provide state and local government with revenue and address some of the
“fairness” concerns of the brick and mortar merchants.
The subject of remote sales taxation has recently come before the United States Supreme
Court in the case of South Dakota v. Wayfair. In this case, the Supreme Court held that remote
sellers may be held liable to collect retail sales tax from any and all of the States, whether or not
they have a physical presence in said State.1 Previously, the nexus requirement to collect sales
tax was that the seller needs to be physically present in the State before sales tax collection was
required.2 My thesis is to offer a different approach from requiring merchants, particularly small
1
South Dakota v Wayfair, Inc., 138 S. Ct. 2080 (2018).
2
Quill, Inc. v. North Dakota, 504 U.S. 298; 112 S.Ct. 1904; 119 L.Ed.2d 91 (1992).
4
to mid-sized online and catalog merchants with small physical footprints, from bearing the
burden sales tax collection in thousands of jurisdictions. That idea is that they collect sales tax
from the retailer’s home jurisdiction from everyone who purchases taxable goods and services
from them.
III. Methodology
I began my research by reading the Supreme Court’s opinions in Wayfair. I then
reviewed the multiple briefs from the parties and multiple amici curiae. After reading the
material that went into the most recent decision of the Supreme Court, I read the previous
decisions of the Court to learn how the law got to where it was before the Wayfair decision. I
also referred to some of the sources utilized in the briefs from all parties in the Wayfair case.
These sources included economic studies and bills pending before Congress. I also found
newspaper articles showing that taxes on remote or online sellers is an issue in other nations as
well, primarily because of complaints from brick and mortar merchants.
I then conducted a survey of state sales and use tax law looking at the following factors:
a. Does the state have a sales tax;
b. What is the rate;
c. Are there local sales taxes;
d. What is the maximum local sales tax rate;
e. Is the state sales tax a “privilege” tax or an “excise” tax;
f. Is there explicit language in state law about not collecting sales tax on
goods leaving the state;
g. Is there a use tax;
h. Is there a use tax credit for taxes paid to other jurisdictions;
I took this information and produced a chart, with citations where applicable.
IV. A Brief Look into Sales Tax and Complimentary Use Tax.
Most states have sales taxes. Those states that have sales tax also have what is referred to
as a use tax or a complimentary use tax. These two taxes work in tandem. A state imposes a
sales tax of a certain percent on all sales in the state. It proceeds to exempt certain products
and/or services from the sales tax. Retailers in the state are required to collect the tax at the time
of sale and hold it in trust for the State, paying it over periodically. Many, but not all states
provide for localities to have additional taxes on retail sales. I will give South Dakota’s statute
imposing a sales tax on the sale of tangible personal property, not only because that state gave
rise to the Supreme Court’s most recent decision on sales taxation on remote retailers, but more
importantly because of its simplicity.
There is hereby imposed a tax upon the privilege of engaging in business as a retailer, a tax of four
and one-half percent upon the gross receipts of all sales of tangible personal property consisting of
goods, wares, or merchandise, except as otherwise provided in this chapter, sold at retail in the
State of South Dakota to consumers or users. 3
However, if a South Dakota resident were to purchase tangible personal property in

another state, South Dakota does not get to tax this transaction. Depending on where the
3
S.D. Codified Laws Sec. 10-45-2 (2018).
5
transaction took place and the goods purchased, there may be no tax at all paid by the consumer.
Of the states bordering South Dakota, North Dakota4, Minnesota5, Iowa,6 Nebraska,7 and
Wyoming8 do not impose sales tax on food for human consumption. Minnesota further does not
impose a sales tax on clothing.9 Montana has no sales tax at all.
This is where the use tax comes in to play. It is called a “complimentary” tax because it
complements the sales tax like the Federal gift tax compliments the Federal estate tax. For
consistency, we will examine South Dakota’s statute imposing a use tax.
An excise tax is hereby imposed on the privilege of the use, storage, and consumption in
this state of tangible personal property purchased for use in this state at the same rate of
percent of the purchase price of said property as is imposed pursuant to chapter 10-45.10
South Dakota is generous, in that it does permit a credit against any sales taxes paid
elsewhere, provided the state in which imposed the tax does the same when a consumer from
their state purchases goods from a South Dakota retailer. Not all states do. This does little good
for the South Dakotan shopping in the Twin Cities because Minnesota limits any use tax credit to
$770.11 It does no good at all if the South Dakotan shopped in Billings, because there is no use
tax in Montana.
South Dakotans are to report their purchases and file a use tax return monthly.12 It is a
Class A misdemeanor to fail to file a use tax return in South Dakota.13 A Class A misdemeanor
is punishable by a year in the county jail and/or a fine of $2,000.14 The problem is no one
actually files a return or pays the tax. That is why the states decided to move on remote sellers to
make them collect the tax for them.
V. How did sales tax-free sales come to happen on the Internet?

A. Freeman v. Hewit: The beginning of the road to tax-free shopping on line.
Sales tax-free shopping on line traces its roots to a time when what few computers that
existed filled whole rooms and probably had the computing power of a very good pocket
calculator of today. The roots of tax-free shopping go back to 1940 Indiana, and a dispute
regarding Indiana’s Gross Income Tax.15 That is correct, the beginnings of tax-free on-line sales
doesn’t even trace back to sales tax, but rather income tax.
In Freeman v. Hewit, the United States Supreme Court was asked to rule on the liability
of a trustee for Indiana’s gross income tax on the sale of stock owned by an estate. The trustee
of the estate sold stock through an Indiana broker, who in turn used a New York broker to sell
4
N.D. Cent. Code Sec. 57-39.2-04.1(2018).
5
Minn. Stat. Sec. 297A.67(2) (2018).
6
Iowa Code Sec. 423.3(57) (2018).
7
Neb. Rev. Stat. Sec. 77-2704.24(1) (2018).
8
Wyo. Stat. Sec. 39-15-105(a)(vi)(E) (2018).
9
Minn. Stat. Sec. 297A.67(8) (2018).
10
11
Minn. Stat. Ann. Sec. 297A.67(21) (2018).
12
S.D. Codified Laws Sec. 10-46-27.1 (2018).
13
14
S.D. Codified Laws Sec. 22-6-2(1)(2018).
15
Freeman v. Hewit, 329 U.S. 249, 251; 67 S.Ct 274, 276; 91 L.Ed 265, 271 (1946).
6
the securities on the New York Stock Exchange.16 Upon the sale of the securities, the trustee
delivered the certificates to the Indiana broker, who in turn mailed them through the U. S. Mail
to New York.17 After receiving the securities from Indiana, the New York broker received
payment from the buyer, and after deducting its commission, forwarded the proceeds to Indiana
and the sellers broker, who deducted his own commission and paid the trustee the remaining
funds.18 Indiana imposed a tax on the gross receipts of 1% of $65,214.20, which the trustee paid
under protest and filed suit for a refund.19
The Supreme Court ruled for the trustee and against the Indiana. Writing for the Court,
Justice Frankfurter wrote:
What makes the tax invalid is the fact that there is interference by a State with the freedom of
interstate commerce. Such a tax by the seller State alone must be judged burdensome in the
context of the circumstances in which the tax takes effect. Trade being a sensitive plant, a direct
tax upon it to some extent at least deters trade even if its effect is not precisely calculable. Many
States, for instance, impose taxes on the consumption of goods, and such taxes have been
sustained regardless of the extra-State origin of the goods, or whether a tax on their sale had been
imposed by the seller State. Such potential taxation by consumer States is but one factor pointing
to the deterrent effect on commerce by a superimposed gross receipts tax. 20
Therefore, the sale of securities across state lines was held not to be taxable by a state
under the Interstate Commerce Clause of the Constitution. The Freeman decision’s progeny was
overturned by the Supreme Court in 1977 by Complete Auto Transit, Inc. v. Brady21; however,
its legacy remained in effect concerning sales taxes.
B. National Bellas Hess v. Department of Revenue: Shopping from a catalog
becomes sales tax-free, if the retailer and customer are not in the same state.
It’s 1967, and the precursor of the Internet is only few years from being created. This is
when the issue of sales tax on catalog retailers, the remote sellers of the day, reached the U.S.
Supreme Court. This case came from Illinois, which attempted to require a catalog merchant,
National Bellas Hess to collect its sales tax on sales made in Illinois.22 There was just one
problem, National Bellas Hess was not located in Illinois, but rather in Missouri, and asserted
that it was beyond the authority of Illinois to compel it to be their tax collector.23
National Bellas Hess would mail catalogs to customers, who would then send orders to
them, through the mails to Missouri, where the orders would be filled and delivered to the
customer by use of the United States Mail or common carrier.24 Illinois asserted that
“…soliciting orders from within this State from users by means of catalogues or other
advertising, whether such orders are received or accepted within or without this State”
constituted being a “retailer maintain a place of business in this State.”25 The Illinois Supreme
16
Id at 250.
17
Id.
18
Id. at 251.
19
Id.
20
Id. at 256-7.
21
Complete Auto Transit v. Brady, 430 U.S. 274, 289 (1977).
22
Bellas Hess v. Dept. of Rev. 386 U.S. 753; 87 S.Ct. 1389; 18 L.Ed 2d 505 (1967).
23
Id.
24
Id, at 754-755.
25
Id. at 755.
7
Court held that National Bellas Hess was required to collect Illinois use tax from its customers
on orders delivered to Illinois.26 The United States Supreme Court reversed the decision.27
Writing for the Court, Justice Stewart wrote:
And if the power of Illinois to impose use tax burdens upon National were upheld, the resulting
impediments upon the free conduct of its interstate business would be neither imaginary nor
remote. For if Illinois can impose such burdens, so can every other State, and so, indeed, can every
municipality, every school district, and every other political subdivision throughout the Nation
with power to impose sales and use taxes. The many variations in rates of tax, in allowable
exemptions, and in administrative and record-keeping requirements could entangle National's
interstate business in a virtual welter of complicated obligations to local jurisdictions with no
legitimate claim to impose "a fair share of the cost of the local government."
The very purpose of the Commerce Clause was to ensure a national economy free from such
unjustifiable local entanglements. Under the Constitution, this is a domain where Congress alone
has the power of regulation and control.28
The Supreme Court differentiated National Bellas Hess from other catalog retailers, such
as Sears Roebuck and Montgomery Ward, which had lost sales tax cases earlier on the basis that
Sears and Wards both maintained local retail outlets in the jurisdictions that sought to impose the
tax.29 This is the beginning of sale-tax free catalog sales, except where there was a “physical
presence” of the retailer.
C. Quill, Inc. v. North Dakota: The States attempt to end the “Physical Presence”
Test.
It is 1992 and the Internet is only a few years from becoming a retail force with which to
be reckoned. National Bellas Hess and the “physical presence” test have been the law of the
land for 25 years. The states are unhappy because they see a source of revenue, that is catalog
sales, going untapped and untappable. North Dakota decided to do something about it.
North Dakota amended the definition of retailer so that it would encompass “every
person who engages in regular or systematic solicitation of a consumer market in the state.”30
Under North Dakota law, this would mean “three or more advertisements in a 12-month
period.”31
Quill was a Delaware corporation with facilities in California, Illinois, and Georgia.32
There were no offices or employees of Quill in North Dakota.33 Quill sold approximately $1
million worth of office equipment and supplies in North Dakota to nearly 3,000 customers.34
North Dakota sued Quill in North Dakota state court to compel payment with interest and
penalties.35 Citing Bellas Hess, the trial court ruled for Quill.36 Shockingly, the North Dakota
26
Id. at 754.
27
Id. at 760.
28
Id. at 759-760.
29
Id. at 758, citing Nelson v. Sears, Roebuck & Co. 312 U.S. 359 at 365.
30
Quill, at 302-3; citing N.D. Cent. Code Sec. 57-40.2-07.
31
Id., citing N.D. Admin. Code Sec. 81-04.1-01-03.
32
Id, at 302.
33
Id.
34
Id.
35
Id at 303.
36
Id.
8
Supreme Court reversed the trial court’s decision, claiming “wholesale changes” to both the law
and the economy justified this ruling.37 Quill appealed to the United States Supreme Court.
Justice Stevens, writing for the Court, agreed with the North Dakota Supreme Court that
the law had changed since National Bellas Hess had been decided twenty-five years earlier. The
Court noted that the Freeman decision was overturned by Complete Auto Transit, Inc. v Brady in
regard to Due Process claims.38 However, this was not enough for North Dakota to prevail.
Justice Stevens went on to write as follows:
In sum, although in our cases subsequent to Bellas Hess and concerning other types of taxes we
have not adopted a similar bright-line, physical-presence requirement, our reasoning in those cases
does not compel that we now reject the rule that Bellas Hess established in the area of sales and
use taxes. To the contrary, the continuing value of a bright-line rule in this area and the doctrine
and principles of stare decisis indicate that the Bellas Hess rule remains good law. For these
reasons, we disagree with the North Dakota Supreme Court's conclusion that the time has come to
renounce the bright-line test of Bellas Hess.39
Justice Stevens wrote further that “…Congress is now free to decide whether, when, and
to what extent the States my burden interstate mail-order concerns with a duty to collect use
taxes.”40 This is a very important statement, as will be revealed later when South Dakota
proceeds to accomplish in 2018 what North Dakota failed to do in 1992.
Justice Scalia wrote a concurring opinion, in which Justice Kennedy joined agreeing the
Commerce Clause ruling of Bellas Hess should not be overturned, on the basis of stare decisis
alone, without “revisiting the merits of that holding.”41 Over time, it would appear from a later
concurring opinion, Justice Kennedy would change his mind.
D. The Internet Tax Freedom Act of 1998: Congress makes the Internet a tax-free
zone, or did it?
In the years following Quill, a new way to market goods and services, as well as deliver
information would sweep the nation and the world. It was the Internet. Remote sellers were
going on line to sell their wares. It was an exciting time with new companies arising out of
nowhere. One such company started out of a garage in Seattle sold books, it would become the
bemouth known today as Amazon.
In 1998, Congress enacted the Internet Tax Freedom Act of 1998. It provides a
moratorium on state and local taxation of Internet access and “multiple or discriminatory taxes
on electronic commerce.”42 Congress defined a “discriminatory tax” as follows:
"(2) Discriminatory tax. The term 'discriminatory tax' means--
"(A) any tax imposed by a State or political subdivision thereof on electronic commerce that-
-
"(i) is not generally imposed and legally collectible by such State or such political
subdivision on transactions involving similar property, goods, services, or information
accomplished through other means;
37
Id.
38
Id at 313.
39
Id. at 317-8.
40
Id. at 318.
41
Id. 320.
42
Internet Tax Freedom Act, 112 Stat. 2681, Sec. 1101 (1998).
9
"(ii) is not generally imposed and legally collectible at the same rate by such State or such
political subdivision on transactions involving similar property, goods, services, or information
accomplished through other means, unless the rate is lower as part of a phase-out of the tax over
not more than a 5-year period;
"(iii) imposes an obligation to collect or pay the tax on a different person or entity than in
the case of transactions involving similar property, goods, services, or information accomplished
through other means;
"(iv) establishes a classification of Internet access service providers or online service
providers for purposes of establishing a higher tax rate to be imposed on such providers than the
tax rate generally applied to providers of similar information services delivered through other
means; or
"(B) any tax imposed by a State or political subdivision thereof, if--
"(i) the sole ability to access a site on a remote seller's out-of-State computer server is
considered a factor in determining a remote seller's tax collection obligation; or
"(ii) a provider of Internet access service or online services is deemed to be the agent of a
remote seller for determining tax collection obligations solely as a result of--
"(I) the display of a remote seller's information or content on the out-of-State computer
server of a provider of Internet access service or online services; or
"(II) the processing of orders through the out-of-State computer server of a provider of
Internet access service or online services. 43
Congress further defined “multiple tax” as follows:
"(6) Multiple tax.
(A) In general. The term 'multiple tax' means any tax that is imposed by one State or political
subdivision thereof on the same or essentially the same electronic commerce that is also subject to
another tax imposed by another State or political subdivision thereof (whether or not at the same
rate or on the same basis), without a credit (for example, a resale exemption certificate) for taxes
paid in other jurisdictions.
"(B) Exception. Such term shall not include a sales or use tax imposed by a State and 1 or
more political subdivisions thereof on the same electronic commerce or a tax on persons
engaged in electronic commerce which also may have been subject to a sales or
use tax thereon.
"(C) Sales or use tax. For purposes of subparagraph (B), the term 'sales or use tax' means a
tax that is imposed on or incident to the sale, purchase, storage, consumption, distribution, or other
use of tangible personal property or services as may be defined by laws imposing such tax and
which is measured by the amount of the sales price or other charge for such property or service.44
Electronic commerce was defined as “any transaction conducted over the Internet or
through Internet access, comprising the sale, lease, license, offer, or delivery of property, goods,
services, or information, whether or not for consideration, and includes the provisions of Internet
access.”45
Congress mandated that commerce over the Internet not be subject to multiple or
discriminatory taxes. However, this was in a world governed by Quill. Congress included a
provision noting that:
…nothing in this title shall be construed to modify, impair, or supersede, or authorize the
modification, impairment, or superseding of any State or local law pertaining to taxation the is
otherwise permissible by or under the Constitution of the United States or other Federal law and in
effect on the date of the enactment of this Act. 46
43
Id at Sec. 1105(2).
44
Id at Sec 1105(6).
45
Id at Sec. 1105(3)
46
Id at Sec. 1101(b)
10
This was drafted in 1998 and made permanent in 201647 All of this time, Justice Stevens
invitation for Congress to act was left, seemingly, unanswered. Congressional silence, at one
time, was taken to mean that it approved of what the courts had done; especially if the court
decisions at issue were many years old.48 The states were not taking Congress’ perceived silence
laying down, for they thought that Justice Stevens’ invitation was a command for something to
be done, and on their terms.
E. Direct Marketing Association v. Brohl, Justice Kennedy’s Invitation which the
States could not possibly refuse.
The states’ attempts to get around Quill¸ at first, were not direct challenges. The most
important of these challenges came from Colorado.
Colorado’s method of choice in attempting to improve compliance with its use tax was to
require retailers that did not collect sales or use tax to keep track of purchases made by Colorado
customers and report the same to both the customer and the Colorado Department of Revenue.49
The retailers were to have these reports to the State on or before March 1st or fact a fine of $10
per Colorado customer omitted from said reports.50
The trade organization representing many of the affected merchants filed suit in Federal
Court in Colorado challenging the law on the basis of the Interstate Commerce Clause.51 The
District Court enjoined the enforcement of the reporting requirement.52 The Tenth Circuit
reversed the District Court’s decision, citing the Tax Injunction Act of 1937.53
On appeal to the Supreme Court, the Tenth Circuit’s decision was reversed.54 However,
the Court did not judge the issue on its merits. The reversal was based on a technicality. The
Tax Injunction Act bars suits to “enjoin, suspend or restrain the assessment, levy, or collection of
any tax under State law where a plain, speedy and efficient remedy may be had in the courts of
said State.”55 Writing for the Court, Justice Thomas wrote, “[A]pplying the correct definition, a
suit cannot be understood to “restrain” the “assessment, levy or collection” of a state tax if it
merely inhibits those activities.”56
The Court’s opinion was not the most important one in Direct Marketing Association.
Justice Kennedy wrote a concurring opinion. He proceeded to examine the path from National
Bellas Hess to Quill.57 Justice Kennedy continued as follows:
In Quill, the Court should have taken the opportunity to reevaluate Bellas Hess not only in light of
Complete Auto but also in view of the dramatic technological and social changes that had taken
place in our increasingly interconnected economy. There is a powerful case to be made that a retailer
doing extensive business within a State has a sufficiently “substantial nexus” to justify imposing
some minor tax-collection duty, even if that business is done through mail or the Internet. After all,
“interstate commerce may be required to pay its fair share of state taxes.” D. H. Holmes Co. v.
47
130 Stat. 281 (Feb. 24, 2016).
48
Flood v. Kuhn, 407 U.S. 258, 273; 92 S.Ct. 2099, 2107; 32 L.Ed.2d 728, 739 (1972).
49
Direct Mktg. Ass’n. v. Brohl, 135 S.Ct. 1124, 1127; 181 L.Ed.2d 97, 102-3 (2015).
50
Id. at 1128.
51
Id.
52
Id. at 1129.
53
Id.
54
Id.
55
Id., citing 28 U.S.C. Sec 1341.
56
Id. at 1133.
57
Id at 1134 (Kennedy, J. concurring).
11
McNamara, 486 U. S. 24, 31, 108 S. Ct. 1619, 100 L. Ed. 2d 21 (1988). This argument has grown
stronger, and the cause more urgent, with time. When the Court decided Quill, mail-order sales in
the United States totaled $180 billion. 504 U. S., at 329, 112 S. Ct. 1904, 119 L. Ed. 2d 91 (White,
J., concurring in part and dissenting in part). But in 1992, the Internet was in its infancy. By 2008,
e-commerce sales alone totaled $3.16 trillion per year in the United States. 58
Justice Kennedy continued:

The Internet has caused far-reaching systemic and structural changes in the economy, and, indeed,
in many other societal dimensions. Although online businesses may not have a physical presence in
some States, the Web has, in many ways, brought the average American closer to most major
retailers.59
In what would later echo in Wayfair, Justice Kennedy would elaborate still further: “As a
result, a business may be present in a State in a meaningful way without the presence being
physical in the traditional sense of the term.”60
Concluding with what would be an invitation that the states could not refuse, Justice
Kennedy wrote:
The instant case does not raise this issue in a manner appropriate for the Court to address it. It
does provide, however, the means to note the importance of reconsidering doubtful authority. The
legal system should find an appropriate case for this Court to reexamine Quill and Bellas Hess.61
Justice Kennedy has now provided the states with what they have wanted, a chance to
overturn Bellas Hess and Quill. The states are not going to let this invitation pass. It was South
Dakota that won the race to the court house door.
F. Senate Bill 106: South Dakota answers Justice Kennedy’s Invitation.
Direct Marketing Association was handed down by the Supreme Court on March 3, 2015.
Within the year, the South Dakota Legislature would answer Justice Kennedy’s invitation with
Senate Bill 106.
The South Dakota Legislature made several findings when enacting Senate Bill 106.
Among the most interesting findings, aside from the harm caused by loss of sales tax in a state
without income tax62 were these two nuggets:
(7) As Justice Kennedy recently recognized in his concurrence in Direct Marketing Association v.
Brohl, the Supreme Court of the United States should reconsider its doctrine that prevents states
from requiring remote sellers to collect sales tax, and as the foregoing findings make clear, this
argument has grown stronger, and the cause more urgent, with time;63
(8) Given the urgent need for the Supreme Court of the United States to reconsider this doctrine,
it is necessary for this state to pass this law clarifying its immediate intent to require collection of
sales taxes by remote sellers, and permitting the most expeditious possible review of the
constitutionality of this law;64
58
Id at 1134-5.
59
Id. at 1135.
60
Id.
61
Id.
62
S.D. Codified Laws Sec. 10-64-1(2) (2018).
63
64
12
The important section of Senate Bill 106 that will be important going forward is
Section 1, which reads as follows:
Notwithstanding any other provision of law, any seller selling tangible personal property, products
transferred electronically, or services for delivery into South Dakota, who does not have a physical
presence in the state, is subject to chapters 10-45 and 10-52, shall remit the sales tax and shall
follow all applicable procedures and requirements of law as if the seller had a physical presence in
the state, provided the seller meets either of the following criteria in the previous calendar year or
the current calendar year:
(1) The seller's gross revenue from the sale of tangible personal property, any product transferred
electronically, or services delivered into South Dakota exceeds one hundred thousand dollars; or
(2) The seller sold tangible personal property, any product transferred electronically, or services
for delivery into South Dakota in two hundred or more separate transactions. 65
This provision has two different ways in which sales tax liability will attach to a retailer,
either a certain value of property sold in South Dakota irrespective of the number of transactions
involved or a certain number of transactions regardless of the dollar value of the transactions.
This would be one of the arguments against the act that many of the amici curiae would raise
against the act, to no avail.66
The finding that Justice Kennedy would latch onto concerned the alleged ease of
calculating sales tax everywhere, quickly.67 Another important provision, which is important for
reasons other than what the Supreme Court presumed, is the finding of an emergency by the
South Dakota Legislature.68 The reason for the importance is that, under South Dakota law,
when the Legislature declares an emergency, the measure may not be made the subject of a
referendum.69
The stage was now set for the case Justice Kennedy asked for in his concurrence
in Direct Marketing Association. The world of direct retailing would never be the same
again.
VI. South Dakota v. Wayfair, Inc.-The End of Tax-Free Sales on the Internet
A. The State’s Case
Senate Bill 106 was designed with the specific intent of making a court challenge to
Bellas Hess and Quill.70 After passage of Senate Bill 106, South Dakota sent notices to large
retailers invoking their then right not to collect sales tax in jurisdictions in which they chose not
to locate under Quill, provided for a declaratory judgment action against recalcitrant
merchants.71 Four remote retailers that did not respond to South Dakota’s demand to collect its
65
66
Brief for Nat’l. Ass’n. of Auctioneers, as Amicus Curiae Supporting Respondents, South Dakota v. Wayfair , Inc.
138 S.Ct. 2080 at 15-16.
67
68
2016 S.D. Sess. Law ch 270, Sec. 9.
69
State ex rel. Lindstrom v. Goetz, 73 S.D. 633; 47 N.W.2d 566 (1951).
70
71
S.D. Codified Laws. Sec. 10-64-3 (2018).
13
sales tax were sued by the state for the money the state alleged it was owed.72 One of the four
(Systemax) decided to collect the South Dakota tax and was dismissed from the complaint.73
South Dakota filed their complaint in Circuit Court for Hughes County, which includes
Pierre, the state capital. They lost, because Quill was still the controlling law, which they
conceded.74 On appeal to the South Dakota Supreme Court, they lost as well, for the same
reason. In fact, the state asked the circuit court and South Dakota Supreme Court to rule against
it for the sole purpose of getting its action, which only the State could bring under Senate Bill
106, to the United States Supreme Court.75
South Dakota’s case centers on:
a. State and local government being deprived of revenue under Quill.76
b. Quill harms local brick and mortar businesses;77
c. “Quill harms interstate commerce itself;”78
The State first alleges that Quill deprives state and local governments of sales tax
revenue. South Dakota cited studies that sales tax increases leads to increases in purchases from
out of state online retailers and a larger decrease in purchases from in-state online retailers.79
The State also cites Governor Dennis Daugaard’s seemingly unsupported assertion that South
Dakota loses $50 million per year in uncollected taxes due to online purchases.80
South Dakota further claims the loss of revenue multiplies because the online retailers do
not have local (South Dakota) facilities and therefore “do not support local jobs or spending the
way local stores do….”81 They cite a “multiplier effect” less revenue, fewer government
employees, leading to still less revenue.82 One can infer that the salary of government
employees is what drives the economy from this line of argument and/or that those who lose jobs
because the retailer which employed them will continue to require additional government
services for an extended period of time.
South Dakota alleges further that local “brick and mortar” retailers are harmed by online
sales. The State states, referring to Quill, “its unfairness to brick-and-mortar retailers is itself a
reason to grant certiorari.”83 Quoting then Judge Gorsuch in Direct Marketing Association v
Brohl, South Dakota alleges that online retailers “…seek more favorable treatment, a
comparative advantage, a sort of judicially sponsored arbitrage or ‘tax shelter.’”84 South Dakota
further cites studies stating that local stores must cut prices by 5-10% to match online retailers,
72
Petition for Writ of Certiorari, South Dakota v. Wayfair, Inc. supra at 15.
73
Id.
74
Id.
75
Respondents’ Brief in Opposition to Petition for Writ of Certiorari, South Dakota v. Wayfair, Inc. 138 S.Ct. 2080
(2018) at 32.
76
Petition for Writ of Certiorari, South Dakota v. Wayfair, Inc., supra at 18.
77
Id. at 23
78
Id at 26.
79
Id. at 22, citing Liran Einav et al., Sales Taxes and Internet Commerce, 104 Am. Econ. Rev. 1, 24 (2014).
80
Id. at 20.
81
Id at 22.
82
Id.
83
Id. at 23.
84
Id. quoting Direct Mrktg. Ass’n v. Brohl, 814 F3d 1129 at 1150 (10th Cir. 2016).
14
implying that the tax advantage of online retailers is all that is causing the struggles of brick and
mortar stores.85 In a sentence that will be echoed later in the amici curiae briefs filed by various
brick and mortar retailers, South Dakota states “[e]mpty storefronts and abandoned retail
institutions both contribute to creeping economic anxiety and signal the disappearance of shared
spaces and experiences in small towns and big cities alike.”86 While South Dakota makes
interesting points here, the tax advantages of online retailers may not be the sole force at work
when it comes to consumers choosing to purchase goods online as opposed to going to a brick
and mortar retailer and purchasing the goods from them. While it is an interesting subject, that
would offer further insight to this issue, it also is beyond this study.
Finally, South Dakota alleges that online retailers harm interstate commerce.
Laughingly, the way Quill harmed interstate commerce, according to South Dakota, is that
retailers minimized their presence by locating in one or as few states as possible, then ship their
goods all over the nation.87 They further allege “economic waste” because purchases from
Newegg, based in California, made by consumers in Wayfair’s home of Massachusetts would
pass those of Californians made from Wayfair, somewhere in the middle of the nation.88 It is
remarkable that governments should be concerned with economic waste and should take the time
and taxpayer funds to litigate to prevent it.
One of the most important reasons for the physical presence doctrine of Bellas Hess and
Quill, is the difficulty of calculating the vast myriad of possible sales taxes across jurisdictions
covering the entire the nation.89 South Dakota answers this with two contentions, which are as
follows:
a. The states are working together to make sales tax collection easier and
“streamlined;90 and
b. The states have “free” software from “certified” vendors that can solve
everyone’s problems in correctly calculating sales taxes.91
Many of the states have worked together on the Streamlined Sales Tax Project.92 South
Dakota is a full member of the organization.93 The goal of the project is for the states to make
their sales tax regimens more streamlined with standardized classifications, exemptions and rates
with a central filing point within each state for the purposes of filing sales tax returns and
registering as a retailer.94 Full members of the project have fully complied with the agreement
creating the organization and are members of its board.95 Only twenty-three states are full
members, with Tennessee as an Associate Member.96 Twenty other states are “advisor states”,
85
Id. at 24.
86
Id. at 25.
87
Id. at 27.
88
Id. at 29.
89
Quill at 315.
90
Petition for Writ of Certiorari, South Dakota v. Wayfair, Inc. 138 S.Ct. 2080 at 46.
91
Id at. 47.
92
Brief for Amicus Curiae Streamlined Sales Tax Governing Board, Inc. South Dakota v. Wayfair, Inc. 138 S.Ct.
2080 at 1.
93
Id. at fn2.
94
Id at 7-11.
95
Id at 2.
96
Id.
15
which are not in full compliance.97 Most notable among the “advisor states” are California, New
York, Texas, Illinois, and Florida.98
South Dakota’s other point is that modern computer software is the solution to the
problem of multi-jurisdictional sales tax collection. This is achieved by what are referred to as
“Certified Service Providers” which “handle all sales and use tax functions for remote sellers and
have the Streamlined States compensate the Certified Service Providers for these services.”99
Certified Service Providers are software companies that provide software to calculate sales taxes
that have been approved by the States.100 The providers allege that, because of new Internet
cloud based platforms have made it so “a single shop owner with basic internet skills can
complete in a few hours with a few clicks” what large amounts of hardware and personnel with
specialized computer skills were required for a few years ago.101 They describe the process of
tax collection as only four simple steps, which are as follows:
a. Fill out information about the business;
b. Choose the States for which taxes are to be collected;
c. Connect their tax software (or other tax software) to the business’s e-commerce
platform; and
d. Tag products with category labels.102
It appears that step three may be the most problematic step, because the selected tax
software must interface with the platform which operates the e-commerce site. They state that a
“plug-in” may be required, which they allege is the same process by which credit card processing
software is made to function with the e-commerce platform.103
Tagging merchandise is the process of categorizing it for tax purposes, referred to as
“Taxability Information Codes”.104 Different states handle different articles differently when
sales taxes are concerned, which potentially makes the task difficult for small or very small
businesses.105 Nuanced differences can make the difference between an item being taxable or
not taxable, as Etsy notes in its brief, as “flag” may or not be taxable depending on whether it is a
US flag, sold be a non-profit or is the flag of a governmental agency.106 They go on to say:
Neither Etsy nor any tax compliance software can make meticulous classification decisions for a
microbusiness; it will be nearly impossible to capture every classification, every exemption, and
every judicial or administrative interpretation of every exemption in every taxing jurisdiction
across the country.107
97
Id.
98
Id. at fn3.
99
Id. at 12.
100
Brief of the National Association of Certified Service Providers and the Software & Information Industry
Association as Amici Curiae in Support of Neither Party; South Dakota v. Wayfair, Inc, 138 S.Ct. 2080 at 4.
101
Id. at 16.
102
Id. at 16-17.
103
Id. at 19.
104
Id. at 19-20.
105
Brief for Etsy, Inc., as Amicus Curiae Supporting Respondents; South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 at
17.
106
Id at 28.
107
Id.
16
The Certified Service Providers also state that they account for the various exemptions of
goods from tax and tax holidays, so that retailers only need to have the software running and
tabulating sales and calculating taxes.108 They do not state how they determine which
jurisdiction’s taxes are to be collected, however, it can reasonably be assumed to be by ZIP code.
Etsy raises the issue of ZIP code 57717, Belle Fourche, South Dakota.109 This area covers three
states, South Dakota, Wyoming and Montana. South Dakota and Wyoming have sales taxes,110
although food is not taxed in Wyoming.111 Montana has no sales taxes.112 Etsy is concerned that
the tax would default to the Belle Fourche, South Dakota rate.113 On this point, I would raise an
additional concern. Consider for a moment ZIP code 56219, which is Browns Valley,
Minnesota. A portion of this ZIP code is in Roberts County, South Dakota, on the former Lake
Traverse Indian Reservation.114 Who would South Dakota hold responsible and what would they
do if clothing, a common online purchase, were sent to a South Dakota consumer that happens to
have been assigned a Browns Valley address by the Postal Service?
B. The State’s Brick and Mortar Allies---Rent Seeking in Every Way Possible
One of South Dakota’s leading arguments in favor of taxing remote sellers is the fairness
to local brick and mortar retailers. The perceived problem of remote sellers taking business
away from brick and mortar retailers is a phenomenon in many places. Brick and mortar have
been urging governments to adopt “Amazon” taxes, not just in the United States but other places.
In the United Kingdom, the Chancellor of the Exchequer, Philip Hammond, has floated the idea
of an “Amazon tax” because the tax system needs to be “fairer” to brick and mortar retailers.115
The European Union is considering revenue-based taxes on such retailers.116 European tax laws
are different, as taxes are minimized by funneling the revenues to subsidiaries abroad and
keeping revenues in high tax jurisdictions “low” for reporting purposes.117
Many parties filed briefs amicus curiae in this matter. Among those were several groups
representing brick and mortar retailers and those who rely upon them. Adam Smith noted in The
Wealth of Nations that people in the same business generally do not associate with each other,
except to contrive ways to keep others out of the same line of business.118 There was a great deal
of that found
South Dakota’s retailers, represented by the South Dakota Retailers Association,
complain of having to collect South Dakota sales tax, while out of state online and other remote
108
Brief of Certified Service Providers at 25.
109
Brief of Etsy, Inc. at 32.
110
Id.
111
Wyo. Stat. Sec. 39-15-105(a)(vi)(E) (2018).
112
Brief of Etsy, Inc. at 32.
113
Id.
114
The author is a former Public Defender for the Sisseton-Wahpeton Oyate of the Lake Traverse Indian
Reservation, which includes Roberts County, South Dakota.
115
Anna Mikhailovna, “Philip Hammond threatens ‘Amazon tax’ on online retailers to help out high street”, The
Telegraph (London) (Aug. 10, 2018) https://www.telegraph.co.uk/politics/2018/08/10/philip-hammond-warns-
online-retailers-face-tax-raid-amid-high/ (Last viewed Aug. 10, 2018).
116
Id.
117
Id.
118
Adam Smith, The Wealth of Nations, 152 (Regnery 1998) (1776).
17
sellers do not collect such taxes.119 South Dakota’s retailers allege that it is a competitive
disadvantage to them that they should have to collect the sales tax, of as much as 6 ½%, while
out of state retailers collect no tax at all.120 The South Dakota Retailers Association proudly
notes their long history of fighting catalog and remote retailers dating back to 1906 and a fight
with Montgomery Ward & Co.121 What they conveniently left out was they do not collect tax on
sales they may make and send out of state.122 They also leave out the fact that their members
only have to calculate taxes and file returns in generally one state (South Dakota), unless they
have a location in another jurisdiction.
The Retail Litigation Center, Inc., which represents larger retailers than those of the
South Dakota Retailers Association also filed an amicus curiae brief supporting the State.123
Their argument is that Bellas Hess and Quill distort interstate commerce in favor of “absentee
retailers” by granting Constitutional protection allowing them to not collect sales tax.124 The
Retail Litigation Center does acknowledge one fact which is “it is now in many ways cheaper to
sell and ship goods from afar than to do so as part of the local community.”125 They complain of
the remote sellers driving business from Main Street based on appeals to “duty-free” sales.126
They complain that “physical presence” depends on where the retailer is located as opposed to
where they allege the transaction to take place,127 which can safely be assumed to be the location
of the purchaser as opposed to the seller.
Another reason for abandoning Bellas Hess and Quill¸ in the opinion of the Retail
Litigation Center is that, the now previous precedent, generated instability in the law.128 They
cite numerous legal actions brought by a number of states including Alabama, Colorado, Indiana,
Massachusetts, South Carolina, Tennessee and Wyoming.129 Additional legislation was pending
in Pennsylvania and Mississippi was also cited as reasons for the Supreme Court to abandon
previous precedent.130
Finally, they allege the Supreme Court needs to change the law, which they allege to be
Constitutionally suspect, because they cannot wait for Congress to change the law.131 They
allege that Congress cannot overrule the court on this issue, but could “bypass the error,”
referring to Bellas Hess and Quill, “by returning to the States as a matter of legislative grace the
taxing power denied them by this Court as a matter of constitutional law.”132 What the Retail
Litigation Center fails to note is that Congress had knowledge of their perceived error of law for
119
Brief of Amicus Curiae South Dakota Retailers Association in Support of Petition; South Dakota v. Wayfair, Inc.
138 S.Ct. 2080 at 3.
120
Id at 8.
121
Id at 3.
122
S.D. Admin. R. 64:06:01:24 (2018).
123
Brief of Retail Litigation Center, Inc., as Amicus Curiae in Support of Petitioner, South Dakota v. Wayfair, Inc.
138 S.Ct. 2080 at 1.
124
Id at 4-5.
125
Id. at 8.
126
Id. at 9.
127
Id. at 19.
128
Id. at 26.
129
Id. at 28.
130
Id. at 29.
131
Id. at 33.
132
Id. at 34.
18
fifty years dating back to Bellas Hess in 1967 and did nothing to permit what they are
advocating. They fail to remember Justice Blackmon’s words in Flood v. Kuhn:
We continue to be loath, 50 years after Federal Baseball and almost two decades after Toolson, to
overturn those cases judicially when Congress, by its positive inaction, has allowed those
decisions to stand for so long and, far beyond mere inference and implication, has clearly evinced
a desire not to disapprove them legislatively. 133
In other words, the Court should disregard their own precedent of letting Congress
proceed with “positive inaction” on issues it has or should have knowledge of and do what they
will, even if Congress’s “positive inaction” may be purposeful.
The Retail Litigation Center briefly discusses technological change leading to some of
the changes in the retail sector. What they are describing is what the political economist Joseph
Schumpeter described as “creative destruction”.134 Creative destruction is the constant
restructuring process that occurs in a macroeconomic setting.135 Schumpeter considered this
force to be “the essential fact about capitalism.”136 A majority of productivity growth comes
from the process of creative destruction.137 While talking about their embrace of technology, it
seems that the parties represented by the Retail Litigation Center want to stop process.
The retailers, big and small, are not the only private interest group siding with South
Dakota in the fight for remote sales taxation. The shopping mall operators filed a brief in
support of South Dakota.
The International Council of Shopping Centers, the Investment Program Association,
Nareit, a “global association of Real Estate Investment Trusts and publicly traded real estate
companies”,138 the National Association of Realtors(R), and the Real Estate Roundtable,
hereinafter referred to as the real estate lobby, filed a joint brief amici curia.
The real estate lobby argues that online sales cause unemployment which “creates a sense
of dislocation among community residents.”139 They further argue that the value of real estate is
harmed by a decline in retail.140 Finally, that lost sales and property taxes harm local
governments.141
Citing a study by PwC, the real estate lobby admits that convenience is a reason for the
decline in retail, but are still fixated on the idea that because the online retailers do not collect
taxes, the purported tax-free aspect of the transaction is the driving force behind online retail.142
Citing another study by Austan Goolsbee, they allege that just under a quarter of online
133
Flood v. Kuhn, 407 U.S. at 283-4.
134
Ricardo J. Caballero, Creative Destruction, https://economics.mit.edu/files/1785. (Last viewed Oct. 11, 2018)
135
Id.
136
Id.
137
Id.
138
Brief for Amici Curiae International Council of Shopping Centers, Investment Program Association, Nareit,
National Association of Realtors(R), and the Real Estate Roundtable in Support of Petitioner, South Dakota v.
Wayfair, Inc. 138 S.Ct. 2080 at 8.
139
Id. at 9.
140
Id.
141
Id.
142
Id. at 12.
19
purchasers making just under a third of online purchases would shift back to brick and mortar
stores if charged sales tax.143
The real estate lobby further alleges that their shopping centers and storefronts foster a
sense of community in a disconnected world.144 They note further that store vacancies show a
community in decline with a community losing places.145 They complain that local merchants
lose patronage and interaction with the local community and the community loses the merchants’
charity in the form of donations to local causes.146
Their next major complaint is that the real estate industry was harmed by Quill. In short,
they have an oversupply of property, which online retailers do not need to rent. This causes
lower occupancy rates and the accompanying lower rents.147 Other establishments that normally
have not populated their developments are taking the place of department store anchors, but only
after significant investment to make such properties suitable have been made.148
They further complain that Quill hampers their attempts to adapt. They complain that
“pop-up” shops do not want to set up shop in their developments for fear of having a “physical
presence”, because of the tax collection responsibilities that they for which such retailers would
then become liable.149
Finally, they complain about the loss to local governments about the loss of sales,
property, and income tax revenue.150 As the sales tax issue has been discussed extensively, I will
go on to discuss property and income taxes. They complain that as their property values decline,
local governments will collect less in property taxes and further generate uncollectable property
taxes.151 I find it ironic that after many years the real estate lobby is concerned about the effect
constantly creating new shopping developments have on property taxes, especially in the
downtown districts that were emptied by shopping malls in the 1960s-1980s, some of which are
full of vacant storefronts to this day.152
Another amici curiae brief was filed jointly by the American Farm Bureau Federation
and the South Dakota Farm Bureau Federation. They complain that retail jobs in rural areas are
being lost to online merchants.153 Retail provides “off farm” income necessary to maintain
family farms that is no longer provided by manufacturing.154 The rural retailers provide
143
Id. at 14.
144
Id. at 18.
145
Id. at 19-20.
146
Id. at 21.
147
Id. at 22.
148
Id. at 23-4.
149
Id. at 26
150
Id. at 29-30
151
Id. at 31.
152
The author is the former Deputy City Attorney in Gary, Indiana. While other issues contributed to Gary’s
decline, the activities of the real estate lobby greatly accelerated the city’s collapse. It’s downtown remains a vacant
bombed out ruin, which they complain online retail is doing to their properties now and its property tax base cannot
support basic city services.
153
Brief of Amici Curiae American Farm Bureau Federation and South Dakota Farm Bureau Federation in Support
of Petitioner, South Dakota v. Wayfair, Inc. 138 S.Ct. 2080 at 6.
154
Id.
20
convenience in their communities through being accessible.155 They note, with irony, that whole
areas of the rural heartland are at risk of becoming “food deserts” where there are no grocery
stores for ten or more miles.156 They note further that the downward spiral is difficult to end,
once begun, as new families do not move in and the old ones cannot continue.157
All the above are examples of rent seeking behavior. Rent seeking behavior is not a
landlord, such as the shopping center developers and operators seeking out tenants to rent their
available storefronts at brick and mortar shopping developments and on Main Streets across the
country. Rent seeking is the appropriation of other’s wealth instead of producing it oneself.158
In the public policy area, it involves the employment of lobbyist to improve the one’s own
position at the expense of a competitor or competitors.159 What these private interest have done
is employ attorneys, and there is nothing wrong with the employment of attorneys, to lobby the
court for their preferred policy solution because they believe that it will harm their competitors
and help them. In other words, rather that adapt to rapidly changing circumstances, they
approached this issue before the court as they would when they would buttonhole legislators to
express their desire for assistance in hampering a competitor, only they had to do it in writing
and for all to read as a public record.
C. Wayfair’s Case
Wayfair, based in Massachusetts,160 is not the only respondent in this matter. They are joined
by Newegg, based in California161 and Overstock based in Utah162 and have mounted a joint
defense of South Dakota’s action. For convenience, they will be referred to, jointly, as Wayfair.
All three respondents are leading online retailers, with Wayfair and Overstock making
the National Retail Federation’s 2017 list of Top 50 E-Retailers.163 None collect sales tax
outside of jurisdictions where they maintain a physical presence. All were targeted by South
Dakota based on their size, lack of physical presence, and likelihood of having made the
requisite number of sales to South Dakota customers called for by Senate Bill 106.164 All three,
relying on Quill, fought back and won in Hughes County Circuit Court and the South Dakota
Supreme Court on summary judgment.165 South Dakota appealed to the United States Supreme
Court,166 following Justice Kennedy’s invitation for the legal community to conjure up such a
case.167
The respondents’ arguments against South Dakota were as follows:
155
Id. at 7.
156
Id. at 11.
157
Id. at 12.
158
David Marotta, What is Rent-Seeking Behavior? Forbes (Feb 24, 2013)
https://www.forbes.com/sites/davidmarotta/2013/02/24/what-is-rent-seeking-behavior/ (Last viewed Sept. 4, 2018)
159
Id.
160
https://www.wayfair.com/ (Last viewed Sept. 18, 2018)
161
https://www.newegg.com/Info/AboutUs.aspx (Last viewed Sept. 18, 2018)
162
https://www.overstock.com/about (Last viewed Sept. 18, 2018)
163
2017 Top E-Retailers Chart, https://nrf.com/2017-top-50-e-retailers-chart (Last viewed Sept. 18, 2018).
164
Respondents’ Brief, South Dakota v Wayfair, Inc.138 S.Ct. 2080 at 41-2.
165
Petition for Writ of Certiorari at 15-6.
166
Id. at 12.
167
Direct Mrktg Ass’n. v. Brohl, 135 S.Ct. at 1135.
21
a. The case was rushed through the South Dakota court system which resulted in there
being a lack of a record or findings of fact;168
b. The states are not being seriously shortchanged on their sales tax collections;169
c. The collection of sales taxes for multiple jurisdictions remains burdensome and the
“free” software South Dakota and various amici curiae are neither a solution nor are
they truly free;170
d. That if Quill was overruled, the states would have no incentive to work out a
compromise that all sides can agree upon;171
e. That, despite South Dakota forbearing retroactive application of tax collection, other
states have not, which would burden remote sellers;172
Wayfair complains that this matter was rushed through the South Dakota courts on a fast
track designed to get the matter in front of the U.S. Supreme Court.173 South Dakota presented
no evidence to the Circuit Court,174in an action that only the state could file, pursuant to an act of
its own legislature.175 South Dakota even argued that the South Dakota Supreme Court should
affirm the Circuit Court’s decision granting summary judgment to Wayfair.176
Wayfair contends that the matter is based on factual premises and not legal ones.177 They
continue that no evidence was entered as to any of South Dakota’s contentions at the trial court
level regarding “technological changes” or “economic changes,” despite the State having the
burden of proving these matters as their case to overturn Bellas Hess and Quill.178 Wayfair notes
the strangeness of South Dakota’s appeal in that they cite the absence of a factual record as a
“virtue.”179 Wayfair continues noting the Court itself has previously stated a factual record is
necessary in dormant Commerce Clause cases.180 Quoting Washington State Apple Advertising
Commission v. Hunt, Wayfair states:
When “state legislation comes into conflict with the Commerce Clause’s overriding requirement
of a national ‘common market,’” the Court is “confronted with the task of effecting an
accommodation of the competing national and local interests.”181
Wayfair further complains that, in the manner the State has handled this case, it is
effectively making it a case of a State against individuals in other states using the Supreme
Court’s original jurisdiction.182 Because the Supreme Court is structured as an appellate court, it
168
Respondents’ Brief at 22.
169
Id. at 13.
170
Id at 14-5.
171
Id. at 19.
172
Id. at 20.
173
Respondents’ Brief in Opposition to Petition for Writ of Certiorari, South Dakota v. Wayfair, Inc. 138 S.Ct. 2080
at 9.
174
Id. at 15.
175
Id. at 19.
176
Id. at 20-1.
177
Id. at 29.
178
Id.
179
Id. at 30.
180
Id.
181
Id. at 30-1, quoting Wash. State Apple Adver. Comm’n v. Hunt, 432 U.S. 333, 350 (1977).
182
Id. at 32.
22
has refused to hear similarly structured cased previously.183 Wayfair also noted that, in
conceding summary judgment at a lower court, may have destroyed their case.184
Wayfair also asserts that sales tax collections are not seriously impeded by remote sellers.
Wayfair cites a 2009 study by the University of Tennessee as the basis for the belief that states
were being seriously shortchanged in their sales tax collections.185 Flaws have been found in this
study and it predates Amazon’s decision to collect sales tax in most, if not all, sales tax
jurisdictions.186 They cite the amici curiae brief of the real estate lobby showing that 80% of the
sales tax that should be collected is being collected.187 They further allege this study shows that
collection rates are higher on Internet sales due to the fact that a great majority of those
purchases are from retailers already required to collect sales tax under Quill.188 Wayfair, further
cites the same PwC study cited by the real estate lobby which showed that convenience is a more
important factor than sales tax when choosing between brick and mortar and online purchases.189
Multi-jurisdictional sales tax collection remains a burden, especially for small and mid-
sized retailers. There are 46 different state (including the District of Columbia) sales taxes, with
thousands of different local jurisdictions with sales taxes over and above their state rates.190
Each separate jurisdiction has different requirements and different tax holidays at different times
and on the purchase of different things.191 The only thing that stood between this Byzantine tax
system and small businesses that chose to offer their wares online was Quill.192
South Dakota claims that advances in software is the solution to the online retailers’ sales
tax problems.193 South Dakota also points to the Streamlined Sales Tax Project, as the means the
states have made it easier for multi-jurisdictional sales tax collections.194 The problem with the
Streamlined Sales Tax Project is that the 24 full member states only cover one-third of the U.S.
population.195
The software has problems as well. It does not eliminate or even reduce the complexity
of the sales tax regimen.196 Wayfair points out the problems with the software solutions offered
by South Dakota such as:
Challenges unaddressed by software include: varying and complex rules for “sourcing” products
and, in particular, services, to the proper jurisdiction; non-uniform product definitions across
states, and even within state for those having “home rule” jurisdictions; special tax “caps” and
thresholds for particular products…. 197
183
Id. citing Ohio v. Wyandotte Chems. Corp. 401 U.S. 493 (1971).
184
Id. at fn. 5.
185
186
Id.
187
Id. at 76.
188
Id.
189
Id. at 78.
190
Respondents’ Brief in Opposition to Writ of Certiorari, at 43.
191
Id.
192
Id. at 44.
193
Id. at 46.
194
Id. at 47.
195
Id.
196
197
Id at 51.
23
Exemption certificates pose another problem, in that, for sales to be tax-exempt the
retailer must collect and retain the proper paperwork from the purchaser.198 Tax-exempt sales
are generally sales to schools, government, not for profits, but also wholesale sales intended to be
resold at retail.199
Another problem with the software proffered by South Dakota is cost. Wayfair estimates
that the cost of multi-jurisdictional sales tax software would be approximately $200,000 per year
in licensing fees alone for unlimited lookup requests.200 Newegg, in sales tax litigation in
Alabama, commissioned a study that showed that multi-jurisdictional sales tax software is not
“plug and play” and cheaply integrated into current systems, but rather constitutes a considerable
expense of between $80,000 to $270,000 for a small to mid-sized retailer.201 This appears to be
before any annual licensing fees. South Dakota’s “free” software only covers the “Streamlined
States”, which do not cover approximately 70% of the U.S. population.202 The cost of
integrating the Streamlined States “free” software into retailers’ computer platforms is not even
accounted for and is not covered, when South Dakota pushes its “free” software.203 South
Dakota and the other states do not even discuss what could be even more expensive for remote
sellers than the software they are pushing, and that is the cost of sales tax audits.204
Without Quill, the states have no incentive to work together and with Congress to create a
solution to their problem that would be workable for remote sellers throughout the nation.
Wayfair argues that Congress is the place where this issue should be resolved.205 Their argument
is that the states will impose their hodgepodge of sales tax laws on remote sellers throughout the
nation, impeding interstate commerce in the process because they refuse to simplify their tax
structures.206 While South Dakota implies that Congress has done nothing, there has been debate
on several different solutions.207 The states’ impatience, coupled with Justice Kennedy’s
“invitation” threaten to derail Congressional efforts because the states will not have any
incentive to work with Congress if the Court rules the states can apply their tax laws on retailers
that are not located in their state, if they remotely sell items of tangible personal property to
residents of states in which the merchant is not located.208
South Dakota, as part of Senate Bill 106, forswore retroactive collection of remote sales
209
taxes. That, sadly, is not the position of many of the other states, so eager they are to reach out
with the greedy hand, that they intend to pursue tax collections from remote sellers that have not
previously collected their taxes.210 Connecticut has sent notices in an attempt to collect three
years of back taxes from remote sellers and Alabama has asserted a six figure tax bill is owned
198
Id. at 55.
199
Id.
200
Id. at 58.
201
Id. at 58-9.
202
Id. at 59-60.
203
Id. at 60.
204
Id. at 61.
205
Respondents’ Brief in Opposition to Writ of Certiorari at 21.
206
Id. at 23
207
Id.
208
Id at 25.
209
210
24
by Newegg based on their “economic presence” theory.211 And this was before ANY opinion
was rendered by the Supreme Court in Wayfair. Respondents assert there would be nothing to
prevent states from attempting to collect back sales taxes from retailers absent Quill and further
that the states allege that remote sellers may not have “protection from retroactive tax laws, in
any context.”212
Retroactive taxation of remote sellers, who were acting in accordance with the laws in
effect when they made their sales would have several deleterious effects, the two most important
would be that several such merchants would be bankrupted by such liabilities, or even proving
the states were incorrect in their assertions of tax liability.213 The other would be that the
Supreme Court cannot be taken at their word, in that they, unaccountable judges, could change
the law on a whim, with retroactive effect, thereby destroying those that relied upon the law for
protection. Wayfair cites Justice Scalia, concurring in Quill stating that:
[i]t would be fundamentally incompatible with state decisis to “demand that private parties
anticipate” the overruling of precedent and to “visit economic hardship upon those that took us at
our word.”214
Such an outcome would, in my opinion, undermine the rule of law because the law could
not be counted upon to protect those acting within it, after changes are made it the law, which
happen to be retroactive. That is why the Founders enacted Article I, Section 9 of the
Constitution prohibiting ex post facto laws. However, these only apply to criminal laws that
would disadvantage the accused.215 As such, those that did not remit sales taxes to the states
under Quill, may not face incarceration for such failure, they do face financial ruin.
D. Others Who Stand to Lose in the Brave New World of Internet Taxation
The three respondents are not the only parties with something to lose in Wayfair. These
parties include other Internet sellers, some of whom filed amicus curiae briefs with the Court.
Some are large Internet companies like eBay and Etsy, while others are small. Some are multi-
channel retailers, who sell goods various ways, one of which is over the Internet. Trade
associations and public interest groups also were involved, arguing for their members and
interests.
Their arguments were as follows;
a. Businesses have operated under Bellas Hess and Quill for many years and should be
able to rely on the “physical presence” rule;
b. Congress is the place to make laws which would change Quill because it is Congress
that protects and regulates interstate commerce;
c. Ruling on this case would “reward” states for enacting laws they know are
unconstitutional in an effort to get the Court to change the law when Congress will
not;
d. Sales taxes are complex and multi-jurisdictional sales tax liability would be an undue
burden on small and mid-sized companies looking for a national audience.
211
Id.
212
Id. at 96.
213
Id. at 20.
214
Respondents’ Brief in Opposition to Writ of Certiorari at 37.
215
Calder v. Bull, 3 U.S. 386 (1798).
25
e. Reliance on proprietary technology by businesses is a hindrance to the addition of
more software to collect multiple states’ sales taxes;
f. States do not have the authority to create a national scheme of taxation by reaching
beyond their borders;
g. Businesses have no way of predicting how many sales they will make to a particular
place, so would have to collect sales tax on the first sale;
h. Some online retailers have little control over their inventory because they sell through
Amazon or other marketplaces;
i. Retroactive application of sales tax collection on sales made to out of state customers
would be an undue burden on sellers who relied on Quill, causing an undue burden on
interstate commerce.
a. Businesses have operated under Bellas Hess and Quill for many years and should be
able to rely on the “physical presence” rule.
Businesses have relied on the rule of Bellas Hess since the case was decided in 1967.216
Americans for Tax Reform cited the four-part standard applied in Complete Auto Transit, that
the states are using to attempt to overturn Bellas Hess, that the Court applied in Quill, which
upheld Bellas Hess. That standard provides a tax to be constitutional if:
1. “[I]s applied to an activity with a substantial nexus with the state”;
2. “[I]s fairly apportioned”;
3. “[D]oes not discriminate against interstate commerce”; and
4. “[I]s fairly related to the services provided by the state.”217
Complete Auto Transit supports taxation for a business’s activities within the taxing
state. 218
Sellers selling items into a state from without the state “based on transaction volumes”
is not in-state activity, of which Complete Auto Transit would support taxing.219 Some activity
needs to be conducted in the state by the business for their activities to become taxable according
to Complete Auto Transit, not having another party deliver a product to the state.220
The Bellas Hess rule “has become part of the basic framework of a sizeable industry.”221
Bellas Hess and Quill protect small to mid-sized businesses from onerous regulations in multiple
jurisdictions, allowing them time to grow and expand into other states, whose taxes these
businesses will collect and remit upon their arrival.222 Elimination of the rule in Quill, would
pose an enormous, if not insurmountable burden on many independent small businesses that
utilize the Internet to conduct their business.223
216
Brief of Amicus Curiae Americans for Tax Reform in Support of Respondents, South Dakota v. Wayfair, Inc. 138
S.Ct. 2080 at 3-4.
217
Complete Auto Transit, 430 U.S. at 287 (1977).
218
Brief for Amici Curiae Washington State Tax Practitioners in Support of Respondents, South Dakota v. Wayfair,
Inc. 138 S.Ct. 2080 at 7.
219
Id. at 9.
220
Id. at 22.
221
Brief of Netchoice as Amicus Curiae in Support of Respondent, South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 at
5.
222
Id. at 6.
223
Brief of Amici Curiae, eBay, Inc. et al. in Support of Respondents, South Dakota v. Wayfair, Inc., 138 S.Ct. 2080
at 11.
26
Catalog sellers have particular problems collecting sales tax because some of their
customers pay by check.224 If purchasers under calculate the sales tax on an order and pay be
check, the seller is put into a difficult position of either absorbing the extra tax, returning the
check, or billing the customer the difference.225 It is usually most cost efficient for the merchant
to absorb the extra tax because of the cost of recovery from the customer.226 Overpayments must
either be paid over the state or refunded to the customer, which adds to the cost of the catalog
merchant.227 If the sales tax rates of every jurisdiction were printed in a catalog it would take
approximately forty pages in the catalog to provide every possible tax rate to a consumer.228
Bellas Hess was initially designed to protect a catalog merchandiser and not requiring sales tax
collection in jurisdictions in which they are not located.
Microbusinesses and other small businesses that populate the Internet and either sell
through their own site or through marketplaces like Amazon, eBay, or Etsy face problems with
sales taxes, but for the protections afforded by Bellas Hess and Quill. Sales tax compliance in
one state is difficult enough for small, one-person businesses and are an impediment to
growth.229 Software may not be the answer when considering how to classify thousands of
different products, some unique that are sold by small businesses.230 But for Quill, many
microbusinesses would not engage in interstate commerce at all.231 These small businesses
provide opportunities in disadvantaged places in the nation and for women, minorities and
persons with disabilities to earn money when they otherwise would not have that opportunity.232
Online marketplaces assist micro and other small businesses reach larger audiences, some of
which are also local brick and mortar stores seeking to make their business larger.233
Many of these businesses have few, if any, back office staff to handle tax compliance
issues.234 A great number have only the proprietor to handle these issues and do not have the
resources to outsource these matters.235
Auction houses would have their costs expanded due to increased licensing fees for sales
tax software. The reason would be that sales taxes would be calculated, not on where the assets
were located, but rather by where the purchaser resides.236
b. Congress is the place to make laws which would change Quill because it is Congress
that protects and regulates interstate commerce.
224
Amicus Curiae Brief of American Catalog Mailers Association Supporting Respondents, South Dakota v.
Wayfair, Inc. 138 S.Ct. 2080 at 10.
225
Id. at 11.
226
Id.
227
Id.
228
Brief for Colony Brands, Inc., as Amicus Curiae in Support of Respondents, South Dakota v. Wayfair, Inc. 138
S.Ct 2080 at 40.
229
Etsy Brief at 5.
230
Id. at 6.
231
Id. at 11.
232
eBay, Inc. Brief at 8-9.
233
Etsy Brief. at 13.
234
eBay, Inc. Brief at 27.
235
Id. at 28.
236
Nat’l Ass’n of Auctioneers Brief at 26.
27
The Constitution gives Congress the authority to regulate Interstate Commerce.237
Congress was debating several bills regarding Internet taxation while Wayfair was moving
through the courts.238 These bills would either allow for taxation across state borders or
statutorily enact Quill. “Resolving such differences based on policy inputs is exactly what
legislatures are best at, and exactly what courts---charged with resolving cases and controversies-
--are least well equipped to handle.”239 While Congress may move slowly (Justice Stevens
invitation to change the law was issued in 1992), there is give and take and all positions can be
considered. In a court, it is more of a winner take all situation, without compromise and with
little to no consideration of issues and parties outside the proceedings.
c. Ruling on this case would “reward” states for enacting laws they know are
unconstitutional in an effort to get the Court to change the law when Congress will
not.
Despite the fact that Congress was debating legislation that would have addressed South
Dakota, and the rest of the states’ issues with Internet taxation, it didn’t respond to Justice
Stevens invitation fast enough for Justice Kennedy, who issued his own invitation. Justice
Kennedy’s invitation was for the “legal community” to find a challenge to Quill.240 South
Dakota loudly and proudly accepted that challenge.241 In accepting that challenge, the South
Dakota Legislature intentionally enacted a statute they knew to be unconstitutional under then
current Supreme Court precedents (Bellas Hess and Quill), with the intent of overturning those
cases and enacting national policy through the Supreme Court because Congress was not
working fast enough for them.242 For states to engage in such conduct is a threat to the rule of
law and would be dangerous precedent in other areas of the law that are more contentious.243 It
is further offensive to federalism for a state to force an issue, through litigation, that belongs to
Congress, so that it may impose its policy choice on the nation.244
d. Sales taxes are complex and multi-jurisdictional sales tax liability would be an undue
burden on small and mid-sized companies looking for a national audience.
While software has made the job of tax compliance easier, the other costs associated with
compliance has only increased, which is a burden on small businesses.245 One of the reasons for
the increased cost is that skilled, trained professionals must be employed to integrate the states’
“free” software into a business’s system, often at multiple points in the system.246 Separate
sourcing rule for in and out of state shipments complicates matters even more, despite the
“Simplified Sales Tax Project.”247 Returns would pose another problem, in that rates may
237
U.S. Constitution Art. I, Sec. 8
238
Netchoice Brief at 23.
239
Id. at 23-4.
240
Direct Marketing Ass’n v. Brohl, 135 S.Ct. 1124 at 1135.
241
Petition for Writ of Certiorari at 13.
242
Americans for Tax Reform Brief at 15.
243
Id.
244
Id at 16.
245
Netchoice Brief at 14-5.
246
Id. at 17.
247
Id. at 20.
28
change between the time of sale and the items return.248 This may be a problem in one taxing
jurisdiction, imagine having to deal with over 12,000 jurisdictions. “The very existence of CSPs
implies that tax collection is not as ‘easy’ as has been suggested.”249 It also may prove to be a
burden to have to rely on a “Certified Service Provider” to provide tax software, as the viability
of a business will depend on the viability of whichever provider the business choses.250 While
taxes are difficult to collect for the Streamlined States, the fact that not all states are streamlined
makes tax compliance even more difficult.251
Tax software does not classify goods sold, in fact the software vendors advise their
customers that the classification of their products is up to them and not the software vendor.252
Having to classify items in one jurisdiction is troublesome enough, having to perform it in over
12,000 would be difficult to impossible for a small business, let alone a microbusiness.253
The possibility of being subjected to audit in several jurisdictions is another burden that
would be impossible for a small business, let alone a microbusiness to handle.254 The expense of
any audit would be a problem, but the possibility of several, some far from home may be too
much for some businesses to handle.
e. Reliance on proprietary technology by businesses is a hindrance to the addition of
more software to collect multiple states’ sales taxes.
Many online retailers rely on proprietary computer systems to operate their businesses
255
online. These systems have evolved over many years and at great expense to the companies
that operate them.256 Off the shelf software solutions are difficult to integrate into these types of
platforms and effective integration will take more time than some imagine.257 Experts at one
company were unable to design a system to comply with Colorado’s reporting requirements.258
Imagine having to perform this task for multiple jurisdictions and not for reporting, but for actual
tax collection.
f. States do not have the authority to create a national scheme of taxation by reaching
beyond their borders.
The projection of one state’s law into another state violates the “territoriality” principle of
the Commerce Clause.259 Allowing one state to deem an entity “physically present” would allow
248
Brief of Amicus Curiae America’s Collectibles Network, Inc., d/b/a Jewelry Television In Support of
Respondents, South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 at 27.
249
Id. at 35.
250
Id.
251
American Catalog Mailers Brief at 15.,
252
Etsy Brief at 25.
253
Id at 28.
254
eBay Brief at 21.
255
America’s Collectable Network Brief at 19.
256
Id.
257
Id. at 19-20.
258
Id at 24-5.
259
Brief for the Cato Institute as Amicus Curiae for Respondents; South Dakota v. Wayfair, Inc. 138 S.Ct 2080 at 9,
citing Midwest Title Loans, Inc. v. Mills¸593 F3d 660, 668-69 (7th Cir. 2010).
29
states to extend their reach by statute alone.260 This would seem to violate the sovereignty of
other states.
Furthermore, precedent holds that taxing interstate commerce, the entity taxed should be
receiving some benefit from the taxing government. Under Complete Auto, taxes must be:
1. Nondiscriminatory and properly apportioned
2. Related to the activities in the state; and
3. The state has provided benefits to the company in return for the tax payments.261
Remote sellers do not receive benefits from jurisdictions in which they are not physically
present and because of this, Complete Auto is not satisfied.262
g. Businesses have no way of predicting how many sales they will make to a particular
place, so would have to collect sales tax on the first sale.
Businesses have no way of determining how many sales, or for what value of sales they
will make to any particular state in a given year.263 Because of this, businesses must collect sales
tax on all sales, to avoid problems down the line. If they become liable for taxes which they did
not collect from a customer, they then have to pay the tax themselves because they will not be
able to go back and get the funds from the customer. As such, the small business exemption in
the South Dakota statute is illusory, unless businesses actually keep track of sales made to each
state and the dollar value of these sales. Therefore, the only way to guarantee not falling under
the South Dakota statute would be to refuse sales to South Dakota or limit sales to South Dakota.
Such conduct would interfere with interstate commerce by preventing the establishment of a
national market.
h. Some online retailers have little control over their inventory because they sell through
Amazon or other marketplaces.
Many small businesses engage in e-commerce by participating in marketplaces.
Marketplaces are Internet web sites that offer goods from a variety of sellers. Examples of such
marketplaces are Amazon, eBay and Etsy. A popular program is Amazon Prime because of the
free shipping.264 For third party merchants to participate in Amazon Prime, they must utilize
“Fulfillment by Amazon.” (FBA)265 When participating in FBA, merchants must ship their
merchandise to Amazon. Once merchandise is shipped to Amazon; Amazon, and not the third-
party merchant, controls the product from that point.266 If a merchant uses UPC labels to
categorize the merchandise, Amazon considers that merchandise to be “commingled” and will
attribute the sale of said merchandise as it pleases.267 Commingled merchandise may be
260
Id. at 11.
261
Complete Auto Transit, Inc., at 287.
262
Brief Amicus Curiae for the American Legislative Exchange Council in Support of Respondent; South Dakota v.
Wayfair, Inc., 138 S.Ct. 2080 at 46.
263
Brief of Flipper, LLC, an Amazon Third Party Merchant with Product Sold in All 50 States and Over 50
Countries as Amicus Curiae in Support of Respondents, South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 at 5.
264
Id. at 8.
265
Id.
266
Id. at 10.
267
Id. at 11.
30
delivered to a customer, even though the merchant never had control of the actual merchandise
sold, but be responsible for collecting and remitting the tax.268
These sales may be regarded as consignment sales, but, unlike most consignment sales
are being taxed to the consignor, as opposed to the consignee.269 As such the marketplace would
be responsible for tax collection and not the merchant.270 Amazon does have a service, for which
it charges third-party merchants to collect tax, but as the consignee, it should be doing that
anyway.271
i. Retroactive application of sales tax collection on sales made to out of state customers
would be an undue burden on sellers who relied on Quill, causing an undue burden on
interstate commerce.
It would be an undue burden to impose potentially crippling taxes retroactively on
merchants who relied on the Supreme Court’s past decisions in Bellas Hess and Quill. While
South Dakota took care to make its statute effective if Quill were ever overturned by the Court,
other states have laws on their books that would be validated retroactive to any Court decision.272
Retroactive application would be a problem because it could lead to double taxation, that is
merchants taxed where the consumer may have actually paid the use tax themselves.273
Furthermore, it is not fair to the merchants to come back and, without notice, demand tax be paid
on sales that were tax-free when made under the law then in effect.274
Several states have passed laws to establish “economic nexuses” without protections
from retroactive enforcement and three were already attempting enforcement while Wayfair was
still pending.275 As the statute of limitations relating to sales tax liability does not commence
until a sales tax return is filed, the states may be able to go back several years to “recoup” taxes
that were not owed under tax laws in effect at the time of sales, but would become taxable with
abrogation of Quill without protections against retroactive application.276
Other states have statutes that default to whatever is constitutional. Unlimited liability
for uncollected sales taxes could be imagined in these jurisdictions, especially in those whose
statutes of limitations do not begin until the first sales tax return is filed.277 Furthermore, nothing
would prevent states from enacting provisions that would be retroactive, in an attempt to collect
funds that, otherwise, would be unavailable to the states.278
Colorado, and the other forty states, territories, and the District of Columbia address
retroactivity by noting that “there is no reason to suspect that the amici States will deviate from
their normal administrative procedures—including advance notice—when implementing this
268
Id.
269
Id. at 12.
270
Id. at 13.
271
Id. at 19.
272
Brief of Tax Executives Institute, Inc., as Amicus Curiae in Support of Respondents; South Dakota v. Wayfair,
Inc. 138 S.Ct 2080, at 8.
273
Id. at 10.
274
Id.
275
Id. at 13.
276
Id. at 14-5.
277
Id. at 19.
278
Id. at 21.
31
Court’s new post-Quill precedent.”279 However, they continue, in the next paragraph with this
interesting statement:
In the unlikely event that a future retailer believes this Court’s decision abrogating Quill is being
retroactively applied to them in an impermissible manner under either federal or State law, the
States’ customary procedures of resolving tax disputes, and the right to judicial review, will
provide the retailer with an appropriate opportunity to be heard.280
This seems to be a way of saying the states may try to collect, but if they do, merchants
will have a way to complain, in the States’ own courts and administrative bodies, until the matter
percolates up the Supreme Court again.
E. Positions not Considered by Any Party
There are some concerns that have not been addressed, but are interesting, if not important to
the future development of law regarding sales taxation in the United States. The issues that will
be discussed are in relation to South Dakota’s law, in particular, but also the states, in general,
taxing purchases made from businesses located in foreign nations. Another issue concerns where
the Indian tribes fit into the sales tax regimen of the states when dealing with remote sellers.
Most states do not tax services within their state, but South Dakota does. How will out of state
service providers, such as engineers, architects, and accountants, who perform services from
their home states be affected by South Dakota’s sales taxes if they perform services on a South
Dakota project. Finally, what about the interests of other sovereign states, which have exercised
their sovereign rights and rejected the taxation of sales within their jurisdictions.
I find the most interesting question to be the one concerning how this law will affect purchases
made from sellers located in foreign nations. The retailers complain of websites that advertise
“no sales taxes”, however, I struggled to find one that had this blaring out. However, I did find
one, www.nextdirect.com. Next is based in the United Kingdom and sells clothing and
homewares. They advertise prominently on their website “No Additional Charges. We pay all
additional duties and tax and deliver direct to your door.”281 Under some states’ laws, this
practice would be illegal. Under some states’ laws, this practice would be illegal. An example would
be Kansas which has a statute expressly forbidding:
any retailer to advertise or hold out, or state to the public, or to any consumer, directly or
indirectly, that the tax, or any part thereof, imposed by this act will be assumed or absorbed by the
retailer, or that it will not be considered as an element in the price to the consumer, or if added,
that it, or any part thereof, will be refunded.282
But the question remains, if the company were totally beyond the reach of American
authorities, how would the states enforce their tax laws upon them.
There is a question as to whether the Import-Export Clause of the Constitution would affect
this case.283 Professor Baker notes that there is a three-part test, enunciated in Michelin Tire Co.
279
Brief for Colorado and 40 Other States, Two United States Territories, and the District of Columbia as Amici
Curiae Supporting Petitioner, South Dakota v. Wayfair, 138 S.Ct. 2080 at 35-6.
280
Id. at 36-7.
281
https://www.nextdirect.com/us/en (Last viewed Sept. 28, 2018).
282
Kan. Stat. Ann. Sec. 79-3605 (2018).
283
Brief of Professor John S. Baker, Jr., as Amicus Curiae, Supporting Neither Party, South Dakota v. Wayfair, Inc.
138 S.Ct. 2080 at 3.
32
v. Wages 423, U.S.276 (1976), under which the Import-Export Clause is interpreted. The test is
whether the tax:
1. Impedes the federal government’s ability to “speak with one voice” in implementing the
nation’s foreign relations;
2. Results in diverting import revenues from the federal government to the states; or
3. Causes interstate rivalry and friction among states when a state received import taxes on
goods destined for other states.284
For foreign businesses in the United States, such business, in order to be taxed in the
United States must engage in “regular, continuous and profit oriented” activity.285 Accessibility
to a foreign website in the United States does not constitute being engaged in business.286
Another issue that may be a problem with the South Dakota statute concerns enforcement
through the declaratory judgment section.287 There is concern that allowing South Dakota to
reach beyond the borders of the United States to hold foreign companies responsible for state tax
collection would be a dangerous precedent because it could allow foreign nations, such as China
or Russia to gain jurisdiction over Americans for American Internet content.288
Another issue of concern would be the taxation of Indians in a world without Quill, as
well as the ability of tribes to collect taxes from remote sellers. Several South Dakota Indian
tribes, along with the National Congress of American Indians and Indian Tribes submitted an
amici curiae brief. After explaining the tax treatment of Indians and Indian Country, who can be
taxed by whom and where can they be taxed; the tribes argued for the same right to tax remote
transactions.289 The tribes argue that they should have the sole authority to tax on Indian land on
all purchases delivered to the reservations.290 They assert that it would not be much of a burden
for remote sellers to add the tribes into their systems as there are only 573 tribes and half of those
are in jurisdictions without sales tax (Oregon, Montana, and Alaska).291 Some states have tax
agreements with tribes292 and Nevada grants a tax credit for purchases made on tribal land if
there is a tribal tax equal to or greater than the Nevada sales tax.293 The tribes also argue that
where neither of these solutions are available, Indians should be able to use exemption
certificates to avoid sales tax, when they reside on tribal lands.294 The problem with the
exemption certificates is that they are an additional record keeping burden on retailers.
The taxation of services is also an issue that most parties in this action have little interest
in discussing. At the time Bellas Hess was decided, states primarily taxed the sales of tangible
284
Id. at 5.
285
Colony Brands Brief at 15.
286
Id. at 16.
287
Prof. Baker Brief at 5.
288
Id. at 19.
289
Brief for the National Congress of American Indians and Indian Tribes and Indian Tribes in South Dakota, as
Amici Curiae, in Support of Neither Party, South Dakota v. Wayfair, Inc., 138 S.Ct. 2080, at 12-3.
290
Id. at 35.
291
Id. at 37.
292
Id. at 42.
293
Id. at 34.
294
Id. at 38-9.
33
personal property and not services.295 Even today, most states do not tax services unless the
service is taxed specifically.296 One of the problems with taxing services is “pyramiding”, the
taxation of services that are resold and taxed again.297 Another problem is taxing “cloud
computing” because the service is not delivered to any particular place in the world or the
taxation of “software as a service” because it can be accessed multiple places.298 As such, a
“physical presence” standard was advocated for service providers until the states could find a
way to tax interstate sales of services.299
Finally, the interests of other sovereigns have not been addressed. There are five states
without state sales taxes. Two of those states each filed an amicus curiae brief in this matter.
“Montana has never had a sales tax.”300 Voters in Montana rejected sales taxes by 70%
in 1971 and by 75% in 1993.301 Montana argues that small and medium sized businesses in their
state would be harmed and no longer able to sell online because of the South Dakota
requirements, in part due to the costs involved of “free” sales tax collection software.302 It
argues that the South Dakota law would place a “burdening effect upon the commerce” of
remote small and medium sized remote retailers, “especially those is non-sales tax states like
Montana, is likely to be significant….”303 Montana further argues that due process would be
violated because small remote sellers that only put a web site on the Internet may potentially
generate enough business to meet South Dakota’s thresholds.304 The due process rights of
Montana residents that the South Dakota statute would inflict would violate the sovereignty of
Montana itself.305 Montana argues that all Internet sellers would have to invest in sales tax
software to track sales if the physical presence standard were abrogated.306
New Hampshire also submitted an amicus curiae brief in this matter. New Hampshire
also argues that the South Dakota statute would violate its sovereign rights in permitting other
states to reach into New Hampshire and impose their tax regimens on New Hampshire
businesses.307 New Hampshire focuses on the loss of property and contractual rights that would
ensue were Bellas Hess and Quill. New Hampshire is a magnet for persons seeking to avoid
sales taxes and borders Massachusetts, Vermont, Maine and the Province of Quebec.308 New
Hampshire businesses may then be forced to collect sales taxes for all, but maybe Quebec,
295
Brief for David A. Fruchtmann as Amicus Curiae Supporting Neither Party, South Dakota v. Wayfair, Inc. 138
S.Ct. 2080 at 16.
296
Id. at 19.
297
Id. at 22.
298
Id. at 23.
299
Id. at. 37.
300
Brief for Montana as Amicus Curiae Supporting Respondents, South Dakota v. Wayfair, Inc. 138 S.Ct. 2080 at 3.
301
Id. at fn. 1.
302
Id. at 7.
303
Id at 21.
304
Id. at 17.
305
Id. at 3.
306
Id. at 12.
307
Brief for the State of New Hampshire as Amicus Curiae Supporting Respondents, South Dakota v. Wayfair, Inc.
138 S.Ct. 2080 at 4.
308
Id. at 19.
34
forcing price increases on all, including New Hampshire residents, who have kept their prices
low by electing representatives that have not imposed sales taxes.309
New Hampshire also makes a novel argument, about where a sale occurs. What happens
when a customer makes on online purchase from a New Hampshire vendor in Kansas, for
delivery in Kentucky with an account that has a California billing address?310 How does the
merchant tax the sale and to where? Do they tax it to where the customer was when the sale was
made, Kansas? Or to where it will be delivered, Kentucky? Or to where it will be billed,
California?311
New Hampshire also states that Quill should remain because Congress has had multiple
opportunities to change the law and has not done so yet.312 Congress is the place to go to refine
laws.313 Businesses will also leverage technology to minimize taxes, even without the physical
presence standard of Bellas Hess and Quill.314 New Hampshire argues that stare decisis assumes
Congress will correct the Court’s errors.315 Therefore, Congress is the place to address South
Dakota’s issues with remote sales taxation.
F. The Court’s Decision: Justice Kennedy’s Farewell “Gift” to the American People
On June 27, 2018, Justice Anthony Kennedy announced his retirement from the Supreme
316
Court. However, on June 21, 2018, he presented the American people with one final
jurisprudential “gift”; his majority opinion in South Dakota v. Wayfair, Inc., a case which he
invited the legal community to conjure up litigation to bring to the Supreme Court because
Congress wasn’t working fast enough.
The Supreme Court, on a 5-4 vote overturned Bellas Hess and Quill. Justice Kennedy,
the senior justice in the majority, who issued the “invitation” for a case to revisit Quill¸ wrote the
majority opinion. The Court concluded that the “physical presence” test no longer makes sense
and were “proving unworkable.”317 Most of the problems with “physical presence” is the
attempts of the states to redefine the term for the purpose of increasing tax collection. Justice
Kennedy cites Massachusetts attempt to “making apps available to be downloaded by in-state
residents and placing cookies in-state residents web browsers,”318 as one such example. He also
cited New York’s “click through” nexus in which tax liability would accrue to a remote seller if
a consumer clicks through another website to the remote seller’s own website.319
Justice Kennedy explained that the Court’s previous holdings in Bellas Hess and Quill,
were “an extraordinary imposition by the Judiciary on States’ authority to collect taxes and
perform critical public functions.”320 Justice Kennedy addressed the Quill majority’s concern
309
Id.
310
Id. at 17.
311
Id.
312
Id. at 22.
313
Id.
314
Id at 32.
315
Id at 32-3.
316
Michael D. Shear, Supreme Court Justice Anthony Kennedy Will Retire, New York Times (June 27, 2018)
www.nytimes.com/2018/06/27/us/politics/anthony-kennedy-retire-supreme-court.html (Last viewed Sept. 14, 2018).
317
Wayfair, at 2097.
318
Id. at 2097-8
319
Id. at 2098.
320
Id. at 2095.
35
about taxing businesses without a physical presence by seemingly waving it away. He
complains that a company with one salesman in each state would have a physical presence, but
one with five hundred in one central location and a website accessible everywhere would not
have such a presence.321 Another complaint was about if a furniture store had a large warehouse
in South Sioux City, Nebraska and a small one in North Sioux City, South Dakota, all of the
sales in South Dakota would be taxable under the physical presence test, regardless of from
where the product was shipped to a South Dakota consumer.322 Of course, Justice Kennedy
further complains of the harm to States’ revenues from these previous holdings,323 but what
should have been expected from Justice Kennedy given his concurrence in Kelo,324 which held
that local government can condemn private property in order to sell to another private entity in
the name of economic development and increased local tax collection.
Addressing the concerns of remote sellers, especially those advocating on behalf of small
businesses that offer their wares on the Internet, Justice Kennedy seems to believe that
technology has all the answers. He mentions software that would be available at a small or no
charge to remote sellers that would handle their problems, as well as tax simplification projects
that may or may not get all the states on board.325 He notes that in small in-state businesses
collect sales tax.326 What he fails to note, is that the small local brick and mortar business would
only collect the sales tax for one state, unless it has locations in more than one state. He goes on
that those with “de minimus” contacts could seek relief later, but those issues were not before the
Court.327
Because the only issue before the Supreme Court was the “physical presence” test of
Bellas Hess and Quill, any other issue that would affect the constitutionality of Senate Bill 106 is
still at issue, there having been no record made in the Circuit Court at trial.328 Other Commerce
Clause claims may be addressed on remand.329 One issue not discussed was retroactivity,
because South Dakota is not seeking retroactive enforcement, however other states may.
Justice Thomas and Justice Gorsuch each filed a short concurring opinion in this case.
Justice Thomas explains that he no longer agrees with his previous position in Quill. He also
issues somewhat of an invitation to re-examine all the Court’s negative commerce clause
jurisprudence.330 Justice Thomas’s invitation should serve as no surprise, given that he has felt
the Court’s Commerce Clause jurisprudence should undergo a fundamental re-examination since
his concurrence in Lopez.331 Justice Gorsuch notes that normally dormant commerce clause
cases prevent states from enacting statutes that discriminate against interstate commerce.332 He
further notes that his concurrence should not be taken to mean that he agrees that federal courts
321
Id. at 2093.
322
Id. at 2094.
323
Id.
324
Kelo v. City of New London, Conn., 545 U.S. 469, 493 (2005) (Kennedy, J., concurring)
325
Id. at 2098.
326
Id. at.
327
Id. at 2099.
328
Id. at 2100.
329
Id.
330
Id. (Thomas, J. concurring).
331
U.S. v. Lopez, 514 U.S. 549, 602 (1995) (Thomas, J. concurring)
332
Wayfair, at 2100. (Gorsuch, J. concurring).
36
may invalidate state statutes that “offend no congressional statute.”333 He further notes that
decision as to whether federal courts can use the commerce clause to strike down state laws,
absent congressional statutes, will be left for another day.334
The dissent was authored by Chief Justice Roberts and joined by Justices Breyer,
Sotomayor and Kagen.
Chief Justice Roberts argues that e-commerce has evolved into a “significant and vibrant
part of our national economy against the backdrop of established rules, including the physical
presence rule.”335 The Chief Justice notes that dormant commerce clause cases receive
heightened respect for stare decisis because while “it is in the province of the courts to formulate
the rules,” this is only so when Congress has yet to legislate.336
Chief Justice Roberts discusses Congress’s efforts to resolve these issues from 2001 until
the present and noted that three bills were pending in Congress at the time of the Court’s
decision.337 The Chief Justice then noted, citing an Amici Curiae brief from Texas Senator Ted
Cruz:
But by suddenly changing the ground rules, the Court may have waylaid Congress’s consideration
of the issue. Armed with today’s decision, state officials can be expected to redirect their attention
from working with Congress on a national solution, to securing new tax revenues from remote
sellers.338
The Chief Justice complains of the Court’s “inexplicable sense of urgency,” going on to
explain that among the top 100 Internet retailers, sales tax collection is approximately 87 to 96%,
with the collection rate at about 80% of Internet sales as a whole.339 The cost of collection to
small and micro-businesses is not lost on the Chief Justice. He notes how the Court “breezily
disregards the costs that its decision will impose on retailers,” explaining the various anomalies
of state sales tax laws.340
The Chief Justice asserts that the burden of multi-jurisdictional tax collection will fall
“disproportionately on small businesses.”341 He notes that it will not be feasible for people to
have businesses making hand crafted goods and selling them to a national audience if they have
to collect sales tax everywhere, especially with the software solution touted by South Dakota and
the majority “still in its infancy, and its capabilities and expense are subject to debate.”342
He believes that Congress is the place for these decisions to be made. Congress may
consider competing interests and address issues in many different ways.343 The dissenters did
agree that the nation’s economy has changed since Bellas Hess and Quill were decided, but they
333
Id.
334
Id. at 2101.
335
Id. (Roberts, C.J., dissenting).
336
Id. at 2102.
337
Id.
338
Id. at 2102-3.
339
Id. at 2103.
340
Id. at 2103-4.
341
Id. at 2104.
342
Id.
343
Id.
37
believe that the Court is compounding its error in those decisions by making this decision and
not leaving the matter to Congress.344
G. The Aftermath: A Special Legislative Session So South Dakotans can enjoy Justice
Kennedy’s “Gift” in time for Christmas.
Senate Bill 106 contained a provision staying enforcement until after the Supreme Court
ruled on its constitutionality. South Dakota’s leaders wanted their tax money as soon as
possible, so on September 12, 2018, the Legislature sat in special session to pass laws requiring
sales tax collection to begin November 1, 2018.345 Smaller sellers who sell through marketplaces
on Amazon and e-Bay will not have to collect tax until next year, when the marketplaces will
have to do so for them.346 The new act will not affect Wayfair, Newegg, and Overstock, due to
pending litigation discussed above.347 In signing the legislation into law, Governor Dennis
Daugaard said, “[t]oday we are able to implement that win and turn it into better law for South
Dakota, a better even playing field.”348 He continued, “[t]his will make things fair.”349 While
critics begged to differ,350 only time will tell.
VII. Analysis
A. Justice Kennedy’s Opinion
Justice Kennedy was correct in stating that Bellas Hess and Quill were outdated and
wrongly decided. His rejection of the “physical presence” test is also correct, in so far as how it
was applied in Bellas Hess and Quill. It makes no sense that any physical presence in a
jurisdiction should be grounds for the application of taxation of that business’s sales. Justice
Kennedy is also correct in claiming that Internet businesses maintain “virtual showrooms” with a
“continuous and pervasive virtual presence” everywhere.351
Justice Kennedy was incorrect with his dismissal of the concerns of small businesses and
the exposure of their sales to taxation in several jurisdictions. While he is correct that it is not
fair to brick and mortar businesses that remote sales do not collect sales taxes, his solution to the
problem of causing them to have to collect sales taxes in potentially all jurisdictions, or forgo
sales nationwide is excessive burdensome on these businesses. The local brick and mortar
businesses will still have to only worry about collecting taxes in their home jurisdiction, in short
where they maintain a physical presence, the same physical presence Justice Kennedy rejects for
the remote sellers. Justice Kennedy is also incorrect with his assertion that businesses on the
Internet are “availing themselves” of the protections of each state.352
344
Id.
345
Dana Ferguson, South Dakotans, your online price tag is about to get steeper. Here’s why. Sioux Falls Argus-
Leader (Sept. 12, 2018) https://www.argusleader.com/story/news/politics/2018/09/12/south-dakotans-your-online-
price-tag-get-steeper-heres-why/1277215002/ (Last viewed Sept.13, 2018).
346
Id.
347
Id.
348
Id.
349
Id.
350
Id.
351
Wayfair at 2095.
352
Id. at 2096.
38
B. Chief Justice Roberts’s Opinion
Chief Justice Roberts believes that, while Bellas Hess¸ was wrongly decided, it should
not have been overturned. This may seem an odd position, but he believes that Congress is the
correct place for these decisions to be made. He frets that the Court’s decision will be an
impediment to Congress’s deliberations on this matter.
E-commerce has become a major force in the American marketplace and pulling the rug
out from under the enterprises that have relied on the rule of Bellas Hess would be harmful.353
Compounding error is what the Court did in their haste to overturn Bellas Hess and Quill.
Chief Justice Roberts correctly asserts that Congress is the better place for these decisions
to be made because they can investigate facts and make compromises that courts are ill equipped
to do in litigation. The Chief Justice’s logic and reasoning in his dissent was sound and, based
on stare decisis, Quill should have been retained to provide Congress with time to act on the
ideas that were percolating through that institution. The institution he correctly notes is the
appropriate place from which action on this issue should be made.
C. Other Positions Under Debate in Congress
At the time of the Court’s decision, there were three bills pending in Congress to address
the states’ and brick and mortar retailers’ concerns about the taxation of sales made by remote
sellers. In addition to these bills, there was one other idea that had been floated in Congress that
is interesting and worth further discussion. The three bills pending were as follows:
a. Marketplace Fairness Act of 2017;354
b. Remote Transactions Parity Act of 2017;355
c. No Regulation Without Representation Act of 2017.356
1. Marketplace Fairness Act of 2017.
The Marketplace Fairness Act of 2017 is the Senate’s attempt to address the issue of
taxation of remote sales. In addition to the lead sponsor, Senator Mike Enzi are Senator Mike
Rounds of South Dakota, the state the brought Quill down and Senator Heidi Heitkamp, North
Dakota’s Tax Commissioner at the time of Quill.357
The Marketplace Fairness Act would permit states that are members of the Streamlined
Sales and Use Tax Agreement to begin requiring the collection of sales taxes from remote
sellers, subject to a minimum sales threshold.358 It further permits states that are not members of
the Streamlined Sales and Use Tax Agreement to collect sales taxes from remote sellers, subject
to the same minimum sales threshold, provided those states change their sales tax laws to
conform to certain standards.359 The required standards are as follows:
a. Accept the Act through legislation and specify which products are and are not subject
to taxation under the act;360
353
Id. at 2101.
354
Marketplace Fairness Act of 2017, S. 976, 115 th Congress (2017).
355
Remote Transactions Parity Act of 2017, H. R. 2193, 115 th Congress (2017).
356
No Regulation Without Representation Act of 2017, H. R. 2887, 115 th Congress (2017).
357
S. 976, 115th Congress (2017).
358
Id. at Sec. 2(a).
359
Id. at Sec. 2(b).
360
Id. at Sec, 2(b)(1).
39
b. Implement minimum sales tax simplification consisting of as follows”
i. A single entity in the State handling the administration of sales and use tax
collection;361
ii. A single audit for remote sellers in the State, covering its local jurisdictions as
well;362
iii. A single sales tax return, the filing of which may not be required more
frequently than brick and mortar sellers and may not have more requirements
imposed upon them;363
c. “Provide a uniform sale and use tax base among State and local taxing jurisdictions
within the State….”364
d. Source all transactions to where it will be received by the purchaser;365
e. Provide information regarding the taxability of goods and services, including
exemptions from taxation in addition to a database consisting of tax rates and the
boundaries to which those rates apply;366
f. Provide free software to handle the calculation, collection, and remittance of the sales
taxes;367
g. Adopt procedures to certify software vendors;368
h. Relieve sellers from liability for errors in collection, including non-collection of sales
taxes, provided the retailer utilized software from a certified provider;369
i. Relieve the software providers from liability if any errors were caused by a remote
seller;370
j. Relieve both the remote seller and certified software provider of liability when
incorrect information is provided by the State for errors in collection, including non-
collection of sales taxes;371 and
k. Provide ninety (90) days’ notice to sellers and software providers of any changes in
rates, either State or local and relieve sellers and software providers of liability for
collection errors if the notice is not timely provided.372
The Marketplace Fairness Act provides for an exemption from the requirement to collect
state sales and/or use taxes for businesses with less than $1,000,000 in gross revenue.373
However, if a business owner has more than one business or is in partnership with someone with
multiple businesses, the income may be aggregated, lowering the threshold.374
The Marketplace Fairness Act is better than what the Supreme Court came up with in
Wayfair, but only just so. It permits the signatories of the Streamlined Sales and Use Tax
361
Id. at Sec 2(b)(2)(A)(i).
362
Id. at Sec. 2(b)(2)(A)(ii).
363
Id. at Sec. 2(b)(2)(A)(iii).
364
Id. at Sec. 2(b)(2)(B).
365
Id. at Sec. 2(b)(2)(C).
366
Id. at Sec. 2(b)(2)(D)(i).
367
Id. at Sec. 2(b)(2)(D)(ii).
368
Id. at Sec. 2(b)(2)(D)(iii).
369
Id. at Sec. 2(b)(2)(E).
370
Id. at Sec. 2(b)(2)(F).
371
Id. at Sec. 2(b)(2)(G).
372
Id. at Sec. 2(b)(2)(H).
373
Id. at Sec. 2(c).
374
Id.
40
Agreement to begin collecting sales taxes from remote sellers one year after its enactment. 375 It
would further prohibit the collection if the date that collection would otherwise be first permitted
during the last quarter of the calendar year, in short one last Christmas season without remote
sales taxes.376 For those states that have not joined, or may not be eligible for full membership in
the Streamlined Sales and Use Tax Agreement, the legislation would permit those states to begin
sales tax collection from remote sellers if they essentially enact, through legislation, the
fundamental terms of the Streamlined Sales and Use Tax Agreement. It also provides a uniform
small business exemption that would cover the entire nation, and not the patchwork of
exemptions that may or may not be permitted by each of the individual states.
One of the problems with the Marketplace Fairness Act is that small businesses that may
have some common owners, but, are separate entities would be aggregated for the purposes of
determining whether they qualify for the small business exemption. It would expose these
businesses to the rigors of being taxed in multiple jurisdictions and utilize software that may be
expensive to install and maintain, despite being “free”, as opposed to brick and mortar, which
only must collect where they have facilities selling goods or taxable services. This requirement
is particularly unfair to those business engaging in remote sales in states that do not have sales
taxes at all because their local brick and mortar competitors will not have such an expense. It
also does not address remote sales tax collections from small businesses that sell through
marketplaces, such as Amazon, eBay, and Etsy. Considering Wayfair, the states may attempt to
treat them as though these businesses were Amazon and not Joe’s Electronics, which happens to
sell its products through Amazon to gain a wider audience.
2. Remote Transactions Parity Act of 2017
The House of Representatives has not been sitting idly by and watching the Senate be the
only place on Capitol Hill where bills addressing remote sales taxation are filed. The first of
these that will be addressed is the Remote Transactions Parity Act of 2017.
Introduced by South Dakota’s Representative Kristi Noem, the Remote Transactions
Parity Act of 2017 is the House companion of the Marketplace Fairness Act. There are some
differences that need to be addressed. One major difference concerns the “free” software
requirement. Under the Remote Transactions Parity Act, states would have to provide free access
to “all of the national certified software providers that have been approved….”377 Free access is
further defined to “include installation, setup and maintenance of the automated system into the
remote seller’s system.”378 It also provides for procedures to safeguard remote sellers and
certified software providers from liability to parties other than a state for over or under collection
of sales tax. These procedures include a sixty (60) day notice procedure in which the seller must
be provided enough information to determine its liability and refund overpayments to customers
or remit under-collected tax to the state.379 Parties, other than the state cannot file suit until after
the 60 day period has run and did not refund overpaid tax or remit underpaid tax to the state.380
Instead of a $1 million gross revenue exemption for small businesses that is provided for under
the Marketplace Fairness Act, the Remote Transactions Parity Act phases in the tax collection
375
Id. at Sec. 3(h)(1).
376
Id. at Sec. 3((h)(2).
377
H. R. 2193, 115th Congress, Sec. 2(b)(2)(D)(iii).
378
Id. at Sec. 2(b)(2)(D)(iv).
379
Id. at Sec. 2(b)(I)(i).
380
Id. at Sec.2(b)(I)(iv).
41
requirement starting with businesses with $10 million in gross receipts in the first year following
the Act’s enactment.381 In the second year, the threshold falls to $5 million382 and after the third
year the requirement is $1 million.383 Each of these provisions has a curious subsection (ii)
which reads as follows:
…; or
(ii) utilizes an electronic marketplace for the purpose of making products or services
available for sale to the public.384
The Remote Transaction Parity Act is a better alternative to the Senate’s Marketplace
Fairness Act because the “free” software really does seem to be free, due to the requirement that
the states pay for the installation and maintenance of the software on merchants’ computers. It
also provides protections from qui tam suits for under or over-collected sales taxes on which the
Marketplace Fairness Act is silent. It further phases in the thresholds for tax collection based on
gross receipts, although the standard used for determining gross receipts is the same as in the
Senate bill. It also addresses the issue of sellers that sell through online marketplaces like
Amazon, eBay and Etsy, but there should be some concern as to how this issue is dealt with,
which will be discussed below.
The Remote Transactions Parity Act has the same problems as the Marketplace Fairness
Act in the multiple jurisdiction sales tax collection burdens it places on small businesses that sell
online. It eases the blows by requiring the software actually be free, including maintenance and
installation, but the burden is still there. It also eases the burden into place based on the size of
the business, except for those that sell through marketplaces. It would appear that, regardless of
size, if a business sells through a marketplace, that there would be a tax collection responsibility.
The problem appears to be that there is not a requirement that the marketplace collect the tax and
the collection responsibility is imposed on the retailer. This would discriminate against micro
and small businesses that expand their audiences by using marketplaces like Amazon, eBay and
Etsy.
3. No Regulation Without Representation Act of 2017
The other bill that was filed in the House of Representatives in the No Regulation
Without Representation Act of 2017.
The lead sponsor of this bill is Representative James Sensenbrenner of Wisconsin along
with Judiciary Committee Chairman Robert Goodlatte of Virginia. The No Regulation Without
Representation Act would statutorily enact Quill as law and require a physical presence in a state
before there would be a sales tax collection requirement.385 “Physical presence” would be
defined to include the following:
a. Being domiciled, either commercially or legally in a state;386
b. Owning, leasing or otherwise maintaining real property within a state;387
381
Id. at Sec. 2(c)(1)(A)(i).
382
Id. at Sec. 2(c)(1)(B)(i).
383
Id at Sec. 2(c)(1)(C)(i).
384
Id at Sec. 2(c)(1)(A)(ii).
385
H. R. 2887, 115th Congress, Sec. 2(b).
386
Id at Sec. 2(b)(1)(A).
387
Id at Sec. 2(b)(1)(B).
42
c. “Leasing or owning tangible personal property (other than computer software)” in a
State of “more than de minimus value;”388
d. Having more than one employee or other person under their direction providing
design, installation or repair services on behalf of the seller;389
e. Having one or more “exclusive employee”, “exclusive independent agents” or
“exclusive independent contractors” engaging in activities to establish or maintain
activities in the State; or390
f. Three or more employees in the State.391
This act would prohibit the states from engaging in activities that would undermine the
“physical presence” standard by prohibiting them from defining “physical presence” to include:
a. Agreements to refer clients from one online site to another for the purpose of making
a purchase;392
b. Any presence in a state of less than fifteen (15) days, unless state law permits a longer
period without establishing a physical presence;393
c. Product placement or setup services provided in connection with product delivery;394
d. Internet advertisements not directed specifically to persons in any single state;395
e. Ownership in a limited liability company by a person outside the state with a physical
presence or organized in the state;396
f. Gathering or furnishing information in one state for use or dissemination in another
state;397
g. Business activities in a state related to the purchase of goods or services in that state
when the final decision is made in a different state.398
States would be prohibited from imposing sales taxes and reporting requirements with
respect to taxes owed unless the selling business has a physical presence in the state.399
Jurisdiction to settle any disputes under this act, which would eliminate state court actions like
South Dakota’s in Wayfair.400
The No Taxation Without Representation Act is the exact opposite of the previous two
bills under Congressional consideration. As such, the benefits flow to different constituencies,
and the problems will be felt in other sectors.
Under this act, things would go on as they were in regard to remote sales, which would
provide relief to remote sellers of all sizes that minimize their physical presence. Sellers would
only have to deal with sales tax collection in their home jurisdiction(s), which would simplify
388
Id at Sec. 2(b)(1)(C).
389
Id. at Sec. 2(b)(1)(D).
390
Id. at Sec. 2(b)(1)(E).
391
Id. at Sec. 2(b)(1)(F).
392
Id. at Sec. 2(b)(2)(A).
393
Id. at Sec. 2(b)(2)(B).
394
Id. at Sec. 2(b)(2)(C).
395
Id. at Sec. 2(b)(2)(D).
396
Id. at Sec. 2(b)(2)(E).
397
Id. at Sec. 2(b)(2)(F).
398
Id. at Sec. 2(b)(2)(G).
399
Id. at Sec. 2(c).
400
Id. at Sec. 3.
43
their operations greatly and allow for small startups to begin, take root, grow and prosper.
Businesses located in states that do not have sales tax would not have tax collection imposed
upon them either by Congress or by the other states.
The problems would be felt by the states in lower revenue collection, without recourse to
the “creative” methods they have used to get around and eventually overturn Quill. In short, they
would be back to the starting point in trying to collect their use taxes. Brick and mortar would
still be complaining about the “unfair advantage” online retailers have because they do not have
to collect sales tax. The “certified software providers” would be in serious difficulties because
their product would no longer be needed. Justice Kennedy’s complaint about the lack of logic in
some aspects of physical presence would not be addressed.
4. Another Idea From Representative Goodlatte
Although not introduced as a bill, Representative Robert Goodlatte did float another,
interesting, idea concerning the collection of sales taxes from remote sellers. Under this plan,
sellers would utilize the tax base of their home states to determine the taxability of goods or
services, but apply the rate of the customer’s state, provided that the seller’s state adopted those
rates into their own laws.401 The seller would remit the taxes to its home state, which would
forward them to the purchaser’s state.402 Originally, the plan would have charged the selling
retailer’s tax rate, however, brick and mortar retailers complained that the playing field would
not be levelled enough.403 Draft language was prepared in 2016 with Representative Anna
Eshoo entitled the Online Sales Simplification Act, which received wide support but going into
the 115th Congress, South Dakota’s litigation in Wayfair undermined this compromise, as the
states want to impose their solution on the nation.404
This is the best idea to be proposed so far. The problems are that the retailer’s local tax
rate is not the one being charged and that the states would have to forward the tax collections to
each other.
VIII. A Better Way Forward and How to Get There

This paper has examined the history of remote sales taxation over the past fifty years
from the Supreme Court’s decision in Bellas Hess to the most recent decision in Wayfair. To
find a way forward, one must look back at the past first. Having examined the past, going into
detail in Wayfair, because it fundamentally changed the legal landscape regarding this issue, it is
now time to offer different ideas on what direction policy should take regarding the taxation of
remote sales.
What is needed is a system that is simple, in that I do not mean that complexity would be
removed from each state’s sales tax regime. By simple, I mean that remote merchants should not
be exposed to having to calculate sales tax in every jurisdiction, but only in the jurisdictions
where they are located. These business people chose to be taxed under the regime of their home
states, not every state in the Union that have sales taxes.
401
Press release, Office of Rep. Robert Goodlatte, Supreme Court Should Allow Congress to Finish its Job on the
Remote Sales Tax (Dec. 7, 2017) https://goodlatte.house.gov/news/documentsingle.aspx?DocumentID=1061 (Last
viewed Sept. 25, 2018).
402
Id.
403
Id.
404
Id.
44
The sovereign decisions of each of the states also needs to be respected, so long as those
decisions do not impede interstate commerce. States should be able to tax, or not tax, sales
within their borders as they decide. They should not be able to reach outside their borders to
impose their taxes on businesses just because they sell to residents of their states.
However, remote sellers should not be able to sell their wares without taxation. This
business model, however advantageous to them, is an impediment to brick and mortar retail.
More study may be needed as to how great an effect the lack of taxation on remote sales has on
brick and mortar retailers. There should be some tax on these sales, provided the retailer is not
located in one of the states that have decided against the taxation. Also, there should not be
double taxation on these sales under each state’s complimentary use tax.
To accomplish these goals, state and local sales taxation needs to be fundamentally re-
examined as to how the sales are taxed. Currently, these sales are taxed differently based on how
the transaction occurs. If made in person, the sale is taxed based on the jurisdiction where the
retailer is located, as in being physically present. If the sale occurs over the Internet (or a catalog
sale), the sale is not taxed, unless the retailer maintains some sort of physical presence in the
state in which the consumer resides.
After the Supreme Court’s decision in Wayfair, the taxation of remote sales will depend
on where the consumer resides. This is based on the assumption that these remote transactions
occur at the consumer’s residence or place of business and not the retailer’s place of business.
This is the fundamental flaw in the current system of sales taxation. The sale does not take place
in the consumer’s home or office, but rather when the order is accepted by the merchant and
fulfilled. In most cases, the customer is charged when the merchandise is turned over to the
common carrier for delivery, not when delivered to the consumer.
Justice Kennedy discusses how online merchants are everywhere, virtually.405 If
merchants can be anywhere and everywhere, virtually in consumers’ homes, why can’t their
customers be in the merchants’ retail locations, virtually? I think that they can be present, in any
merchant’s business location, through the virtual reality that is the Internet.
What does this mean regarding the taxation of the transactions that take place in this
“virtual” world? For starters, taxes would actually be paid. However, since the transaction takes
place in the merchant’s location and not the customer’s home jurisdiction, the customer would
pay the taxes in the merchant’s home jurisdiction, except when the consumer resides in a
jurisdiction in which the merchant maintains a physical presence in which it actually sells its
goods or services to the public. If a customer resides in a jurisdiction in which the merchant
actually sells its goods or services, not to include only storage or only back office functions not
at headquarters, then the customer would be charged his local sales taxes. Services would be
taxed based on where the service provider maintained the office that produced the work product.
Let’s look at some examples of how this would work, with the states’ laws as currently
structured:
1. Jane, a resident of Faith, South Dakota, purchases a decorative widget from Aunt
Sadie’s Decorative Widget Works of Logansport, Indiana. Jane would pay Indiana’s
405
Wayfair, 138 S.Ct. at 2095.
45
7% sales tax and be entitled to a credit for the entire amount because Indiana would
exempt purchases made by Indiana residents from its use tax when they pay a sales
tax to another state, so long as, if the amount of tax paid is less than 7%, they pay the
rest to Indiana.
2. Jane, then purchases a widget holder from Bob’s Widget Holder Fabrication Co. of
Galena, Illinois. She would pay the Illinois sales tax, but also still be liable for the
South Dakota use tax, because Illinois does not exempt from its use tax any out of
state purchases, even if sales tax were paid to that jurisdiction.
3. Jane finally purchases a widget cover from SamCo, a national brick and mortar
retailer that also offers its wares online. SamCo has several stores in South Dakota
but is headquartered in a different state. Jane would pay the South Dakota sales tax
and not SamCo’s home state tax.
4. Assume Jane is a resident of Winnipeg, Manitoba, the sales made in examples 1 and 2
would be exempt from taxation, because the items are being exported to a foreign
nation. The sale made in example 3 would depend on whether SamCo does business
in Manitoba and/or Canada and Canadian sales tax laws, which are not the subject of
this study.
Example 2 does offer a harsh result, but if Wayfair is to continue and all of the very small
merchants are then required to collect every state’s sales tax, the only one of these purchases
Jane may be able to make would be the widget cover from SamCo because the others may not
offer their wares online, or may not offer their wares in states where tax collection becomes an
obligation, except for their home jurisdiction.
To avoid the harsh result of Example 2, I also propose that states offer use tax credit for
purchases made in other states, up to the amount of sales tax paid to that state. The states cannot
be required to do this, but, depending on how and by whom, the plan is implemented, the states
could be “incentivized” to do so. To see how any combination of state’s sales and use taxes
would work and if credit would be given for taxes paid elsewhere, I have compiled a table in
Appendix A showing each state’s rates, the maximum local rate, whether the tax is excise or a
tax on the “privilege” of doing business in the state, on the existence of a use tax, whether the
state grants credit for sales taxes paid elsewhere, and whether reciprocity is a condition of the
credit being allowed.
There is the issue of the taxpayer having a voice where the taxes are paid and the lack of
influence they would have over policy. This is one reason why sales taxes have not extended
across state lines previously. To this I say, if a consumer in Alabama does not like the way
California is governed, he may purchase the goods he wants from another vendor in a
jurisdiction more to his liking. The same goes true for the California shopper not finding
Alabama’s governing policies and principles to his liking.
How can such a plan be brought into effect? There are several ways, some better and
more certain of being successfully implemented than others.
The first way would be for it to be enacted by Congress, under its authority to regulate
interstate commerce. For this to be successful, Congress must prohibit the result from Wayfair.
That is, Congress must forbid the states from assessing sales taxes on businesses that either are
not headquartered within the state or are not offering their goods or services for sale from an
actual physical location within the state. Second, Congress could permit states to assess sales
46
taxes on purchases made by out of state residents, for delivery to their residences, from
businesses headquartered in that state. Third, states would only be permitted to collect sales
taxes on remote sales to out of state residents if they permit a credit for any taxes paid to the
merchant’s state towards their resident’s use tax obligation. Fourth, sales that are for export
outside of the United States or its territories would be exempt from state sales taxation. Finally,
merchants would be required to advise their customer that they may owe a use tax obligation and
they should consult their local jurisdiction as to if, and how much, they may owe. States would
be prohibited from demanding that out of state merchants keep track of purchases made by and
report said purchases to the state, detailing them by resident.
This would be the best way to enact this system because Congress does have the
authority to regulate interstate commerce. That power was granted Congress to prevent each
state from setting up customs booths at their borders and collecting tariffs on goods imported
from other states. By requiring the credit be afforded to customers that pay tax to another state,
double taxation would be avoided, and the use tax would remain in place to handle the amounts
due in excess of what was paid to the merchant’s home state, if that merchant’s home state has
sales tax at all. Merchants would have to advise customers that they may owe a use tax, even if
they are located in a state without sales tax, so that the customer would know that tax may be due
to their home state. It would be up to the states to figure out how to collect this tax without
dragooning out of state businesses into their tax collection machine to do it for them.
Another way to accomplish this would be at the state level. Some states, or even one
state could decide, considering Wayfair, that sales from businesses in their states to customers
out of state is fair game. Also, some of the largest of these businesses are located in states
notorious for being revenue hungry. Two of the three respondents in Wayfair are located in
California (Newegg) and Massachusetts (Wayfair). Businesses such as these, who may desire to
minimize their tax collection expense could engage in some rent seeking behavior of their own
and enlist their legislatures to require they collect their state’s tax on all of their sales, wherever
the items are shipped within the United States and that said taxes would not be refundable. This
is important to qualify for use tax credit, where given. In those states that do not afford use tax
credit, the Internet Tax Freedom Act may be useful because of the ban on “discriminatory
taxes”406.
The problem with this strategy is that the system would be even less uniform that what is
being created under Wayfair, at least initially. That is where the other problem arises. Litigation
would be required to determine which state was imposing the “discriminatory tax”. The states
that have large numbers of remote sellers or have a significant number with large volume and
little physical presence outside their home jurisdiction could try this method, using the strategy
South Dakota adopted in Wayfair. In short, they could conjure up their own litigation, in their
own court system, fast track it to the Supreme Court and hope to win. The problem with
litigation is that it can be unpredictable, and one never can be entirely sure what a judge will do
until the judge has acted. The other problem with litigation is that is more of a “winner takes all”
system, as opposed to when solutions are sought through the bargaining and “logrolling” of the
legislation process.
406
Internet Tax Freedom Act, 112 Stat. 2681 (1998).
47
Finally, parties could attempt to accomplish this by contract when the goods are
purchased. This is not a very good idea, and any merchant that attempts this should be prepared
to pay the purchaser’s state tax as well, under protest, and then litigate it through the purchaser’s
state’s courts. I would not give good odds to prevailing, however, there is case law that says that
the tax should be collected based on where the sale takes place.407 However, this case is based
on a poorly drafted regulation as to how to determine where in a single state it should be decided
which local sales tax should be collected.408 Also, many states have regulations stating the
interstate shipment of goods from their state is not taxable, regardless of whether the goods are
shipped F.O. B. origin or F.O.B. destination.409
IX. Conclusions
Sales taxes should be determined by the location of the merchant that is selling the
merchandise and not the customer purchasing the merchandise, when the merchandise is
delivered to the customer by means of a common carrier.
X. Recommendations
Either Congress, or the states need to enact legislation to effectuate the changes to sales
taxation described above so that businesses, especially microbusinesses and small businesses that
seek to expand by offering their products and services over the Internet are not hampered by the
hassle and complexity of sales tax laws of the various states and their units of local government.
These changes need to happen to prevent the balkanization of the American economy and/or the
concentration of ecommerce in a small number of very large businesses at the expense of small
businesses and entrepreneurs.
XI. Areas of Further Research

The effect of multi-jurisdictional sales tax liability on microbusinesses and other small
businesses needs to be studied further. The emphasis needs to be on whether these businesses
would restrict their sales so that they do not sell to potential customers in states that impose a tax
collection obligation on out of state businesses or whether these businesses would just go out of
business entirely. Also, for study, would there be people willing to commence the operation of a
micro or other small business, offering its wares online, in an environment, in which said
business would be required to collect multiple different sales taxes, based on where the
businesses customers are located, as opposed to where the business is located.
The effect on state revenues should be examined, looking at both the current system
based on the location of the customer and under the proposed system where the tax would be
imposed based on the location of the business. Ways need to be found for states to maximize
their revenue under the proposed system of business location-based taxation, as opposed to the
current customer location-based system.
Additional study should also be done to determine the effect on states with low or no
sales taxes, where taxes are collected based on the location of the business and not the consumer.
Some attention should be paid as to how much in taxes the business would be paying and
407
Hartney Fuel Oil Co. v. Hamer, 998 N.E.2d 1227 (Ill. 2013).
408
Id. at 1244.
409
S.D. Admin. R. 64:06:01:24 (2018).
48
whether, as an incentive to locate in a state with low sales taxes, the amount of income, sales or
property taxes they would pay to locate in a particular jurisdiction would affect any decision to
locate or relocate a business.
49
XII. Appendix
State by State Sales/Use Tax Chart
State General Sales Tax Local Tax Privilege or Explicit Exclusion Use Tax Use Tax Reciprocity
Excise for out of state Credit Required
sales
AL Yes 4%410 Yes411 7%412 Privilege413 Yes414 Yes415 Yes416 Yes417
AK No Yes418419 7.5%420 N/A N/A No N/A N/A
AZ Yes421 5%422 Yes423424 Privilege426 No427 Yes428 Yes429 Yes430
5.9%425
AR Yes 3%431 Yes432 433434435436 Excise438 No Yes439 Yes440 Yes441
5.125%437
410
Ala. Code Sec. 40-23-2(a) (LexisNexis 2018).
411
Ala. Code Sec. 11-51-200 (LexisNexis 2018).
412
www.sale-tax.com/ (Last viewed Sept. 1, 2018).
413
414
Ala. Admin. Code r 810-6-3-.35.01 (2018).
415
416
417
Id.
418
Alaska Stat. Sec. 29.45.650 (2018).
419
Alaska Stat. Sec. 29.45.700 (2018).
420
421
Ariz. Rev. Stat. Sec. 42-5008 (LexisNexis 2018).
422
Ariz. Rev. Stat. Sec. 42-5010(l) (LexisNexis 2018).
423
Ariz. Rev. Stat. Sec. 42-6002 (LexisNexis 2018). Regarding municipal sales taxes.
424
Ariz. Rev. Stat. Sec. 42-6103 (LexisNexis 2018). Regarding county sales taxes.
425
426
427
Ariz. Admin. Code Sec. R15-5-173 (LexisNexis 2018).
428
429
429
Ariz. Rev. Stat. Sec. 42-5159(A)(2) (LexisNexis 2018).
430
Id.
431
Ark. Code Ann. Sec. 26-52-301 (2018).
432
Ark. Code Ann. Sec. 26-74-201 et seq. (2018). Regarding county capital improvements.
433
Ark. Code Ann. Sec. 26-74-301 et seq. (2018). Regarding county capital improvments.
434
Ark. Code Ann. Sec. 26-75-202 et seq. (2018). Regarding municipal capital improvements.
435
Ark. Code Ann. Sec. 26-75-301 et seq. (2018). Regarding municipal capital improvements.
436
Ark. Code Ann. Se. 26-75-502 (2018). Regarding general municipal revenues.
437
438
Ark. Code Ann. Sec. 26-52-301 (2018).
439
Ark. Code Ann. Sec. 26-53-106 (2018).
440
Ark. Code Ann. Sec. 26-53-131(a) (2018).
441
Id.
50
CA Yes442 7.25%443 Yes4444453%446 Privilege447 Yes448 Yes449 Yes450 No451
CO Yes452 2.9%453 Yes454 Excise456 Yes457 Yes458 Yes459 No460
8.3%455
CT Yes4616.35%462 No463 Privilege464 No Yes465 No466 N/A
DE No No N/A N/A No N/A N/A
DC Yes 5.75%467 N/A Privilege468 yes469 Yes470 Yes471 No
FL Yes472 6%473 Yes474 2%475 Privilege476 Yes477 Yes478 No N/A
442
Cal. Rev.& Tax Code Sec. 6051 (Deering 2018).
443
444
Cal. Rev, & Tax Code Sec. 7202 (Deering 2018). County sales tax.
445
Cal. Rev. & Tax Code Sec. 7261 (Deering 2018). Other local sales taxes.
446
447
Cal. Rev. & Tax Code Sec. 6051 (Deering 2018).
448
449
450
451
Id.
452
Colo. Rev. Stat. Sec. 39-26-104 (2018).
453
454
Colo. Rev. Stat. Sec. 29-2-101 et seq. (2018).
455
456
Colo. Rev. Stat. Sec. 39-26-104 (2018).
457
Colo. Rev. Stat. Sec. 39-26-713(i) (2018).
458
Colo. Rev. Stat. Sec. 39-26-202 (2018).
459
Colo. Rev. Stat. Sec. 39-26-713(f) (2018).
460
Id.
461
Conn. Gen. Stat. Sec. 12-408 (2018).
462
463
Id.
464
Conn. Gen. Stat. Sec. 12-408(A)(1) (2018).
465
Conn. Gen. Stat. Sec. 12-411 (2018).
466
$25 worth of goods are exempt from use tax per year as per Conn. Gen. Stat. Sec.12-413(3) (2018).
467
D.C. Code Sec. 47-2002 (LexisNexis 2018).
468
Id.
469
D.C. Mun. Regs. 9-404.4 (LexisNexis 2018).
470
471
D.C. Code Sec, 47-2206(3) (LexisNexis 2018).
472
Fla. Stat. Ann. Sec. 212.05(a) (LexisNexis 2018).
473
474
Fla. Stat. Ann. Sec. 205.032 (LexisNexis 2018).
475
476
Fla Stat. Ann. Sec. 212.05(a) (LexisNexis 2018).
477
Fla. Admin. Code Ann. 12A-1.104(a)(2) (2018).
478
Fla. Stat. Ann. Sec. 212.05(b) (LexisNexis 2018).
51
GA Yes479 4%480 Yes481 4824.9%483 Excise484 No485 Yes486 Yes487 Yes488
HA Yes489 4%490 Yes 0.5%491 Privilege492 Services493 Yes494495 No N/A
ID Yes496 6%497 No Excise498 Yes499 Yes500 Yes501 No
IL Yes5026.25%503 Yes5045055064.75%507 Excise508 Yes509 Yes510 No N/A
IN Yes 7%511 No Excise512 No Yes513 Yes514 No
IA Yes 6%515 Yes 1%516 Excise517 Yes518 Yes519 No N/A
479
Ga. Code Ann. Sec. 48-8-30(b)(1) (2018).
480
481
Ga. Code Ann. Sec. 48-8-110 et seq. (2018). Special Purpose Local Option Tax.
482
Ga. Code Ann. Sec. 48-8-140 et seq. (2018). Educational Purposes Tax.
483
484
Ga. Code Ann. Sec. 48-8-30(b)(1) (2018).
485
Ga. Comp. R & Regs. r. 560-12-1-.18 (2018). Exemptions may only be made as authorized the Legislature.
486
Ga. Code Ann. Sec. 48-8-30(c)(2) (2018).
487
Ga. Code Ann. Sec. 48-8-42(a) (2018).
488
Ga. Code Ann. Sec. 48-8-42(b) (2018).
489
Haw. Rev. Stat. Ann. Sec. 237-13 (LexisNexis 2018).
490
491
Id.
492
493
Haw. Rev. Stat. Ann. Sec. 237-29.53 (LexisNexis 2018).
494
Haw. Rev. Stat. Ann. Sec. 238-2 (LexisNexis 2018). Use tax for property.
495
Haw. Rev. Stat. Ann. Sec. 238-2.3 (LexisNexis 2018). Use tax for services.
496
Idaho Code Ann. Sec. 63-3619 (2018).
497
498
499
Idaho Code Ann. Sec.63-3622Q (2018).
500
Idaho Code Ann. Sec. 63-3621(a) (2018).
501
Idaho Code Ann. Sec. 63-3621(j) (2018).
502
35 Ill. Comp. Stat. Ann. 120/2 (LexisNexis 2018).
503
504
70 Ill. Comp. Stat. Ann. 3615/4.03(e) (LexisNexis 2018). Regional Transportation Authority.
505
55 Ill. Comp. Stat. Ann. 5.5-1006 (LexisNexis 2018). County Retailers Occupation Tax.
506
65 Ill. Comp. Stat. Ann. 5/8-11-1 (LexisNexis 2018).
507
508
35 Ill. Comp. Stat. 120/2 (LexisNexis 2018).
509
86 Ill. Admin. Code Sec. 130.605(f) LexisNexis 2018).
510
35 Ill. Comp. Stat. Ann 105/3 (LexisNexis 2018).
511
Ind. Code Ann. Sec. 6-2.5-2-1 (LexisNexis 2018).
512
Id.
513
514
Ind. Code Ann. Sec. 6-2.5-3-5(LexisNexis 2018).
515
Iowa Code Sec. 423.2 (2018).
103
Iowa Code Sec. 423B.5 (2018).
517
Iowa Code. Sec. 423.2 (2018).
518
Iowa Admin. Code r 701-17.8(422) (2018).
519
Iowa Code Sec. 423.5 (2018).
52
KS Yes5206.5%521 Yes522 4%523 Privilege524 Yes525 Yes526 Yes527 No
KY Yes 6%528 No Excise529 Yes530 Yes531 Yes532 Yes533
LA Yes5344.45%535 Yes536 7%537 Excise538 Yes539 Yes540 No N/A
ME Yes 5.5%541 No Excise542 No Yes543 Yes544 No
MD Yes545 6%546 No Excise547 No548, subject to Yes550 Yes551 No
refund549
MA Yes 6.25%552 No Excise553 Yes554 Yes555 Yes556 Yes 557
MI Yes 6%558 No Privilege559 No Yes560 Yes561 No
520
Kan. Stat. Ann. Sec. 79-3603 (2018).
521
522
Kan. Stat. Ann. Sec. 12-187 (2018).
523
524
Kan. Stat. Ann. Sec. 79-3603 (2018).
525
Kan. Admin. Regs. Sec. 92-19-29 (2018).
526
Kan. Stat. Ann. Sec. 79-3703 (2018).
527
Kan. Stat. Ann. Sec. 79-3704(c) (2018).
528
Ky. Rev. Stat. Ann. Sec. 139.200 (LexisNexis 2018).
529
Id.
530
103 Ky. Admin. Regs. 30:190(2)(2) (2018).
531
532
533
Id.
534
La. Rev. Stat. Ann. Sec. 47:302 (2018).
535
536
La. Rev. Stat. Ann. Sec. 47-337.4 (2018).
537
538
539
La. Rev. Stat. 47:305(E) (2018).
540
541
Me. Rev. Stat. Tit. 36, Sec. 1811 (2018).
542
Id.
543
544
545
Md. Code Ann. Tax-Gen. Sec. 11-102(a)(1) (2018).
546
547
Md. Code Ann. Tax-Gen Sec. 11-102(a) (2018).
548
Md. Code Ann. Tax-Gen. Sec. 11-216(b) (2018).
549
Md. Code Ann. Tax-Gen. Sec. 11-216(c) (2018).
550
551
552
Mass. Gen. Laws Ch. 64H, Sec. 2 (LexisNexis 2018).
553
554
555
Mass. Gen. Laws Ch. 64I, Sec. 2 (LexisNexis 2018).
556
Mass. Gen. Laws Ch. 64I, Sec. 7(c) (LexisNexis 2018).
557
Id.
558
Mich. Comp. Laws Serv. Sec. 205.52 (LexisNexis 2018).
559
Id.
560
Mich. Comp. Laws Serv. Sec. 205.93 (1) (LexisNexis 2018).
561
Mich. Comp. Laws Serv. Sec. 205.94(e) (LexisNexis 2018).
53
MN Yes 6.5%562 Yes563 2%564 Excise565 Yes566 Yes567 No568 N/A.
MS Yes569 7%570 Yes 1%571 Privilege572 Yes573 Yes574 Yes575 No
MO Yes576 4.225%577 Yes578 5795806.125%581 Privilege582 Yes583 Yes584 Yes585 No
MT No No N/A N/A No N/A N/A
NE Yes586 5.5%587 Yes 2%588 Excise589 Yes590 Yes591 Yes592 Yes593
NV Yes5945956.85%596 Yes 5975985991.415%600 Privilege601 Yes602 Yes603 Yes?604 No
NH No No N/A N/A No N/A N/A
562
Minn. Stat. Sec. 297A.62(1) (2018).
563
Minn. Stat. Sec. 297A.99 (2018).
564
565
Minn. Stat. Sec. 297A.62(1) (2018).
566
Id. Minnesota defines taxable sales as those which are delivered in Minnesota.
567
Minn. Stat. Sec. 297A.63(1)(a) (2018).
568
Minn. Stat. Sec. 297A.67(21) (2018). $770 worth of merchandise exempt per year.
569
Miss. Code Ann. Sec. 27-65-13 (2018).
570
571
Miss. Code Ann. Sec. 27-65-241 (2018).
572
Miss. Code Ann. Sec. 27-65-13 (2018).
573
35-004-003-05 Miss. Code R. Sec. 102 (2018).
574
Miss. Code Ann. Sec. 27-67-5 (2018).
575
Miss. Code Ann. Sec. 27-67-7(a) (2018).
576
Mo. Rev. Stat. Sec. 144.020 (2018).
577
578
Mo. Rev. Stat. Sec. 94-510 (2018).
579
Mo. Rev. Stat. Sec. 94-605 (2018). Transportation Tax for St Louis and Kansas City.
580
Mo. Rev. Stat. Sec. 94-900 (2018). Public Safety Sales Tax.
581
582
Mo. Rev. Stat. Sec. 144.020 (2018).
583
Mo. Code Regs. Ann. Tit. 12 Sec. 113.200 (2018).
584
Mo. Rev. Stat. Sec. 144.610 (2018).
585
Mo. Rev. Stat. Sec. 144.615(5) (2018).
586
Neb. Rev. Stat. Ann. Sec. 77-2703(1) (LexisNexis 2018).
587
Neb. Rev. Stat. Ann. Sec. 77-2701.02(4) (LexisNexis 2018).
588
Neb. Rev. Stat. Ann. Sec. 77-27,142 (LexisNexis 2018).
589
590
591
592
Neb. Rev. Stat. Ann. Sec. 77-2704.31 (LexisNexis 2018).
593
Id.
594
Nev. Rev. Stat. Sec. 372.105 (LexisNexis 2018).
595
596
597
Nev. Rev. Stat. Sec. 377A.100 et seq. (LexisNexis 2018).
598
Nev. Rev. Stat. Sec. 377B.100 et seq. (LexisNexis 2018).
599
Nev. Rev. Stat. Sec. 377C.100 et seq (LexisNexis 2018).
600
601
Nev. Rev. Stat. Sec. 372.105 (Lexis Nexis 2018).
602
603
604
Nev. Rev. Stat. Sec. 372.345 (LexisNexis 2018). Statute does not state the tax must be paid to another state.
54
NJ Yes 6.625%605 No Excise606 Yes607 Yes608 No N/A
NM Yes 5.125%609 Yes 6104.125%611 Privilege612 Yes 613 Yes614 Yes615 No
NY Yes 4%616 Yes6176184.875%619 Excise620 Yes621 Yes622 Yes623 Yes624
NC Yes 4.75%625 Yes 2.75 %626627628629630 Privilege631 Yes632 Yes633 No N/A.
ND Yes 5%634 Yes635636 3.5%637 Excise638 Yes639 Yes640 Yes641 Yes642
OH Yes 5.75%643 Yes644645 2.25%646 Excise647 Yes 648 Yes649 Yes650 No
OR No No N/A N/A No N/A N/A
605
N.J. Stat. Ann. Sec. 54:32B-3 (LexisNexis 2018).
606
Id.
607
N.J. Admin Code Sec. 18:24-2.6 (LexisNexis 2018).
608
609
N.M. Stat. Ann. Sec. 7-9-4 (LexisNexis 2018).
610
611
612
613
N.M. Stat. Ann. Sec. 7-9-57(LexisNexis 2018).
614
N.M. Stat. Ann. Sec. 7-9-7 (Lexis Nexis 2018).
615
N.M. Stat. Ann. Sec. 7-9-79(A) (LexisNexis 2018).
616
N.Y. Tax Law Sec. 1105 (Consol. 2018).
617
618
619
620
621
N.Y. Comp. Codes R. & Regs. Tit.20 Sec. 528.23 (2018).
622
623
N.Y. Tax Law Sec. 1118(7) (Consol. 2018).
624
Id.
625
N.C. Gen. Stat. Sec. 105-164.4 (2018).
626
N.C. Gen. Stat. Sec. 105-463 et seq. (2018).
627
628
629
630
631
N.C. Gen. Stat. Sec. 105-164.4 (2018).
632
N.C. Gen. Stat. Sec. 105-164.13(33a) (2018).
633
N.C. Gen. Stat. Sec. 105-164.6 (2018).
634
N.D. Cent. Code Sec. 57-39.2-02.1 (2018).
635
N.D. Cent. Code Sec. 11.09.1-05(4) (2018).
636
N.D. Cent. Code Sec. 40-05.1-06(4) (2018).
637
638
N.D. Cent. Code Sec. 57-39.2-02.1 (2018).
639
N.D. Admin. Code r.81-04.1-.3-04 (2018).
640
N.D. Cent. Code Sec. 57-40.2-02.1 (2018).
641
N.D. Cent. Code Sec. 57-40.2-11 (2018).
642
Id.
643
Ohio Rev. Code Ann. Sec. 5739.02 (LexisNexis 2018).
644
Ohio Rev. Code Ann. Sec. 5739.021(A) (LexisNexis 2018).
645
646
647
648
Ohio Admin. Code r 5703-9-39 (2018).
649
650
Ohio Rev. Code Ann. Sec. 5741.02(C)(5) (LexisNexis 2018).
55
OK Yes 4.5%651 Yes652 7%653 Excise654 Yes655 Yes656 Yes657 Yes658
PA Yes 6%659 Yes660 2%661 Excise662 Yes663 Yes664 Yes665 Yes666
RI Yes 6%667 No Excise668 Yes669 Yes670 Yes671 No
SC Yes672 6%673 Yes674 6756766776783%679 Excise680 Yes681 Yes682 Yes683 No
SD Yes 4.5%684 Yes2%685 Privilege686 Yes687 Yes688 Yes689 Yes690
TN Yes 7% 691 Yes 2.75%692 Privilege693 Yes 694 Yes695 Yes696 No
651
Okla. Stat. Ann. Tit. 68, Sec. 1354 (LexisNexis 2018).
652
Okla. Stat. Ann. Tit. 68, Sec 2701(B) (LexisNexis 2018).
653
www.sale-tax.com/ (Last viewed Sept.1, 2018).
654
Okla. Stat. Ann. Tit.68, Sec. 1354 (LexisNexis 2018).
655
Okla. Admin. Code Sec. 710:65-15-1(b) (2018).
656
657
Okla. Stat. Ann. Tit. 68, Sec. 1404(3) (LexisNexis 2018).
658
Id.
659
72 Pa. Stat. Ann. Sec. 7202(a) (LexisNexis 2018).
660
72 Pa. Stat. Ann. Sec 7201-B (LexisNexis 2018).
661
662
72 Pa. Stat, Ann, Sec. 7202(a) (LexisNexis 2018).
663
61 Pa. Code Sec 32.5(b) (2018).
664
72 Pa. Stat. Ann. Sec. 7202(b) (LexisNexis 2018).
665
61 Pa. Code Sec.33.2(d)(4) (2018).
666
Id.
667
R.I. Gen. Laws Sec. 44-18-18 (2018).
668
Id.
669
R.I. Gen. Laws Sec. 44-18-36(2) (2018).
670
R.I. Gen. Laws Sec. 44-18-20 (2018).
671
R.I. Gen. Laws Sec. 44-18-30A (2018).
672
S.C. Code Ann. Sec. 12-36-910 (2018).
673
674
S.C. Code Ann. Sec. 4-10-20 (2018).
675
S.C. Code Ann. Sec. 4-10-730 (2018).
676
S.C. Code Ann. Sec. 4-10-310 (2018).
677
S.C. Code Ann. Sec. 4-10-420 (2018).
678
S.C. Code Ann. Sec. 4-10-540 (2018).
679
680
S.C. Code Ann. Sec. 12-36-910 (2018).
681
S.C. Code Ann. Regs. 117-334.5 (2018).
682
S.C. Code Ann. Sec. 12-36-1310(A) (2018).
683
S.C. Code Ann. Sec. 13-36-1310(C) (2018).
684
685
S.D. Codified Laws Sec. 10-52-2(2018).
686
687
S.D. Admin. R. 64:06:01:24 (2018).
688
689
S. D. Codified Laws Sec. 10-46-6.1 (2018).
690
Id.
691
Tenn. Code Ann. Sec. 67-6-202 (2018).
692
Tenn. Code Ann. Sec. 67-6-702 (2018).
693
Tenn. Code Ann. Sec. 67-6-202 (2018).
694
Tenn. Code Ann. Sec. 67-6-313(a) (2018).
695
Tenn. Code Ann. Sec. 67-6-203 (2018).
696
Tenn. Code Ann. Sec. 67-6-313(f) (2018).
56
TX Yes 6.25%697 Yes 2%698699 Excise700 Yes701 Yes702 Yes703 Yes704
UT Yes 4.7%705 Yes706 7073.9%708 Excise709 Yes710 Yes711 Yes712 No
VT Yes 6%713 Yes 1%714 Excise715 Yes 716 Yes717 No N/A
VA Yes 4.3%718 Yes 1.7%719 Privilege720 Yes721 Yes722 Yes723 No
WA Yes 6.5%724 Yes 3.9%725 Excise726 Sometimes727728 Yes729 No N/A
WV Yes 6%730 Yes 1%731 Privilege732 No Yes733 No N/A
WI Yes 5%734 Yes 1.1%735 Privilege736 Yes737 Yes738 No N/A
697
Tex. Tax Code Sec. 151.051 (LexisNexis 2018).
698
Tex. Tax Code Sec. 321.101 et seq. (LexisNexis 2018).
699
700
701
Tex. Tax Code Sec. 151.330(a) (LexisNexis 2018).
702
703
704
Id.
705
Utah Code Ann. Sec. 59-12-103 (LexisNexis 2018).
706
707
708
709
710
Utah Admin. Code r. R865-19S-44 (2018).
711
Utah Code Ann. Sec. 59-12-103(l) (LexisNexis 2018).
712
Utah Code Ann. Sec. 59-12-104(26) (LexisNexis 2018).
713
Vt. Stat. Ann. Tit. 32, Sec. 9771 (2018).
714
tax.vermont.gov/business-and-corp/sales-and-use-tax/local-option-tax (Last viewed Sept 1, 2018).
715715
716
10-060-033 Vt. Code R. Sec. 1.9701(8)-2(A) (2018). Only sales sourced to Vermont are taxable.
717
718
Va. Code Ann. Sec. 58.1-603 (2018).
719
https://tax.virginia.gov/retail-sales-and-use-tax (Last viewed Sept. 1, 2018).
720
Va. Code Ann. Sec. 58.1-603 (2018).
721
23 Va. Admin. Code Sec. 10-210-780(A) (2018).
722
Va. Code Ann. Sec. 58.1-604 (2018).
723
Va. Code Ann. Sec. 58.1-611 (2018).
724
Wash. Rev. Code Ann. Sec. 82.08.020 (LexisNexis 2018).
725
726
727
Wash. Rev. Code Ann. Sec. 82.08.0268 (LexisNexis 2018). Relating to the sale of farm implements out of state.
728
Wash. Rev. Code. Ann. Sec. 82.08.0269 (LexisNexis 2018). Relating to the sale of anything to a resident of a
noncontiguous State of the United States.
729
730
W.Va. Code Ann. Sec. 11-15-3 (LexisNexis 2018).
731
732
733
W.Va. Code Ann. Sec. 11-15A-2 (LexisNexis 2018).
734
Wis. Stat. Ann. Sec. 77.52 (LexisNexis 2018).
735
Wis. Stat. Ann. Sec. 77.71 (LexisNexis2018).
736
737
Wis. Stat. Ann. Sec. 77.55 (Lexis Nexis 2018).
738
57
WY Yes7394%740 Yes 2%741 Excise742 No743 Yes744 No N/A
739
Wyo. Stat. Ann. Sec. 39-15-103 (2018).
740
Wyo. Stat. Ann. Sec. 39-15-104(b) (2018).
741
Wyo. Stat. Ann. Sec. 39-15-204(a)(I) (2018).
742
Wyo. Stat. Ann. Sec. 39-15-103 (2018).
743
Wyo. Stat. Ann. Sec. 39-15-105 (2018).
744
Wyo. Stat. Ann. Sec. 39-16-103 (2018).
58
XIII. Bibliography
A. Cases
Bellas Hess v. Dept. of Rev. 386 U.S. 753; 87 S.Ct. 1389; 18 L.Ed 2d 505 (1967).
Calder v. Bull, 3 U.S. 386 (1798).
Complete Auto Transit v. Brady, 430 U.S. 274 (1977).
Direct Mktg. Ass’n. v. Brohl, 135 S.Ct. 1124, 1127; 181 L.Ed.2d 97, 102-3 (2015).
Flood v. Kuhn, 407 U.S. 258, 273; 92 S.Ct. 2099, 2107; 32 L.Ed.2d 728, 739 (1972).
Freeman v. Hewit, 329 U.S. 249, 251; 67 S.Ct 274, 276; 91 L.Ed 265, 271 (1946).
Hartney Fuel Oil Co. v. Hamer, 998 N.E.2d 1227 (Ill. 2013).
Kelo v. City of New London, Conn., 545 U.S. 469 (2005).
Quill, Inc. v. North Dakota, 504 U.S. 298; 112 S.Ct. 1904; 119 L.Ed.2d 91 (1992).
South Dakota v Wayfair, Inc., 138 S. Ct. 2080 (2018).
State ex rel. Lindstrom v. Goetz, 73 S.D. 633; 47 N.W.2d 566 (1951).
U.S. v. Lopez, 514 U.S. 549, 602 (1995).
B. Statutes
130 Stat. 281 (Feb. 24, 2016).
2016 S.D. Sess. Law ch 270, Sec. 9.
35 Ill. Comp. Stat. Ann 105/3 (LexisNexis 2018).
35 Ill. Comp. Stat. Ann. 120/2 (LexisNexis 2018).
55 Ill. Comp. Stat. Ann. 5.5-1006 (LexisNexis 2018).
65 Ill. Comp. Stat. Ann. 5/8-11-1 (LexisNexis 2018).
70 Ill. Comp. Stat. Ann. 3615/4.03(e) (LexisNexis 2018).
72 Pa. Stat. Ann. Sec. 7202(a) (LexisNexis 2018).
72 Pa. Stat. Ann. Sec. 7202(b) (LexisNexis 2018)
Ala. Code Sec. 40-23-2(a) (LexisNexis 2018).
Alaska Stat. Sec. 29.45.650 (2018).
Alaska Stat. Sec. 29.45.700 (2018).
Ariz. Rev. Stat. Sec. 42-5010(l) (LexisNexis 2018).
Ariz. Rev. Stat. Sec. 42-5159(A)(2) (LexisNexis 2018).
Ark. Code Ann. Sec. 26-52-301 (2018).
Ark. Code Ann. Sec. 26-53-106 (2018).
Ark. Code Ann. Sec. 26-53-131(a) (2018).
Ark. Code Ann. Sec. 26-74-201 et seq. (2018).
Cal. Rev, & Tax Code Sec. 7202 (Deering 2018).
Cal. Rev.& Tax Code Sec. 6051 (Deering 2018).
Colo. Rev. Stat. Sec. 39-26-104 (2018).
Colo. Rev. Stat. Sec. 39-26-202 (2018).
59
Colo. Rev. Stat. Sec. 39-26-713(f) (2018).
Colo. Rev. Stat. Sec. 39-26-713(i) (2018).
Conn. Gen. Stat. Sec. 12-408 (2018).
Conn. Gen. Stat. Sec. 12-408(A)(1) (2018).
Conn. Gen. Stat. Sec.12-413(3) (2018).
D.C. Code Sec, 47-2206(3) (LexisNexis 2018).
Fla Stat. Ann. Sec. 212.05(a) (LexisNexis 2018).
Fla. Stat. Ann. Sec. 205.032 (LexisNexis 2018).
Fla. Stat. Ann. Sec. 212.05(a) (LexisNexis 2018).
Fla. Stat. Ann. Sec. 212.05(b) (LexisNexis 2018).
Ga. Code Ann. Sec. 48-8-110 et seq. (2018).
Ga. Code Ann. Sec. 48-8-140 et seq. (2018).
Ga. Code Ann. Sec. 48-8-30(b)(1) (2018).
Ga. Code Ann. Sec. 48-8-30(c)(2) (2018).
Ga. Code Ann. Sec. 48-8-42(a) (2018).
Ga. Code Ann. Sec. 48-8-42(b) (2018).
Idaho Code Ann. Sec. 63-3621(a) (2018).
Idaho Code Ann. Sec. 63-3621(j) (2018).
Idaho Code Ann. Sec.63-3622Q (2018).
Ind. Code Ann. Sec. 6-2.5-3-5(LexisNexis 2018).
Internet Tax Freedom Act, 112 Stat. 2681, Sec. 1101 (1998).
Iowa Code Sec. 423.2 (2018).
Iowa Code Sec. 423.3(57) (2018).
Iowa Code Sec. 423B.5 (2018).
Kan. Stat. Ann. Sec. 12-187 (2018).
Kan. Stat. Ann. Sec. 79-3603 (2018).
Kan. Stat. Ann. Sec. 79-3605 (2018).
Kan. Stat. Ann. Sec. 79-3703 (2018).
Kan. Stat. Ann. Sec. 79-3704(c) (2018).
La. Rev. Stat. 47:305(E) (2018).
La. Rev. Stat. Ann. Sec. 47-337.4 (2018).
Mass. Gen. Laws Ch. 64I, Sec. 2 (LexisNexis 2018).
Mass. Gen. Laws Ch. 64I, Sec. 7(c) (LexisNexis 2018).
Md. Code Ann. Tax-Gen Sec. 11-102(a) (2018).
Md. Code Ann. Tax-Gen. Sec. 11-216(b) (2018).
60
Mich. Comp. Laws Serv. Sec. 205.52 (LexisNexis 2018).
Mich. Comp. Laws Serv. Sec. 205.93 (1) (LexisNexis 2018).
Mich. Comp. Laws Serv. Sec. 205.94(e) (LexisNexis 2018).
Minn. Stat. Ann. Sec. 297A.67(21) (2018).
Minn. Stat. Sec. 297A.62(1) (2018).
Minn. Stat. Sec. 297A.63(1)(a) (2018).
Minn. Stat. Sec. 297A.67(2) (2018).
Minn. Stat. Sec. 297A.67(21) (2018).
Minn. Stat. Sec. 297A.67(8) (2018).
Minn. Stat. Sec. 297A.99 (2018).
Miss. Code Ann. Sec. 27-65-13 (2018).
Miss. Code Ann. Sec. 27-65-241 (2018).
Miss. Code Ann. Sec. 27-67-5 (2018).
Miss. Code Ann. Sec. 27-67-7(a) (2018).
Mo. Rev. Stat. Sec. 144.020 (2018).
Mo. Rev. Stat. Sec. 144.610 (2018).
Mo. Rev. Stat. Sec. 144.615(5) (2018).
Mo. Rev. Stat. Sec. 94-510 (2018)
Mo. Rev. Stat. Sec. 94-605 (2018).
Mo. Rev. Stat. Sec. 94-900 (2018).
N.C. Gen. Stat. Sec. 105-164.13(33a) (2018).
N.C. Gen. Stat. Sec. 105-164.4 (2018).
N.C. Gen. Stat. Sec. 105-164.6 (2018).
N.D Cent. Code Sec. 40-05.1-06(4) (2018).
N.D. Cent. Code Sec. 11.09.1-05(4) (2018).
N.D. Cent. Code Sec. 57-39.2-02.1 (2018).
N.D. Cent. Code Sec. 57-39.2-02.1 (2018).
N.D. Cent. Code Sec. 57-39.2-04.1(2018).
N.D. Cent. Code Sec. 57-40.2-02.1 (2018).
N.D. Cent. Code Sec. 57-40.2-11 (2018).
N.J. Stat. Ann. Sec. 54:32B-6 (LexisNexis 2018)
N.M. Stat. Ann. Sec. 7-9-57(LexisNexis 2018).
N.M. Stat. Ann. Sec. 7-9-7 (Lexis Nexis 2018).
N.M. Stat. Ann. Sec. 7-9-79(A) (LexisNexis 2018).
N.Y. Tax Law Sec. 1118(7) (Consol. 2018).
Neb. Rev. Stat. Ann. Sec. 77-27,142 (LexisNexis 2018).
61
Neb. Rev. Stat. Ann. Sec. 77-2701.02(4) (LexisNexis 2018).
Neb. Rev. Stat. Ann. Sec. 77-2704.31 (LexisNexis 2018).
Neb. Rev. Stat. Sec. 77-2704.24(1) (LexisNexis 2018).
Nev. Rev. Stat. Sec. 372.105 (Lexis Nexis 2018).
Nev. Rev. Stat. Sec. 377A.100 et seq. (LexisNexis 2018).
Nev. Rev. Stat. Sec. 377B.100 et seq. (LexisNexis 2018).
Ohio Rev. Code Ann. Sec. 5741.02(C)(5) (LexisNexis 2018).
Okla. Stat. Ann. Tit. 68, Sec 2701(B) (LexisNexis 2018).
Okla. Stat. Ann. Tit. 68, Sec. 1404(3) (LexisNexis 2018).
R.I. Gen. Laws Sec. 44-18-18 (2018).
R.I. Gen. Laws Sec. 44-18-20 (2018).
R.I. Gen. Laws Sec. 44-18-30A (2018).
R.I. Gen. Laws Sec. 44-18-36(2)(2018).
S.C. Code Ann. Sec. 12-36-1310(A) (2018).
S.C. Code Ann. Sec. 12-36-910 (2018).
S.C. Code Ann. Sec. 13-36-1310(C) (2018).
S.C. Code Ann. Sec. 4-10-20 (2018).
S.C. Code Ann. Sec. 4-10-310 (2018).
S.C. Code Ann. Sec. 4-10-420 (2018).
S.C. Code Ann. Sec. 4-10-540 (2018).
S.C. Code Ann. Sec. 4-10-730 (2018).
S.D. Codified Laws. Sec. 10-64-3 (2018).
S. D. Codified Laws Sec. 10-46-6.1 (2018).
S.D. Codified Laws Sec. 10-46-27.1 (2018).
S.D. Codified Laws Sec. 10-52-2(2018).
S.D. Codified Laws Sec. 22-6-2(1)(2018).
Tenn. Code Ann. Sec. 67-6-202 (2018).
Tenn. Code Ann. Sec. 67-6-203 (2018).
62
Tenn. Code Ann. Sec. 67-6-313(a) (2018).
Tenn. Code Ann. Sec. 67-6-313(f) (2018).
Tenn. Code Ann. Sec. 67-6-702 (2018).
Tex. Tax Code Sec. 151.330(a) (LexisNexis 2018).
Utah Code Ann. Sec. 59-12-104(26) (LexisNexis 2018).
Va. Code Ann. Sec. 58.1-603 (2018).
Va. Code Ann. Sec. 58.1-604 (2018).
Va. Code Ann. Sec. 58.1-611 (2018).
W.Va. Code Ann. Sec. 11-15A-2 (LexisNexis 2018).
Wash. Rev. Code. Ann. Sec. 82.08.0269 (LexisNexis 2018).
Wis. Stat. Ann. Sec. 77.55 (Lexis Nexis 2018).
Wis. Stat. Ann. Sec. 77.71 (LexisNexis2018).
Wyo. Stat. Ann. Sec. 39-15-103 (2018).
Wyo. Stat. Ann. Sec. 39-15-104(b) (2018).
Wyo. Stat. Ann. Sec. 39-15-105 (2018).
Wyo. Stat. Ann. Sec. 39-15-204(a)(i) (2018).
Wyo. Stat. Ann. Sec. 39-16-103 (2018).
Wyo. Stat. Sec. 39-15-105(a)(vi)(E) (2018).
C. Regulations
10-060-033 Vt. Code R. Sec. 1.9701(8)-2(A) (2018).
103 Ky. Admin. Regs. 30:190(2)(2) (2018).
35-004-003-05 Miss. Code R. Sec. 102 (2018).
61 Pa. Code Sec 32.5(b) (2018)
61 Pa. Code Sec.33.2(d)(4) (2018).
86 Ill. Admin. Code Sec. 130.605(f) (2018).
Ala. Admin. Code r 810-6-3-.35.01 (2018).
Ariz. Admin. Code Sec. R15-5-173 (LexisNexis 2018).
D.C. Mun. Regs. 9-404.4 (LexisNexis 2018).
Fla. Admin. Code Ann. 12A-1.104(a)(2) (2018).
Ga. Comp. R & Regs .r. 560-12-1-.18 (2018).
Iowa Admin. Code r 701-17.8(422) (2018).
Kan. Admin. Regs. Sec. 92-19-29 (2018).
Mo. Code Regs. Ann. Tit. 12 Sec. 113.200 (2018).
N.D. Admin. Code r.81-04.1-.3-04 (2018).
N.J. Admin Code Sec. 18:24-2.6 (LexisNexis 2018).
N.Y. Comp. Codes R. & Regs. Tit.20 Sec. 528.23 (2018).
Ohio Admin. Code r 5703-9-39 (2018).
63
Okla. Admin. Code Sec. 710:65-15-1(b) (2018).
S.C. Code Ann. Regs. 117-334.5 (2018).
S.D. Admin. R. 64:06:01:24 (2018).
Utah Admin. Code r. R865-19S-44 (2018).
Va. Admin. Code Sec. 10-210-780(A) (2018).
D. Other Authorities
2017 Top E-Retailers Chart, https://nrf.com/2017-top-50-e-retailers-chart (Last viewed Sept. 18, 2018).
Adam Smith, The Wealth of Nations, 152 (Regnery 1998) (1776).
Anna Mikhailovna, “Philip Hammond threatens ‘Amazon tax’ on online retailers to help out high street”, The
Telegraph (London) (Aug. 10, 2018) https://www.telegraph.co.uk/politics/2018/08/10/philip-hammond-warns-
online-retailers-face-tax-raid-amid-high/ (Last viewed Aug. 10, 2018).
Brief Amicus Curiae for the American Legislative Exchange Council in Support of Respondent; South Dakota v.
Wayfair, Inc., 138 S.Ct. 2080.
Brief for Amici Curiae International Council of Shopping Centers, Investment Program Association, Nareit,
National Association of Realtors(R), and the Real Estate Roundtable in Support of Petitioner, South Dakota v.
Wayfair, Inc. 138 S.Ct. 2080.
Brief for Amici Curiae Washington State Tax Practitioners in Support of Respondents, South Dakota v. Wayfair,
Inc. 138 S.Ct. 2080.
Brief for Amicus Curiae Streamlined Sales Tax Governing Board, Inc. South Dakota v. Wayfair, Inc. 138 S.Ct.
2080.
Brief for Colony Brands, Inc., as Amicus Curiae in Support of Respondents, South Dakota v. Wayfair, Inc. 138 S.Ct
2080.
Brief for Colorado and 40 Other States, Two United States Territories, and the District of Columbia as Amici Curiae
Supporting Petitioner, South Dakota v. Wayfair, 138 S.Ct. 2080.
Brief for David A. Fruchtmann as Amicus Curiae Supporting Neither Party, South Dakota v. Wayfair, Inc. 138 S.Ct.
2080.
Brief for Etsy, Inc., as Amicus Curiae Supporting Respondents; South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 at 17.
Brief for Montana as Amicus Curiae Supporting Respondents, South Dakota v. Wayfair, Inc. 138 S.Ct. 2080.
Brief for Nat’l. Ass’n. of Auctioneers, as Amicus Curiae Supporting Respondants, South Dakota v. Wayfair , Inc.
138 S.Ct. 2080.
Brief for the Cato Institute as Amicus Curiae for Respondents; South Dakota v. Wayfair, Inc. 138 S.Ct 2080.
Brief for the National Congress of American Indians and Indian Tribes and Indian Tribes in South Dakota, as Amici
Curiae, in Support of Neither Party, South Dakota v. Wayfair, Inc., 138 S.Ct. 2080.
Brief for the State of New Hampshire as Amicus Curiae Supporting Respondents, South Dakota v. Wayfair, Inc. 138
S.Ct. 2080.
Brief of Amici Curiae American Farm Bureau Federation and South Dakota Farm Bureau Federation in Support of
Petitioner, South Dakota v. Wayfair, Inc. 138 S.Ct. 2080 .......................................................................................20
Brief of Amicus Curiae America’s Collectibles Network, Inc., d/b/a Jewelry Television In Support of Respondents,
South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 .......................................................................................................29
Brief of Amicus Curiae Americans for Tax Reform in Support of Respondents, South Dakota v. Wayfair, Inc. 138
S.Ct. 2080 ................................................................................................................................................................26
Brief of Flipper, LLC, an Amazon Third Party Merchant with Product Sold in All 50 States and Over 50 Countries
as Amicus Curiae in Support of Respondents, South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 ..............................30
Brief of Professor John S. Baker, Jr., as Amicus Curiae, Supporting Neither Party, South Dakota v. Wayfair, Inc. 138
S.Ct. 2080 ................................................................................................................................................................32
Brief of Retail Litigation Center, Inc., as Amicus Curiae in Support of Petitioner, South Dakota v. Wayfair, Inc. 138
S.Ct. 2080 ................................................................................................................................................................18
Brief of Tax Executives Institute, Inc., as Amicus Curiae in Support of Respondents; South Dakota v. Wayfair, Inc.
138 S.Ct 2080 ..........................................................................................................................................................31
Brief of the National Association of Certified Service Providers and the Software & Information Industry
Association as Amici Curiae in Support of Neither Party; South Dakota v. Wayfair, Inc, 138 S.Ct. 2080 at 4.
64
Dana Ferguson, South Dakotans, your online price tag is about to get steeper. Here’s why. Sioux Falls Argus-
Leader (Sept. 12, 2018) https://www.argusleader.com/story/news/politics/2018/09/12/south-dakotans-your-
online-price-tag-get-steeper-heres-why/1277215002/.
David Marotta, What is Rent-Seeking Behavior? Forbes (Feb 24, 2013)
https://www.forbes.com/sites/davidmarotta/2013/02/24/what-is-rent-seeking-behavior/ (Last viewed Sept. 4,
2018).
https://tax.virginia.gov/retail-sales-and-use-tax (Last viewed Sept. 1, 2018).
https://www.newegg.com/Info/AboutUs.aspx (Last viewed Sept 21, 2018).
https://www.nextdirect.com/us/en (Last viewed Sept. 28, 2018).
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A New Look at Remote Sales Taxation in The Aftermath of South Dakota v. Wayfair

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A New Look at Remote Sales Taxation in The Aftermath of South Dakota v. Wayfair

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A NEW LOOK AT REMOTE SALES TAXATION IN THE AFTERMATH OF

SOUTH DAKOTA V. WAYFAIR

© 2018 Vincent Pelfrey, All Rights Reserved

However, if a South Dakota resident were to purchase tangible personal property in

V. How did sales tax-free sales come to happen on the Internet?

Justice Kennedy continued:

VIII. A Better Way Forward and How to Get There

XI. Areas of Further Research

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