Quill Corp. v. North Dakota
Encyclopedia
Quill Corp. v. North Dakota, 504 U.S. 298
(1992) is a Supreme Court
ruling concerning use tax
. Quill Corporation
is an office supply
retailer. Quill had no physical presence in North Dakota
(neither a sales
force, nor a retail outlet), however it did have a licensed computer software
program that some of its North Dakota customers used to check Quill's current inventories and place orders directly. North Dakota attempted to impose a use tax
on Quill, which was struck down by the Supreme Court.
North Dakota Supreme Court
upheld the statute.
Quill, incorporated in Delaware, did not have a physical location in North Dakota and none of its workers were located there. Quill sold office equipment and stationery in North Dakota by using catalogues, flyers, advertisements in national periodicals, and telephone calls. Deliveries were made by post and common carrier from out-state-locations.
, Quill had established a presence, as the floppy disk
s were physically located in their state. The Supreme Court based its reasoning on analysis of the Commerce Clause rather than due process.
The Commerce Clause gives the federal government power to regulate interstate commerce and prohibits certain state actions, such as applying duties, that interfere with trade among the states. In National Bellas Hess, Inc. v. Department of Revenue of Illinois
, 386 US 753 (1967), it was held that a business whose only contacts with the taxing state are by mail or by common carrier lacks the "substantial nexus" required under the Dormant Commerce Clause.
The court determined that Complete Auto Transit, Inc. v. Brady
, 430 US 274 (1977), did not limit or undo the National Bellas Hess rule. A corporation, the court ruled, may have the minimum contacts required by the due process clause and still fall short of the substantial nexus required by the Dormant Commerce Cause. The court noted that the bright-line rule of National Bellas Hess "furthers the ends" of the Dormant Commerce Clause. The Quill court thus reversed the decision of the North Dakota Supreme Court
requiring Quill to collect and remit sales taxes on purchases made by customers from that state.
(R-Wyoming) and Lamar Alexander
(R-Tennessee) introduced a bill that would overrule the decision and allow states to collect sales taxes on internet sales. The bill has wide support from brick-and-mortar retailers such as Walmart and Home Depot, and even online retailer Amazon
has indicated support. EBay
opposes the bill. States would be required to simplify their sales tax code in order to collect tax from online retailers.
Case citation
Case citation is the system used in many countries to identify the decisions in past court cases, either in special series of books called reporters or law reports, or in a 'neutral' form which will identify a decision wherever it was reported...
(1992) is a Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
ruling concerning use tax
Use tax
A use tax is a type of excise tax levied in the United States. It is assessed upon otherwise "tax free" tangible personal property purchased by a resident of the assessing state for use, storage or consumption of goods in that state , regardless of where the purchase took place...
. Quill Corporation
Quill Corporation
Quill Corporation is the largest mail-order office supply retailer in the United States with revenues of $1.3B per year and EBITDA of over 20%. Currently headquartered in Lincolnshire, Illinois, Quill offers more than 200,000 products including school and office supplies, office machines,...
is an office supply
Office Supply
Office Supply is a New Wave band consisting of three keyboardists. The band has successfully released their debut album Work in Progress, on the independent record label Toaster Records on April 30, 2006...
retailer. Quill had no physical presence in North Dakota
North Dakota
North Dakota is a state located in the Midwestern region of the United States of America, along the Canadian border. The state is bordered by Canada to the north, Minnesota to the east, South Dakota to the south and Montana to the west. North Dakota is the 19th-largest state by area in the U.S....
(neither a sales
Sales
A sale is the act of selling a product or service in return for money or other compensation. It is an act of completion of a commercial activity....
force, nor a retail outlet), however it did have a licensed computer software
Computer software
Computer software, or just software, is a collection of computer programs and related data that provide the instructions for telling a computer what to do and how to do it....
program that some of its North Dakota customers used to check Quill's current inventories and place orders directly. North Dakota attempted to impose a use tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...
on Quill, which was struck down by the Supreme Court.
Background
The Tax Commissioner attempted to require Quill to collect and pay use tax on sales shipped into the state. TheNorth Dakota Supreme Court
North Dakota Supreme Court
The North Dakota Supreme Court is the highest court of law in the state of North Dakota. The Court rules on questions of law in appeals from the state's district courts....
upheld the statute.
Quill, incorporated in Delaware, did not have a physical location in North Dakota and none of its workers were located there. Quill sold office equipment and stationery in North Dakota by using catalogues, flyers, advertisements in national periodicals, and telephone calls. Deliveries were made by post and common carrier from out-state-locations.
Opinion of the court
North Dakota argued that under due processDue process
Due process is the legal code that the state must venerate all of the legal rights that are owed to a person under the principle. Due process balances the power of the state law of the land and thus protects individual persons from it...
, Quill had established a presence, as the floppy disk
Floppy disk
A floppy disk is a disk storage medium composed of a disk of thin and flexible magnetic storage medium, sealed in a rectangular plastic carrier lined with fabric that removes dust particles...
s were physically located in their state. The Supreme Court based its reasoning on analysis of the Commerce Clause rather than due process.
The Commerce Clause gives the federal government power to regulate interstate commerce and prohibits certain state actions, such as applying duties, that interfere with trade among the states. In National Bellas Hess, Inc. v. Department of Revenue of Illinois
National Bellas Hess v. Illinois
In National Bellas Hess v. Department of Revenue, 386 U.S. 753, 87 S.Ct. 1389 , the Supreme Court ruled that a mail order reseller was not required to collect sales tax unless it had some physical contact with the state.-Background:...
, 386 US 753 (1967), it was held that a business whose only contacts with the taxing state are by mail or by common carrier lacks the "substantial nexus" required under the Dormant Commerce Clause.
The court determined that Complete Auto Transit, Inc. v. Brady
Complete Auto Transit, Inc. v. Brady
Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 , is a case decided by the Supreme Court of the United States regarding the Commerce Clause and sales tax.-Background:...
, 430 US 274 (1977), did not limit or undo the National Bellas Hess rule. A corporation, the court ruled, may have the minimum contacts required by the due process clause and still fall short of the substantial nexus required by the Dormant Commerce Cause. The court noted that the bright-line rule of National Bellas Hess "furthers the ends" of the Dormant Commerce Clause. The Quill court thus reversed the decision of the North Dakota Supreme Court
North Dakota Supreme Court
The North Dakota Supreme Court is the highest court of law in the state of North Dakota. The Court rules on questions of law in appeals from the state's district courts....
requiring Quill to collect and remit sales taxes on purchases made by customers from that state.
Effect on taxation of online sales
In Quill Corps. v. North Dakota the Supreme Court ruled that a business must have a physical presence in a state for that state to require it to collect sales taxes. However, the court explicitly stated that Congress can overrule the decision through legislation.Congressional action
In 2011, Senators Dick Durbin (D-Illinois), Mike EnziMike Enzi
Michael Bradley "Mike" Enzi is the senior U.S. Senator from Wyoming and a member of the Republican Party.Raised in Thermopolis, Wyoming, Enzi attended George Washington University and the University of Denver. He expanded his father's shoe store business in Gillette before being elected mayor of...
(R-Wyoming) and Lamar Alexander
Lamar Alexander
Andrew Lamar Alexander is the senior United States Senator from Tennessee and Conference Chair of the Republican Party. He was previously the 45th Governor of Tennessee from 1979 to 1987, United States Secretary of Education from 1991 to 1993 under President George H. W...
(R-Tennessee) introduced a bill that would overrule the decision and allow states to collect sales taxes on internet sales. The bill has wide support from brick-and-mortar retailers such as Walmart and Home Depot, and even online retailer Amazon
Amazon.com
Amazon.com, Inc. is a multinational electronic commerce company headquartered in Seattle, Washington, United States. It is the world's largest online retailer. Amazon has separate websites for the following countries: United States, Canada, United Kingdom, Germany, France, Italy, Spain, Japan, and...
has indicated support. EBay
EBay
eBay Inc. is an American internet consumer-to-consumer corporation that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide...
opposes the bill. States would be required to simplify their sales tax code in order to collect tax from online retailers.
See also
- Dormant Commerce ClauseDormant Commerce ClauseThe "Dormant" Commerce Clause, also known as the "Negative" Commerce Clause, is a legal doctrine that courts in the United States have inferred from the Commerce Clause in Article I of the United States Constitution...
- List of United States Supreme Court cases, volume 504
- List of United States Supreme Court cases
- Lists of United States Supreme Court cases by volume
- List of United States Supreme Court cases by the Rehnquist Court