1. Case history and background - Kenneth
Quill Corp. v. North Dakota, 504 U.S. 298, 112 S. Ct. 1904, 119 L. Ed. 2d 91 (1992)
Quill Corp. v. North Dakota is the primary prior case that South Dakota v. Wayfair, Inc. takes issue with, and from where the departure from Stare Decisis begins.
The Syllabus points out that “Forty-one States, two Territories, and the District of Columbia have asked the Court to reject Quill's test.” (p. 12) and the South Dakota v. Wayfair case demonstrates the delicate balancing act the Supreme Court has to manage when satisfying the interest of the various parties involved, the Legislature via the Commerce Clause, the authority of State Governments, and the Judiciary via Stare Decisis.
The tests of the Quill case involve: a due process Minimum Contacts test, a interstate commerce clause Substantial Nexus test, a Physical Presence test, a Fairly Apportioned test, meaning the taxes levied upon a business are commensurate with the services that the state provides to the business.
National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753, 87 S. Ct. 1389, 18 L. Ed. 2d 505 (1967)
National Bellas Hess is the main case that the Quill case takes as precedent for its decision. Quill upholds the decision made in National Bellas Hess on the basis of Stare Decisis, suggesting that if Congress disagrees with National Bellas Hess it is more than welcome to legislate against it, but the Supreme Court is required to respect Stare Decisis and uphold National Bellas Hess.
The Court in the Wayfair case breaks with Stare Decisis on the grounds that Stare Decisis is not an “inexorable command” and that the Legislature is not responsible for fixing flawed precedent, but that the Supreme Court is responsible for fixing flawed precedent, even if it means breaking with Stare Decisis.
Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 279, 97 S. Ct. 1076, 51 L. Ed. 2d 326 (1977)
Complete Auto Transit v. Brady established four requirements to determine if a state tax imposition is valid on an out of state business; the four requirements are that: the business must have a Substantial Nexus within the taxing state, the taxes must be Fairly Apportioned, the taxes must not discriminate against Interstate Commerce, the taxes must be Fairly Related to the services the taxing state provides.
National Geographic Soc. v. California Bd. of Equalization, 430 U. S. 551, 555, 97 S. Ct. 1386, 51 L. Ed. 2d 631 (1977) National Geographic v. California established that National Geographic had a Sufficient Nexus within California to be subject to sales and use tax collection requirements for magazine subscription sales within California even if the sufficient nexus in question, two offices for National Geographic, were unrelated to magazine subscription sales subject to sales and use taxes within California; the Physical Presence doctrine was not discussed in this case.
5. Business, economic and social significance of the Court’s decision - Kenneth
The Physical Presence requirement established in National Bellas Hess v. Department of Revenue, 386 U.S. 753 87 S. Ct. 1389 18 L. Ed. 2d 505 (1967) and Quill Corp. v. North Dakota, 504 U.S. 298, 112 S. Ct. 1904, 119 L. Ed. 2d 91 (1992) was overruled.
Quill Corp. v. North Dakota required that a business have a physical presence in a state in order to determine whether or not a business had a substantial nexus in a state for state sales taxation purposes, even though the Court in Quill accepted that a physical presence in a state was not required to establish a substantial nexus in a state for due process purposes.
The Majority Opinion in South Dakota v. Wayfair, Inc., 585 U.S. 162, 138 S. Ct. 2080, 201 L. Ed. 2d 403 (2018) pointed out that in Quill the majority opinion expressed concern that it would be difficult for a business to collect the correct sales tax amounts, the Court in South Dakota v. Wayfair suggested that modern technology would make this problem less of an issue.
The Dissenting Opinion in South Dakota v. Wayfair argues that sale tax collection could still be problematic in modern times, pointing out that there are over 10,000 different sale tax jurisdictions in the United States with different policies for taxable and tax-exempt goods and services, different product categories, and different substantial nexus requirements.
The Dissenting Opinion in South Dakota v. Wayfair points out that in New Jersey, yarn for art projects is taxable, but yarn for sweaters is not taxable. Texas levies tax on plain deodorants, but not on deodorants with antiperspirants. In Illinois Twix and Snickers candy bars are subject to different tax rates, given that Twix contains flour and Snickers does not.
The Majority Opinion pointed out that modern technology also provided more of an advantage to businesses seeking to capitalize on the Physical Presence requirement for the purposes of avoiding state sales tax collection.
The Court argued that the physical presence requirement resulted in market distortions that incentivized companies to avoid building out their businesses in a way that might be more operationally efficient because doing so would result in a physical presence in a greater number of tax jurisdictions.
As a hypothetical example: a business might set up all their operations in Alaska. Shipping everything out of Alaska wouldn’t be operationally efficient, but the tax efficiencies of avoiding a physical presence in multiple tax jurisdictions might incentivize this type of operation anyway.
The most economically significant part of the South Dakota v. Wayfair, Inc. case is the elimination of the Physical Presence requirement established in prior case history.
Operating locations for remote businesses such as catalog companies and e-commerce companies become less influenced by tax jurisdiction efficiencies, and more by logistical efficiencies.
Businesses operating in a local tax jurisdiction would not be placed at a price disadvantage relative to businesses operating remotely due to the way taxes are levied.
Cultural Significance of South Dakota v. Wayfair, Inc. (2018) The collection of justices in the Majority Opinion and the Dissenting Opinion in the South Dakota v. Wayfair (2018) case would show what seems to come across as two sets of odd alliances to a casual observer of Supreme Court Cases.
The Majority Opinion includes: : Kennedy, J., delivered the opinion of the Court, in which Thomas, Ginsburg, Alito, and Gorsuch, JJ., joined. Thomas, J., post, p. 189, and Gorsuch, J., post, p. 190, filed concurring opinions. (p.13)The Dissenting Opinion includes: Roberts, C. J., filed a dissenting opinion, in which Breyer, Sotomayor, and Kagan, JJ., joined, post, p. 191. (p.13)
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