# National Bellas Hess Incorporated v. Department of Revenue of Illinois/Dissent Fortas

* Court Documents
* Case Syllabus
* Opinion of the Court
* Dissenting Opinion Fortas
United States Supreme Court
386 U.S. 753
National Bellas Hess Incorporated v. Department of Revenue of Illinois
Argued: Feb. 23, 1967. --- Decided: May 8, 1967
Mr. Justice FORTAS, with whom Mr. Justice BLACK and Mr. Justice DOUGLAS join, dissenting.
In my opinion, this Court's decision in Scripto, Inc. v. Carson, 362 U.S. 207, 80 S.Ct. 619, 4 L.Ed.2d 660 (1960), as well as a realistic approach to the facts of pp ellant's business, dictates affirmance of the judgment of the Supreme Court of Illinois.
National Bellas Hess is a large retail establishment specializing in wearing apparel. Directly and through subsidiaries, it operates a national retail mail order business with headquarters in North Kansas City, Missouri, and its wholly owned subsidiaries operate a large number of retail stores in various States. In 1961, appellant's net sales were in the neighborhood of $60,000,000, and its accounts receivable amounted to about $15,500,000.
Its sales in Illinois amounted to $2,174,744 for the approximately 15 months for which the taxes in issue in this case were assessed. This substantial volume is obtained by twice-a-year catalogue mailings, supplemented by 'intermediate smaller 'sales books' or 'flyers," as the court below styled them. The catalogue contains about 4,000 items of merchandise. The company's mailing list includes over 5,000,000 names. The 'flyers' are sent to an even larger list than the catalogues and are occasionally mailed in bulk addressed to 'occupant.'
A substantial part of Bellas Hess' sales is on credit. Its catalogue features 'NBH Budget Aid Credit'-which requires no money down but requires the purchaser to make monthly payments which include a service fee or interest charge, and which also incorporates an agreement, unless expressly rejected by the purchaser, for 'Budget Aid Family Insurance.' The company also offers 'charge account' services-payable monthly including a 'service charge' if the account is not fully paid within 30 days. The form to be filled in for credit purchases contains the usual type of information, including place of employment, name of bank, marital status, home ownership or rental. Merchandise can also be bought c.o.d. or by sending a check or money order with the order for goods.
There should be no doubt that this large-scale, systematic, continuous solicitation and exploitation of the Illinois consumer market is a sufficient 'nexus' to require Bellas Hess to collect from Illinois customers and to remit the use tax, especially when coupled with the use of the credit resources of residents of Illinois, dependent as that mechanism is upon the State's banking and credit institutions. Bellas Hess is not simply using the facilities of interstate commerce to serve customers in Illinois. It is regularly and continuously engaged in 'exploitation of the consumer market' of Illinois (Miller Bros. Co. v. State of Maryland, 347 U.S. 340, 347, 74 S.Ct. 535, 540, 98 L.Ed. 744 (1954)) by soliciting residents of Illinois who live and work there and have homes and banking connections there, and who, absent the solicitation of Bellas Hess, might buy locally and pay the sales tax to support their State. Bellas Hess could not carry on its business in Illinois, and particularly its substantial credit business, without utilizing Illinois banking and credit facilities. Since the case was tried on affidavits, we are not informed as to the details of the company's credit operations in Illinois. We do not know whether it utilizes credit information or collection agencies, or similar institutions. The company states that it has 'brought no suits in the State of Illinois.' Accepting this as true, it would nevertheless be unreasonable to assume that the company does not either sell or assign its accounts or otherwise take measures to collect its delinquent accounts, or that collection does not include local activities by the company or its assignees or representatives.
Bellas Hess enjoys the benefits of, and profits from the facilities nurtured by, the State of Illinois as fully as if it were a retail store or maintained salesmen therein. Indeed, if it did either, he benefit that it received from the State of Illinois would be no more than it now has-the ability to make sales of its merchandise, to utilize credit facilities, and to realize a profit; and, at the same time, it would be required to pay additional taxes. Under the present arrangement, it conducts its substantial, regular, and systematic business in Illinois and the State demands only that it collect from its customer-users-and remit to the State-the use tax which is merely equal to the sales tax which resident merchants must collect and remit. To excuse Bellas Hess from this obligation is to burden and penalize retailers located in Illinois who must collect the sales tax from their customers. In Illinois the rate is 3 1/2%, and when it is realized that in some communities the sales tax requires, in effect, that as much as 5% be added to the amount that customers of local, tax-paying stores must pay, the importance of the competitive discrimination becomes apparent. While this advantage to out-of-state sellers is tolerable and a necessary constitutional consequence where the sales are occasional, minor and sporadic and not the result of a calculated, systematic exploitation of the market, it certainly should not be extended to instances where the out-of-state company is engaged in exploiting the local market on a regular, systematic, large-scale basis. In such cases, the difference between the nature of the business conducted by the mail order house and by the local enterprise is not entitled to constitutional significance. The national mail order business amounts to over $2,400,000,000 a year. Some of this is undoubtedly subject to the full range of taxes because of the location of stores in the various States, and some of it is and should be exempt from state use tax because of its sporadic or minor nature. See Report of the Special Subcommittee on State Taxation of Interstate Commerce of the House Judiciary Committee, H.R.Rep. No. 565, 89th Cong., 1st Sess., Vol. 3 (1965), at 770-777. But the volume which, under the present decision, will be placed in a favored position and exempted from bearing its fair burden of the collection of state taxes certainly will be substantial, and as state sales taxes increase, this haven of immunity may well increase in size and importance.
In Scripto, supra, this Court applied a sensible, practical conception of the Commerce Clause. The interstate seller which, in that case, claimed constitutional immunity from the collection of the Florida use tax had, like appellant here, no office or place of business in the State, and had no property or employees there. It solicited orders in Florida through local 'independent contractors' or brokers paid on a commission basis. These brokers were furnished catalogues and samples, and forwarded orders to Scripto, out of state. The Court noted that the seller was 'charged with no tax-save when * * * he fails or refuses to collect it' (362 U.S., at 211, 80 S.Ct., at 621) and that the State 'reimburs (ed the seller) * * * for its service' as tax collector (362 U.S., at 212, 80 S.Ct., at 622). The same is true in the present case. I do not see how Scripto is meaningfully distinguishable from this case. In fact, Scripto involved the sale of a single article of commerce. The 'exploitation' of the State's market was by no means as pervasive or comprehensive as is here involved, nor was there any reference to the company's use of the State's credit institutions.
The present case is, of course, not at all controlled by Miller Bros. Co. v. State of Maryland, 347 U.S. 340, 74 S.Ct. 535, 98 L.Ed. 744 (1954). In that case, as this Court said, the company sold its merchandise at its store in Delaware; there was 'no solicitation other than the incidental effects of general advertising * * * no invasion or exploitation of the consumer market * * *.' 347 U.S., at 347, 74 S.Ct., at 540. As the Court noted in Scripto, supra, Miller Bros. was a case in which there was 'no regular, systematic displaying of its products by catalogs, samples or the like.' 362 U.S., at 212, 80 S.Ct., at 622. On the contrary, in the present case, appellant regularly sends not only its catalogue, but even bulk mailings soliciting business addressed to 'occupant,' and it offers and extends credit to residents of Illinois based on their local financial references.
As the Court says, the test whether an out-of-state business must comply with a state levy is variously formulated: 'whether the state has given anything for which it can ask return'; whether the out-of-state business enjoys the protection or benefits of the State; whether there is a sufficient nexus: 'Some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax.' However this is formulated, it seems to me entirely clear that a mail order house engaged in the business of regularly, systematically, and on a large scale offering merchandise for sale in a State in competition with local retailers, and soliciting deferred-payment credit accounts from the State's residents, is not excused from compliance with the State's use tax obligations by the Commerce Clause or the Due Process Clause of the Constitution.
It is hardly worth remarking that appellant's expressions of consternation and alarm at the burden which the mechanics of compliance with use tax obligations would place upon it and others similarly situated should not give us pause. The burden is no greater than that placed upon local retailers by comparable sales tax obligations; and the Court's response that these administrative and record keeping requirements could 'entangle' appellant's interstate business in a welter of complicated obligations vastly underestimates the skill of contemporary man and his machines. There is no doubt that the collection of taxes from consumers is a burden; but it is no more of a burden on a mail order house such as appellant located in another State than on an enterprise in the same State which accepts orders by mail; and it is, indeed, hardly more of a burden than it is on any rd inary retail store in the taxing State.
I would affirm.

## Notes

* ↑ Moody's Industrial Manual (1962).
* ↑ Because this case was tried on affidavits, reference has also been made to the National Bellas Hess Catalogue, Spring and Summer 1967, to supplement the picture of appellant's business afforded by the record.
* ↑ This is the current rate in Pennsylvania. Pa.Stat.Ann., Tit. 72, § 3403-201 (1964). See The World Almanac (1967, Newspaper Enterprise Assn.) 136-137.
* ↑ U.S. Bureau of the Census, 1963 Census of Business, Retail Trade-Area Statistics, pt. 1, table 2, p. 1-8 (1966).
* ↑ See Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 61 S.Ct. 586, 85 L.Ed. 888 (1941); Nelson v. Montgomery Ward & Co., 312 U.S. 373, 61 S.Ct. 593, 85 L.Ed. 897 (1941).
* ↑ Our observation in Nelson . Sears, Roebuck & Co., 312 U.S. 359, 365-366, 61 S.Ct. 586, 589, 85 L.Ed. 888 (1941), is an apt response to appellant's claim that it will not be able to collect all of the tax from its purchasers: '(S)o far as assumed losses on tax collections are concerned, respondent is in no position to found a constitutional right on the practical opportunities for tax avoidance which its method of doing business affords Iowa residents, or to claim a constitutional immunity because it may elect to deliver the goods before the tax is paid.' Actually, it appears that appellant's method of doing business is such as to minimize the non-collection of the tax.
* ↑ The Illinois statute provides for a 'discount of 2% or $5 per calendar year, whichever is greater * * * to reimburse the retailer for expenses incurred in collecting the tax, keeping records, preparing and filing returns, remitting the tax and supplying data * * *.' Ill.Rev.Stat. c. 120, § 439.9 (1965). Appellant does not claim that this amount is inadequate to reimburse it for its expenses in collecting the tax for the State.
* ↑ Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444, 61 S.Ct. 246, 250, 85 L.Ed. 267 (1940).
* ↑ Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 364, 61 S.Ct. 586, 588, 85 L.Ed. 888 (1941).
* ↑ Miller Bros. Co. v. State of Maryland, 347 U.S. 340, 344 345, 74 S.Ct. 535, 539. 98 L.Ed. 744 (1954).
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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