Complete Home & Office Legal Guide/Complete Home and Office Legal Guide (Chestnut) (1993).ISO/stat/ussct/quill1.asc

Text File | 1993-09-14 | 40KB | 706 lines

/* When is a mail order company required to collect sales tax
from out of state orders? The final word is the Quill vs. North
Dakota case of the U.S. Supreme Court, which follows in full text
with our comments. */

NOTE: Where it is feasible, a syllabus (headnote) will be
released, as is being done in connection with this case, at the
time the opinion is issued.  The syllabus constitutes no part of
the opinion of the Court but has been prepared by the Reporter of
Decisions for the convenience of the reader.  See United States
v. Detroit Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

    Syllabus

QUILL CORP. v. NORTH DAKOTA, BY AND
THROUGH ITS TAX COMMISSIONER, HEITKAMP
certiorari to the supreme court of north dakota
No. 91194.  Argued January 22, 1992 Decided May 26, 1992

Respondent North Dakota filed an action in state court to require
petitioner Quill Corporation "an out-of-state mail-order house
with neither outlets nor sales representatives in the State" to
collect and pay a use tax on goods purchased for use in the
State.  The trial court ruled in Quill's favor.  It found the
case indistinguishable from National Bellas Hess, Inc. v.
Department of Revenue of Ill., 386 U.S.  753, which, in holding
that a similar Illinois statute violated the Fourteenth
Amendment's Due Process Clause and created an unconstitutional
burden on interstate commerce, concluded that a "seller whose
only connection with customers in the State is by common carrier
or the . . . mail" lacked the requisite minimum contacts with
the State.  Id., at 758.  The State Supreme Court reversed,
concluding, inter alia, that, pursuant to Complete Auto Transit,
Inc. v.  Brady, 430 U.S. 274, and its progeny, the Commerce
Clause no longer mandated the sort of physical-presence nexus
suggested in Bellas Hess; and that, with respect to the Due
Process Clause, cases following Bellas Hess had not construed
minimum contacts to require physical presence within a State as a
prerequisite to the legitimate exercise of state power.

Held:

1. The Due Process Clause does not bar enforcement of the State's
use tax against Quill.  This Court's due process jurisprudence
has evolved substantially since Bellas Hess, abandoning
formalistic tests focused on a defendant's presence within a
State in favor of a more flexible inquiry into whether a
defendant's contacts with the forum made it reasonable, in the
context of the federal system of government, to require it to
defend the suit in that State.  See, Shaffer v.  Heitner, 433
U.S. 186, 212.  Thus, to the extent that this Court's decisions
have indicated that the clause requires a physical presence in a
State, they are overruled.  In this case, Quill has purposefully
directed its activities at North Dakota residents, the magnitude
of those contacts are more than sufficient for due process
purposes, and the tax is related to the benefits Quill receives
from access to the State.

2. The State's enforcement of the use tax against Quill places an
unconstitutional burden on interstate commerce.  Pp.919.  (a)
Bellas Hess was not rendered obsolete by this Court's subsequent
decision in Complete Auto, supra, which set forth the four-part
test that continues to govern the validity of state taxes under
the Commerce Clause.  Although Complete Auto renounced an
analytical approach that looked to a statute's formal language
rather than its practical effect in determining a state tax
statute's validity, the Bellas Hess decision did not rely on such
formalism.  Nor is Bellas Hess inconsistent with Complete Auto.
It concerns the first part of the Complete Auto test and stands
for the proposition that a vendor whose only contacts with the
taxing State are by mail or common carrier lacks the "substantial
nexus" required by the Commerce Clause.

(b) Contrary to the State's argument, a mail-order house may have
the "minimum contacts" with a taxing State as required by the Due
Process Clause, and yet lack the "substantial nexus" with the
State required by the Commerce Clause.  These requirements are
not identical and are animated by different constitutional
concerns and policies.  Due process concerns the fundamental
fairness of governmental activity, and the touchstone of due
process nexus analysis is often identified as "notice" or "fair
warning." In contrast, the Commerce Clause and its nexus
requirement are informed by structural concerns about the effects
of state regulation on the national economy.

(c) The evolution of this Court's Commerce Clause jurisprudence
does not indicate repudiation of the Bellas Hess rule.  While
cases subsequent to Bellas Hess and concerning other types of
taxes have not adopted a bright-line, physical presence
requirement similar to that in Bellas Hess, see, e. g., Standard
Pressed Steel Co. v. Depart ment of Revenue of Wash., 419 U.S.
560, their reasoning does not compel rejection of the Bellas Hess
rule regarding 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 rule
remains good law.

(d) The underlying issue here is one that Congress may be better
qualified to resolve and one that it has the ultimate power to
resolve.

470 N.W. 2d 203, reversed and remanded.

Stevens, J., delivered the opinion for a unanimous Court with
respect to Parts I, II, and III, and the opinion of the Court
with respect to Part IV, in which Rehnquist, C. J., and Blackmun,
O'Connor, and Souter, JJ., joined.  Scalia, J., filed an opinion
concurring in part and concurring in the judgment, in which
Kennedy and Thomas, JJ., joined.  White, J., filed an opinion
concurring in part and dissenting in part.


SUPREME COURT OF THE UNITED STATES No. 91-194

QUILL CORPORATION, PETITIONER v. NORTH DAKOTA by and through its
TAX COMMISSIONER, HEIDI HEITKAMP on writ of certiorari to the
supreme court of north dakota

[May 26, 1992]

Justice Stevens delivered the opinion of the Court.  This case,
like National Bellas Hess, Inc. v. Department of Revenue of Ill.,
386 U. S. 753 (1967), involves a State's attempt to require an
out-of-state mail-order house that has neither outlets nor sales
representatives in the State to collect and pay a use tax on
goods purchased for use within the State.  In Bellas Hess we held
that a similar Illinois statute violated the Due Process Clause
of the Fourteenth Amendment and created an unconstitutional
burden on interstate commerce.  In particular, we ruled that a
"seller whose only connection with customers in the State is by
common carrier or the United States mail" lacked the requisite
minimum contacts with the State.  Id., at 758.

In this case the Supreme Court of North Dakota declined to follow
Bellas Hess because "the tremendous social, economic, commercial,
and legal innovations" of the past quarter-century have rendered
its holding "obsole[te]." 470 N.W. 2d 203, 208 (1991).  Having
granted certiorari, 502 U.S. ___, we must either reverse the
State Supreme Court or overrule Bellas Hess.  While we agree with
much of the State Court's reasoning, we take the former course.

/* Fascinating point for the constitutional scholar. The Court
seems to say that they have to rule squarely on an issue. That
has never stopped the court before from marginalizing its changes
in the law. or using semantic tests which defy intellectual
rationale to avoid ruling. */

I

Quill is a Delaware corporation with offices and warehouses in
Illinois, California, and Georgia.  None of its employees work or
reside in North Dakota and its ownership of tangible property in
that State is either insignificant or nonexistent.  Quill sells
office equipment and supplies; it solicits business through
catalogs and flyers, advertisements in national periodicals, and
telephone calls.  Its annual national sales exceed $200,000,000,
of which almost $1,000,000 are ma