By Lisa Soronen

If state and local governments agree on one thing it is that the U.S. Supreme Court's decision in Quill is bad enough and should not be made worse. 

The State and Local Legal Center (SLLC) has filed an amicus brief in the Ohio Supreme Court urging it to rule that Ohio’s commercial activity tax (CAT) applies to online vendors who sell in the state.

The SLLC argues the holding of Quill Corp. v. North Dakota (1992), that states cannot require retailers with no in-state physical presence to collect use tax, should not be extended to a privilege-of-doing-business tax. 

Ohio’s CAT imposes a tax on gross receipts from any person having sales of over $150,000 in the state and a “substantial nexus” with the state, including having at least $500,000 of taxable gross receipts annually. The CAT is a privilege-of-doing-business tax charged directly to the retailer not a sales or use tax.

Mason, Newegg, and Crutchfield have more than $500,000 of gross receipts annually from sales in Ohio exclusively online. They argue that Quill prohibits Ohio from making them pay the CAT because they have no physical presence in Ohio.

Per Quill, out-of-state sellers must have a “substantial nexus,” i.e. a physical presence in a state, to be required to collect use tax. Mason, Newegg, and Crutchfield argue that Quill’s physical presence requirement should apply to the CAT because it operates similarly to a use tax.

The SLLC amicus brief argues that Quill is a bright-line rule that does not apply outside the sales and use tax context. The Ohio Supreme Court should not expand the reasoning of Quill to a privilege-of-doing-business tax because Quill has had “clear and deleterious effects on state treasuries and local economies.”

While the SLLC usually only files amicus briefs in U.S. Supreme Court cases, it filed a brief in this case because limiting the reach of Quill is particularly important to SLLC members. Last May the SLLC also filed an amicus brief in a 10th U.S. Circuit Courtof Appeals case, arguing that Quill should not prevent Colorado from requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue.

Eric Citron and Tom Goldstein wrote the SLLC brief, which all of the Big Seven joined along with SLLC associate members the International Municipal Lawyers Association and Government Finance Officers Association. 

Lisa Soronen is the executive director of the State and Local Legal Center and writes frequently for the NCSL blog about the U.S. Supreme Court.