Steve Moore Interviewed by ‘Law360’ Regarding SCOTUS Review of Physical-Presence Tax Nexus Holding in Quill

February 1, 2018 | Mentions

On January 12, 2018, the United States Supreme Court granted review in the case of South Dakota v. Wayfair, Inc. et al. In the petition for writ of certiorari, the state of South Dakota presented a single issue – whether SCOTUS should “abrogate Quill’s sales-tax-only, physical-presence requirement.” The Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota barred the collection of state sales tax from retailers that are not physically present within the state’s borders. In light of the significant rise in e-commerce, the holding has been criticized as outdated and unfair to states and to brick-and-mortar retailers.

South Dakota passed Senate Bill 106 in March of 2016 requiring remote sellers to remit sales taxes if they sell more than $100,000 of goods or have more than 200 transactions per calendar year delivered to South Dakota, even if they have no physical presence in the state. South Dakota brought an action seeking a judicial declaration that the law was valid and applicable to four out-of-state retailers—NewEgg, Systemax, Wayfair, and (“Retailers”). The Retailers filed and won a motion for summary judgment before South Dakota’s Sixth Judicial Circuit, which was affirmed by the Supreme Court of South Dakota. The state supreme court noted that however compelling the state’s interests and argument might be, the legislation was in direct contravention to the holding in Quill which remained the controlling precedent on the issue of Commerce Clause limitations on interstate collection of sales and use taxes. The South Dakota Attorney General petitioned SCOTUS for writ of certiorari in October 2017 which was granted.

Law360 interviewed Jackson Walker tax attorney Steven D. Moore as to his thoughts on why review was approved now given less than two percent of petitions for discretionary review are granted and the fact that similar challenges have been rejected previously. Steve pointed out:

We have a law that was drafted in such a way that it really was pretty clearly inconsistent with Quill. To have state legislatures being that bold, maybe that was part of the influence, but I think it’s probably more complicated than that. I think the modern economy is moving fast and you’ve got big internet retailers now that are just playing different roles in our lives.

This is not the first time that states have tried to find a workaround to Quill that would allow them to cash in on the thriving online economy. Ohio, New York, and Florida have all attempted novel “presence” arguments in an effort to levy taxes on sales activity traditionally exempted by Quill. Likewise, Congress has proposed a number of bills in recent years that would allow states to tax remote sales, but nothing definitive has come of such efforts. The Supreme Court, in fact, encouraged Congress in Quill and in other cases since to decide for all to what extent the states may burden interstate concerns with a duty to collect use taxes.

Overturning Quill could have a huge impact on state revenues. According to the National Conference of State Legislatures, in 2012 alone states lost more than $23 billion in uncollected taxes on transactions between their residents and out-of-state vendors. Thirty-five states joined in an amici curiae brief in support of South Dakota’s position. But there are many possible outcomes besides overturning Quill. The Court could go the procedural route and find the law invalid based on precedent or it could find that the law impedes on an issue Congress must decide. It could devise a new standard on which to judge the legislation—one that may be more or less confounding than Quill has been. There are numerous competing viewpoints that cut across political lines about what a post-Quill precedent should be.  Nearly two dozen amicus curiae briefs have already been filed in the matter by various associations.

While it is unclear exactly how the Court will resolve this contention, it seems apparent they are no longer willing to wait for Congress to take action. As Steve pointed out to Law360, “If they really were just going to leave Quill alone, why would they take this case?”

The Court is expected to hear oral arguments in April with a decision expected by late June.

Steve Moore PortraitMeet Steve

Steven D. Moore practices tax law in Jackson Walker’s Austin office. He provides tax strategy advice related to business mergers, acquisitions, and divestitures to multi-state businesses across several industries, including oil and gas, power generation and aviation. He also handles administrative hearings before the Texas Comptroller of Public Accounts and works with the firm’s litigation group to prosecute judicial resolution of Texas corporate income tax cases. Steve is known for his expertise in state tax matters as both a speaker and writer and was named as 2017 Editor of Bloomberg BNA’s Texas Corporate Income Tax Navigator and State Tax Portfolio.


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Steven D. Moore
Partner, Austin