The NCSL Blog


By Max Behlke

Since 1992, Quill v. North Dakota, the U.S. Supreme Court decision that prohibits a state from requiring out-of-state sellers to collect and remit the state’s sales tax, has been the law of the land.

computer mouse on paper money In a few months, that may no longer be the case.

Next Tuesday, the court will hear oral arguments in South Dakota v. Wayfair, which should shed some light on how the justices may ultimately decide the case when the court issues an opinion in June. Regardless of how the court rules, the outcome will have a profound impact on state taxing authority and interstate commerce.

Will the Court Overturn Quill?

When North Dakota sued the Quill Corporation in 1989, the state was looking to reverse Bellas Hess, a 1967 Supreme Court ruling that found state laws that require out-of-state catalogue sellers to collect and remit applicable sales tax violated both the Due Process Clause of the 14th Amendment and the Commerce Clause of the U.S. Constitution.

In Quill, the North Dakota Supreme Court agreed with the state and found that changes in direct marketing and the legal landscape had made Bellas Hess an “obsolescent precedent.” The U.S. Supreme Court, on the other hand, disagreed.

In the 1992 opinion, the court found that requiring retailers to comply with every state’s sales tax code was an “undue” burden on interstate commerce. Important, however, the court abrogated the Due Process violations established by Bellas Hess and noted that the “Due Process Clause does not bar enforcement of that State's use tax against Quill.” Therefore, in Wayfair, the court will not consider Due Process concerns, but whether or not South Dakota’s law unduly burdens interstate commerce.

The question now before the court is rather simple: Should it “abrogate Quill’s sales-tax-only, physical-presence requirement?” Predicting how the court will rule, however, is much more difficult.

On one hand, South Dakota is the ideal state to challenge Quill. The state is a member of the Streamlined Sales and Use Tax Agreement, it has a simple sales tax code, and it overwhelmingly relies on sales tax as a revenue source because the state does not impose a corporate or personal income tax. In other words, the state needs the revenue and it has made tax collection as simple as possible.  

Moreover, the court will have to take into account the sheer volume and continued growth of internet sales. When deciding Quill in 1992, the court could not have predicted the advent and growth of electronic commerce, considering that the first secured internet transaction did not take place until August 1994.

Now, e-commerce is flourishing. In 2017, e-commerce represented 13 percent of total retail sales and constituted roughly 49.4 percent of all retail sales growth. Moreover, the technological advancements that led to the e-commerce boom have also greatly simplified tax administration.

Therefore, the court may not be sympathetic to arguments that “it is too difficult” to collect and remit taxes across the country given the technology of 2018. Not to mention, do many people still shop through catalogs?

On the other hand, the court may be concerned that states will apply their tax laws unfairly or retroactively should Quill be overturned. A number of experts, including Senator Heidi Heitkamp (D-N.D.), who was tax commissioner of North Dakota at the time of Quill, believe the state would have won its case if it had convinced the justices that enforcement of their tax law would be prospective and that the state wouldn’t apply it retroactively.

For this reason, South Dakota’s law, S.B. 106, included a provision that “No obligation to remit the sales tax required by this Act may be applied retroactively.”

Decision Expected in June

The Supreme Court is expected to issue its opinion in South Dakota v. Wayfair in June. Should South Dakota win, states will continue to work together to ensure that interstate sales tax collection is not burdensome or costly for remote sellers.

Should South Dakota lose, states will have to rethink the long-term viability of the sales tax.

Online sales tax timeline original size

Oline sales tax timeline original size

Additional Resources

Max Behlke is director, budget and tax in NCSL's State-Federal Division in Washington, D.C.


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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.