Case No. 17-494 | S.D.
South Dakota v. Wayfair presents the Court with an opportunity to reexamine its decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992). The issue comes before the Court as a result of efforts in South Dakota (“the State”) to pass and enforce sales tax obligations on online retailers who engage in high volumes of transactions each year, but nevertheless have no physical presence in the State. As part of these efforts, the State filed suit against several online retailers (“Respondents”) with the understanding that the suit would need to make it all the way to the Supreme Court and succeed in overturning Quill.
In Quill, the Court struck down a North Dakota statute similar to the one that the State enacted here. In Quill, the Court held that although the North Dakota statute did not violate the Due Process Clause, it did violate the Constitution’s so-called “dormant” Commerce Clause. See Quill, 504 U.S. at 301–19. In so doing, the Court affirmed the rule that it established in National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753 (1967), which mandates that sales tax obligations be imposed only on entities that have a physical presence in the state.
In its appeal to the Court, the State asserts that the economic landscape has changed so much since Quill that a different approach is now warranted. Pointing to some of the Court’s other Commerce Clause jurisprudence, the State also argues that such a reconsideration is permissible because the Bellas Hess rule was already on unsure footing when Quill was decided.
In response, Respondents assert that Quill remains a viable, firmly-rooted precedent. Respondents further contend that turning away from Quill is not only unnecessary as a precedential matter, but also unwise as a policy matter. They argue that the State’s argument fails to appreciate the policy challenges that would be involved with such a tax law, recent economic and technological advancements notwithstanding. Respondents also argue that the substantial reliance interests at stake counsel against abandoning the typical stare decisis approach.
The potential impact of this case certainly is substantial. A decision to overturn Quill and uphold the State’s legislation could give way to similar legislation in other states. This could cause the tax burdens on online retailers to increase significantly. It is clear that key players throughout the retail industry, as well as state and local governments, are keenly aware of the import of this case, as many have filed amicus briefs with the Court.