Source: https://supreme.justia.com/cases/federal/us/504/298/
Timestamp: 2019-04-24 00:20:33+00:00

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Respondent North Dakota, through its Tax Commissioner, 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.
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. Pp. 305-308.
(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. Pp. 309-312.
(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. pp. 312-313.
(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. Department 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. pp. 314-318.
(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. pp. 318-319.
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, post, p. 319. WHITE, J., filed an opinion concurring in part and dissenting in part, post, p. 321.
*Briefs of amici curiae urging reversal were filed for the State of New Hampshire et al. by John P. Arnold, Attorney General of New Hampshire, and Harold T. Judd, Senior Assistant Attorney General, Charles M. Oberly III, Attorney General of Delaware, and John R. McKernan, Jr., Governor of Maine; for the American Bankers Association et al. by John J. Gill III, Michael F. Crotty, and Frank M. Salinger; for the American Council for the Blind et al. by David C. Todd and Timothy J. May; for Arizona Mail Order Co., Inc., et al. by Maryann B. Gall, Timothy B. Dyk, Michael J. Meehan, Frank G. Julian, David J. Bradford, George S. Isaacson, Martin I. Eisenstein, and Stuart A. Smith; for Carrot Top Industries, Inc., et al. by Charles A. Trost and James F. Blumstein; for the Clarendon Foundation by Ronald D. Maines; for the Coalition for Small Direct Marketers by Richard J. Leighton and Dan M. Peterson; for the Direct Marketing Association by George S. Isaacson, Martin I. Eisenstein, and Robert J. Levering; for the National Association of Manufacturers et al. by Bruce J. Ennis, Jr., David W Ogden, Jan S. Amundson, and John Kamp; for Magazine Publishers of America, Inc., et al. by Eli D. Minton, James R. Cregan, Ian D. Volner, and Stephen F. Owen, Jr.; and for the Tax Executives Institute, Inc., by Timothy J. McCormally.
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.
Abrams, Attorney General of New York, Lee Fisher, Attorney General of Ohio, Susan B. Loving, Attorney General of Oklahoma, Ernest D. Preate, Jr., Attorney General of Pennsylvania, T. Travis Medlock, Attorney General of South Carolina, Dan Morales, Attorney General of Texas, Paul Van Dam, Attorney General of Utah, Jeffrey L. Amestoy, Attorney General of Vermont, Mary Sue Terry, Attorney General of Virginia, Ken Eikenberry, Attorney General of Washington, Mario J. Palumbo, Attorney General of West Virginia, and John Payton; for the State of New Jersey by Robert J. Del Tufo, Attorney General, Sarah T. Darrow, Deputy Attorney General, Joseph L. Wannotti, Assistant Attorney General, Richard G. Taranto, and Joel I. Klein; for the State of New Mexico by Tom Udall, Attorney General, and Frank D. Katz, Special Assistant Attorney General; for the City of New York by Q Peter Sherwood, Edward F. X. Hart, and Stanley Buchsbaum; for the International Council of Shopping Centers, Inc., et al. by Charles Rothfeld; for the Multistate Tax Commission by James F. Flug and Martin Lobel; for the National Governors' Association et al. by Richard Ruda; and for the Tax Policy Research Project by Rita Marie Cain.
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.1 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 million, of which almost $1 million are made to about 3,000 customers in North Dakota. It is the sixth largest vendor of office supplies in the State. It delivers all of its merchandise to its North Dakota customers by mail or common carrier from out-of-state locations.
1 In the trial court, the State argued that because Quill gave its customers an unconditional 90-day guarantee, it retained title to the merchandise during the 90-day period after delivery. The trial court held, however, that title passed to the purchaser when the merchandise was received. See App. to Pet. for Cert. A40-A41. The State Supreme Court assumed for the purposes of its decision that that ruling was correct. 470 N. W. 2d 203, 217, n. 13 (1991). The State Supreme Court also noted that Quill licensed a computer software program to some of its North Dakota customers that enabled them to check Quill's current inventories and prices and to place orders directly. Id., at 216-217. As we shall explain, Quill's interests in the licensed software does not affect our analysis of the due process issue and does not comprise the "substantial nexus" required by the Commerce Clause. See n. 8, infra.
atic solicitation of a consumer market in thee] state." § 5740.2-01(6). State regulations in turn define "regular or systematic solicitation" to mean three or more advertisements within a 12-month period. N. D. Admin. Code § 81-04.1-0103.1 (1988). Thus, since 1987, mail-order companies that engage in such solicitation have been subject to the tax even if they maintain no property or personnel in North Dakota.
Quill has taken the position that North Dakota does not have the power to compel it to collect a use tax from its North Dakota customers. Consequently, the State, through its Tax Commissioner, filed this action to require Quill to pay taxes (as well as interest and penalties) on all such sales made after July 1, 1987. The trial court ruled in Quill's favor, finding the case indistinguishable from Bellas Hess; specifically, it found that because the State had not shown that it had spent tax revenues for the benefit of the mailorder business, there was no "nexus to allow the state to define retailer in the manner it chose." App. to Pet. for Cert. A41.
The North Dakota Supreme Court reversed, concluding that "wholesale changes" in both the economy and the law made it inappropriate to follow Bellas Hess today. 470 N. W. 2d, at 213. The principal economic change noted by the court was the remarkable growth of the mail-order business "from a relatively inconsequential market niche" in 1967 to a "goliath" with annual sales that reached "the staggering figure of $183.3 billion in 1989." Id., at 208, 209. Moreover, the court observed, advances in computer technology greatly eased the burden of compliance with a "'welter of complicated obligations' " imposed by state and local taxing authorities. Id., at 215 (quoting Bellas Hess, 386 U. S., at 759-760).
impermissible and adopted instead a "consistent and rational method of inquiry [that focused on] the practical effect of [the] challenged tax." Mobil Oil Corp. v. Commissioner of Taxes of Vt., 445 U. S. 425, 443 (1980). This and subsequent rulings, the court maintained, indicated that the Commerce Clause no longer mandated the sort of physical-presence nexus suggested in Bellas Hess.
Similarly, with respect to the Due Process Clause, the North Dakota court observed that 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. The state court then concluded that "the Due Process requirement of a 'minimal connection' to establish nexus is encompassed within the Complete Auto test" and that the relevant inquiry under the latter test was whether "the state has provided some protection, opportunities, or benefit for which it can expect a return." 470 N. W. 2d, at 216.
2 The court also suggested that, in view of the fact that the "touchstone of Due Process is fundamental fairness" and that the "very object" of the Commerce Clause is protection of interstate business against discriminatory local practices, it would be ironic to exempt Quill from this burden and thereby allow it to enjoy a significant competitive advantage over local retailers. 470 N. W. 2d, at 214-215.
As in a number of other cases involving the application of state taxing statutes to out-of-state sellers, our holding in Bellas Hess relied on both the Due Process Clause and the Commerce Clause. Although the "two claims are closely related," Bellas Hess, 386 U. S., at 756, the Clauses pose distinct limits on the taxing powers of the States. Accordingly, while a State may, consistent with the Due Process Clause, have the authority to tax a particular taxpayer, imposition of the tax may nonetheless violate the Commerce Clause. See, e. g., Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U. S. 232 (1987).
The two constitutional requirements differ fundamentally, in several ways. As discussed at greater length below, see Part IV; infra, the Due Process Clause and the Commerce Clause reflect different constitutional concerns. Moreover, while Congress has plenary power to regulate commerce among the States and thus may authorize state actions that burden interstate commerce, see International Shoe Co. v. Washington, 326 U. S. 310, 315 (1945), it does not similarly have the power to authorize violations of the Due Process Clause.
objections. Yet it may fall because of its burdening effect upon the commerce. And, although the two notions cannot always be separated, clarity of consideration and of decision would be promoted if the two issues are approached, where they are presented, at least tentatively as if they were separate and distinct, not intermingled ones." International Harvester Co. v. Department of Treasury, 322 U. S. 340, 353 (1944) (Rutledge, J., concurring in part and dissenting in part).
Heeding Justice Rutledge's counsel, we consider each constitutionallimit in turn.
3 Felt & Tarrant Mfg. Co. v. Gallagher, 306 U. S. 62 (1939). 4 Nelson v. Sears, Roebuck & Co., 312 U. S. 359 (1941).
the Court suggested that such presence was not only sufficient for jurisdiction under the Due Process Clause, but also necessary. We expressly declined to obliterate the "sharp distinction ... between mail-order sellers with retail outlets, solicitors, or property within a State, and those who do no more than communicate with customers in the State by mail or common carrier as a part of a general interstate business." 386 U. S., at 758.
Our due process jurisprudence has evolved substantially in the 25 years since Bellas Hess, particularly in the area of judicial jurisdiction. Building on the seminal case of International Shoe Co. v. Washington, 326 U. S. 310 (1945), we have framed the relevant inquiry as whether a defendant had minimum contacts with the jurisdiction "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Id., at 316 (quoting Milliken v. Meyer, 311 U. S. 457, 463 (1940)). In that spirit, we have abandoned more formalistic tests that 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 our federal system of Government, to require it to defend the suit in that State. In Shaffer v. Heitner, 433 U. S. 186, 212 (1977), the Court extended the flexible approach that International Shoe had prescribed for purposes of in personam jurisdiction to in rem jurisdiction, concluding that "all assertions of statecourt jurisdiction must be evaluated according to the standards set forth in International Shoe and its progeny."
cally enter the forum State. Although territorial presence frequently will enhance a potential defendant's affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor's efforts are 'purposefully directed' toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there." Id., at 476 (emphasis in original).
Comparable reasoning justifies the imposition of the collection duty on a mail-order house that is engaged in continuous and widespread solicitation of business within a State. Such a corporation clearly has "fair warning that [its] activity may subject [it] to the jurisdiction of a foreign sovereign." Shaffer v. Heitner, 433 U. S., at 218 (STEVENS, J., concurring in judgment). In "modern commercial life" it matters little that such solicitation is accomplished by a deluge of catalogs rather than a phalanx of drummers: The requirements of due process are met irrespective of a corporation's lack of physical presence in the taxing State. Thus, to the extent that our decisions have indicated that the Due Process Clause requires physical presence in a State for the imposition of duty to collect a use tax, we overrule those holdings as superseded by developments in the law of due process.
In this case, there is no question that Quill has purposefully directed its activities at North Dakota residents, that the magnitude of those contacts is more than sufficient for due process purposes, and that the use tax is related to the benefits Quill receives from access to the State. We therefore agree with the North Dakota Supreme Court's conclusion that the Due Process Clause does not bar enforcement of that State's use tax against Quill.
Article I, § 8, cl. 3, of the Constitution expressly authorizes Congress to "regulate Commerce with foreign Nations, and among the several States." It says nothing about the protection of interstate commerce in the absence of any action by Congress. Nevertheless, as Justice Johnson suggested in his concurring opinion in Gibbons v. Ogden, 9 Wheat. 1, 231-232, 239 (1824), the Commerce Clause is more than an affirmative grant of power; it has a negative sweep as well. The Clause, in Justice Stone's phrasing, "by its own force" prohibits certain state actions that interfere with interstate commerce. South Carolina State Highway Dept. v. Barnwell Brothers, Inc., 303 U. S. 177, 185 (1938).
5 Under our current Commerce Clause jurisprudence, "with certain restrictions, interstate commerce may be required to pay its fair share of state taxes." D. H. Holmes Co. v. McNamara, 486 U. S. 24, 31 (1988); see also Commonwealth Edison Co. v. Montana, 453 U. S. 609, 623-624 (1981) ("It was not the purpose of the commerce clause to relieve those engaged in interstate commerce from their just share of [the] state tax burden even though it increases the cost of doing business") (internal quotation marks and citation omitted).
did not rely on any such labeling of taxes and therefore did not automatically fall with Freeman and its progeny.
While contemporary Commerce Clause jurisprudence might not dictate the same result were the issue to arise for the first time today, Bellas Hess is not inconsistent with Complete Auto and our recent cases. Under Complete Auto's four-part test, we will sustain a tax against a Commerce Clause challenge so long as the "tax  is applied to an activity with a substantial nexus with the taxing State,  is fairly apportioned,  does not discriminate against interstate commerce, and  is fairly related to the services provided by the State." 430 U. S., at 279. Bellas Hess concerns the first of these tests 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.
sion that our decision in Complete Auto undercut the Bellas Hess rule.
The State of North Dakota relies less on Complete Auto and more on the evolution of our due process jurisprudence. The State contends that the nexus requirements imposed by the Due Process and Commerce Clauses are equivalent and that if, as we concluded above, a mail-order house that lacks a physical presence in the taxing State nonetheless satisfies the due process "minimum contacts" test, then that corporation also meets the Commerce Clause "substantial nexus" test. We disagree. Despite the similarity in phrasing, the nexus requirements of the Due Process and Commerce Clauses are not identical. The two standards are animated by different constitutional concerns and policies.
Due process centrally concerns the fundamental fairness of governmental activity. Thus, at the most general level, the due process nexus analysis requires that we ask whether an individual's connections with a State are substantial enough to legitimate the State's exercise of power over him. We have, therefore, often identified "notice" or "fair warning" as the analytic touchstone of due process nexus analysis. In contrast, the Commerce Clause and its nexus requirement are informed not so much by concerns about fairness for the individual defendant as by structural concerns about the effects of state regulation on the national economy. Under the Articles of Confederation, state taxes and duties hindered and suppressed interstate commerce; the Framers intended the Commerce Clause as a cure for these structural ills. See generally The Federalist Nos. 7, 11 (A. Hamilton). It is in this light that we have interpreted the negative implication of the Commerce Clause. Accordingly, we have ruled that that Clause prohibits discrimination against interstate commerce, see, e. g., Philadelphia v. New Jersey, 437 U. S. 617 (1978), and bars state regulations that unduly burden interstate commerce, see, e. g., Kassel v. Consolidated Freightways Corp. of Del., 450 U. S. 662 (1981).
6 North Dakota's use tax illustrates well how a state tax might unduly burden interstate commerce. On its face, North Dakota law imposes a collection duty on every vendor who advertises in the State three times in a single year. Thus, absent the Bellas Hess rule, a publisher who included a subscription card in three issues of its magazine, a vendor whose radio advertisements were heard in North Dakota on three occasions, and a corporation whose telephone sales force made three calls into the State, all would be subject to the collection duty. What is more significant, similar obligations might be imposed by the Nation's 6,000-plus taxing jurisdictions. See National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753, 759-760 (1967) (noting that the "many variations in rates of tax, in allowable exemptions, and in administrative and record-keeping requirements could entangle [a mail-order house] in a virtual welter of complicated obligations") (footnotes omitted); see also Shaviro, An Economic and Political Look at Federalism in Taxation, 90 Mich. L. Rev. 895, 925-926 (1992).
The State Supreme Court reviewed our recent Commerce Clause decisions and concluded that those rulings signaled a "retreat from the formalistic constrictions of a stringent physical presence test in favor of a more flexible substantive approach" and thus supported its decision not to apply Bellas Hess. 470 N. W. 2d, at 214 (citing Standard Pressed Steel Co. v. Department of Revenue of Wash., 419 U. S. 560 (1975), and Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U. S. 232 (1987)). Although we agree with the state court's assessment of the evolution of our cases, we do not share its conclusion that this evolution indicates that the Commerce Clause ruling of Bellas Hess is no longer good law.
First, as the state court itself noted, 470 N. W. 2d, at 214, all of these cases involved taxpayers who had a physical presence in the taxing State and therefore do not directly conflict with the rule of Bellas Hess or compel that it be overruled. Second, and more importantly, although our Commerce Clause jurisprudence now favors more flexible balancing analyses, we have never intimated a desire to reject all established "bright-line" tests. Although we have not, in our review of other types of taxes, articulated the same physical-presence requirement that Bellas Hess established for sales and use taxes, that silence does not imply repudiation of the Bellas Hess rule.
true: A tax may be consistent with due process and yet unduly burden interstate commerce. See, e. g., Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U. S. 232 (1987).
8 In addition to its common-carrier contacts with the State, Quill also licensed software to some of its North Dakota clients. See n. 1, supra. The State "concedes that the existence in North Dakota of a few floppy diskettes to which Quill holds title seems a slender thread upon which to base nexus." Brief for Respondent 46. We agree. Although title to "a few floppy diskettes" present in a State might constitute some minimal nexus, in National Geographic Society v. California Ed. of Equalization, 430 U. S. 551, 556 (1977), we expressly rejected a "'slightest presence' standard of constitutional nexus." We therefore conclude that Quill's licensing of software in this case does not meet the "substantial nexus" requirement of the Commerce Clause.
taxation." Northwestern States Portland Cement Co. v. Minnesota, 358 U. S. 450, 457-458 (1959).
Moreover, a bright-line rule in the area of sales and use taxes also encourages settled expectations and, in doing so, fosters investment by businesses and individuals.9 Indeed, it is not unlikely that the mail-order industry's dramatic growth over the last quarter century is due in part to the bright-line exemption from state taxation created in Bellas Hess.
"follow the mechanical test set out in Attleboro, or the balance-of-interests test applied in our Commerce Clause cases." 461 U. S., at 390-391. We first observed that "the principle of stare decisis counsels us, here as elsewhere, not lightly to set aside specific guidance of the sort we find in Attleboro." Id., at 391. In deciding to reject the Attleboro analysis, we were influenced by the fact that the "mechanical test" was "anachronistic," that the Court had rarely relied on the test, and that we could "see no strong reliance interests" that would be upset by the rejection of that test. 461 U. S., at 391-392. None of those factors obtains in this case. First, the Attleboro rule was "anachronistic" because it relied on formal distinctions between "direct" and "indirect" regulation (and on the regulatory counterparts of our Freeman line of cases); as discussed above, Bellas Hess turned on a different logic and thus remained sound after the Court repudiated an analogous distinction in Complete Auto. Second, unlike the Attleboro rule, we have, in our decisions, frequently relied on the Bellas Hess rule in the last 25 years, see supra, at 311, and we have never intimated in our review of sales or use taxes that Bellas Hess was unsound. Finally, again unlike the Attleboro rule, the Bellas Hess rule has engendered substantial reliance and has become part of the basic framework of a sizable industry. The "interest in stability and orderly development of the law" that undergirds the doctrine of stare decisis, see Runyon v. McCrary, 427 U. S. 160, 190-191 (1976) (STEVENS, J., concurring), therefore counsels adherence to settled precedent.
these reasons, we disagree with the North Dakota Supreme Court's conclusion that the time has come to renounce the bright-line test of Bellas Hess.
This aspect of our decision is made easier by the fact that the underlying issue is not only one that Congress may be better qualified to resolve,lO but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions. See Prudential Insurance Co. v. Benjamin, 328 U. S. 408 (1946). Indeed, in recent years Congress has considered legislation that would "overrule" the Bellas Hess ruleY Its decision not to take action in this direction may, of course, have been dictated by respect for our holding in Bellas Hess that the Due Process Clause prohibits States from imposing such taxes, but today we have put that problem to rest. Accordingly, Congress is now free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes.
10 Many States have enacted use taxes. See App. 3 to Brief for Direct Marketing Association as Amicus Curiae. An overruling of Bellas Hess might raise thorny questions concerning the retroactive application of those taxes and might trigger substantial unanticipated liability for mailorder houses. The precise allocation of such burdens is better resolved by Congress rather than this Court.
11 See, e. g., H. R. 2230, 101st Cong., 1st Sess. (1989); S. 480, 101st Cong., 1st Sess. (1989); S. 2368, 100th Cong., 2d Sess. (1988); H. R. 3521, lOOth Cong., 1st Sess. (1987); S. 1099, 100th Cong., 1st Sess. (1987); H. R. 3549, 99th Cong., 1st Sess. (1985); S. 983, 96th Cong., 1st Sess. (1979); S. 282, 93d Cong., 1st Sess. (1973).
may be that "the better part of both wisdom and valor is to respect the judgment of the other branches of the Government." Id., at 638.
adjudicative jurisdiction and those for legislative (or prescriptive) jurisdiction are necessarily identical; and on that basis I join Parts I, II, and III of the Court's opinion. Compare Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U. S. 102 (1987), with American Oil Co. v. Neill, 380 U. S. 451 (1965).
I also agree that the Commerce Clause holding of Bellas Hess should not be overruled. Unlike the Court, however, I would not revisit the merits of that holding, but would adhere to it on the basis of stare decisis. American Trucking Assns., Inc. v. Smith, 496 U. S. 167, 204 (1990) (SCALIA, J., concurring in judgment). Congress has the final say over regulation of interstate commerce, and it can change the rule of Bellas Hess by simply saying so. We have long recognized that the doctrine of stare decisis has "special force" where "Congress remains free to alter what we have done." Patterson v. McLean Credit Union, 491 U. S. 164, 172-173 (1989). See also Hilton v. South Carolina Public Railways Comm'n, 502 U. S. 197, 202 (1991); Illinois Brick Co. v. Illinois, 431 U. S. 720, 736 (1977). Moreover, the demands of the doctrine are "at their acme ... where reliance interests are involved." Payne v. Tennessee, 501 U. S. 808, 828 (1991). As the Court notes, "the Bellas Hess rule has engendered substantial reliance and has become part of the basic framework of a sizable industry." Ante, at 317.
we maintain public confidence in our ability-sometimes to adopt new principles for the resolution of new issues without abandoning clear holdings of the past that those principles contradict. We seemed to be doing that in this area. Having affirmatively suggested that the "physical presence" rule could be reconciled with our new jurisprudence, we ought not visit economic hardship upon those who took us at our word. We have recently told lower courts that "[i]f a precedent of this Court has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, [they] should follow the case which directly controls, leaving to this Court the prerogative of overruling its own decisions." Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U. S. 477, 484 (1989). It is strangely incompatible with this to demand that private parties anticipate our overrulings. It is my view, in short, that reliance upon a square, unabandoned holding of the Supreme Court is always justifiable reliance (though reliance alone may not always carry the day). Finally, the "physical presence" rule established in Bellas Hess is not "unworkable," Patterson, supra, at 173; to the contrary, whatever else may be the substantive pros and cons of the rule, the "bright-line" regime that it establishes, see ante, at 314, is unqualifiedly in its favor. JUSTICE WHITE'S concern that reaffirmance of Bellas Hess will lead to a flurry of litigation over the meaning of "physical presence," see post, at 331, seems to me contradicted by 25 years of experience under the decision.
of-state mail-order businesses that do not have a "physical presence" in the State. The Court stops short, however, of giving Bellas Hess the complete burial it justly deserves. In my view, the Court should also overrule that part of Bellas Hess which justifies its holding under the Commerce Clause. I, therefore, respectfully dissent from Part 1\1.
In Part IV of its opinion, the majority goes to some lengths to justify the Bellas Hess physical-presence requirement under our Commerce Clause jurisprudence. I am unpersuaded by its interpretation of our cases. In Bellas Hess, the majority placed great weight on the interstate quality of the mail-order sales, stating that "it is difficult to conceive of commercial transactions more exclusively interstate in character than the mail-order transactions here involved." Id., at 759. As the majority correctly observes, the idea of prohibiting States from taxing "exclusively interstate" transactions had been an important part of our jurisprudence for many decades, ranging intermittently from such cases as Case of State Freight Tax, 15 Wall. 232, 279 (1873), through Freeman v. Hewit, 329 U. S. 249, 256 (1946), and Spector Motor Service, Inc. v. O'Connor, 340 U. S. 602 (1951). But though it recognizes that Bellas Hess was decided amidst an upheaval in our Commerce Clause jurisprudence, in which we began to hold that "a State, with proper drafting, may tax exclusively interstate commerce so long as the tax does not create any effect forbidden by the Commerce Clause," Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 285 (1977), the majority draws entirely the wrong conclusion from this period of ferment.
man and its progeny" in our decision in Complete Auto. See ante, at 311. I am unpersuaded by this attempt to distinguish Bellas Hess from Freeman and Spector, both of which were repudiated by this Court. See Complete Auto, supra, at 288-289, and n. 15. What we disavowed in Complete Auto was not just the "formal distinction between 'direct' and 'indirect' taxes on interstate commerce," ante, at 310, but also the whole notion underlying the Bellas Hess physical-presence rule-that "interstate commerce is immune from state taxation," Complete Auto, supra, at 288.
The Court compounds its misreading by attempting to show that Bellas Hess "is not inconsistent with Complete Auto and our recent cases." Ante, at 311. This will be news to commentators, who have rightly criticized Bellas Hess.1 Indeed, the majority displays no small amount of audacity in claiming that our decision in National Geographic Society v. California Bd. of Equalization, 430 U. S. 551, 559 (1977), which was rendered several weeks after Complete Auto, reaffirmed the continuing vitality of Bellas Hess. See ante, at 311.
1 See, e. g., P. Hartman, Federal Limitations on State and Local Taxation § 10.8 (1981); Hartman, Collection of Use Tax on Out-of-State Mail-Order Sales, 39 Vand. L. Rev. 993, 1006-1015 (1986); Hellerstein, Significant Sales and Use Tax Developments During the Past Half Century, 39 Vand. L. Rev. 961, 984-985 (1986); McCray, Overturning Bellas Hess: Due Process Considerations, 1985 B. Y. U. L. Rev. 265, 288-290; Rothfeld, Mail Order Sales and State Jurisdiction to Tax, 53 Tax Notes 1405, 1414-1418 (1991).
las Hess rule compelled us to hold that the tax collection responsibilities could not be imposed. We expressly rejected that view, holding that the "requisite nexus for requiring an out-of-state seller [the Society] to collect and pay the use tax is not whether the duty to collect the use tax relates to the seller's activities carried on within the State, but simply whether the facts demonstrate 'some definite link, some minimum connection, between (the State and) the person ... it seeks to tax.'" 430 U. S., at 561 (citation omitted).
The Court next launches into an uncharted and treacherous foray into differentiating between the "nexus" requirements under the Due Process and Commerce Clauses. As the Court explains: "Despite the similarity in phrasing, the nexus requirements of the Due Process and Commerce Clauses are not identical. The two standards are animated by different constitutional concerns and policies." Ante, at 312. The due process nexus, which the Court properly holds is met in this case, see ante, at Part III, "concerns the fundamental fairness of governmental activity." Ante, at 312. The Commerce Clause nexus requirement, on the other hand, is "informed not so much by concerns about fairness for the individual defendant as by structural concerns about the effects of state regulation on the national economy." Ibid.
Citing Complete Auto, the Court then explains that the Commerce Clause nexus requirement is not "like due process' 'minimum contacts' requirement, a proxy for notice, but rather a means for limiting state burdens on interstate commerce." Ante, at 313. This is very curious, because parts two and three of the Complete Auto test, which require fair apportionment and nondiscrimination in order that interstate commerce not be unduly burdened, now appear to become the animating features of the nexus requirement, which is the first prong of the Complete Auto inquiry. The Court freely acknowledges that there is no authority for this novel interpretation of our cases and that we have never before found, as we do in this case, sufficient contacts for due process purposes but an insufficient nexus under the Commerce Clause. See ante, at 313-314, and n. 6.
Mobil Oil Corp. v. Commissioner of Taxes ofVt., 445 U. S. 425, 437 (1980), the Court cited Bellas Hess for the due process requirements necessary to sustain a tax. In my view, these citations hardly signal the continuing support of Bellas Hess that the majority seems to find persuasive.
ments in the Complete Auto test is also unpersuasive. See ante, at 313-314, n. 7 (citing Trinova Corp. v. Michigan Dept. of Treasury, 498 U. S. 358, 373 (1991)). Instead of explaining the doctrinal origins of the Commerce Clause nexus requirement, the majority breezily announces the rule and moves on to other matters. See ante, at 313-314. In my view, before resting on the assertion that the Constitution mandates inquiry into two readily distinct "nexus" requirements, it would seem prudent to discern the origins of the "nexus" requirement in order better to understand whether the Court's concern traditionally has been with the fairness of a State's tax or some other value.
as any limitation of due process or 'jurisdiction to tax' in that sense is concerned; it is nondiscriminatory ... ; [it] is duly apportioned ... ; and cannot be repeated by any other state." 335 U. S., at 96-97 (concurring opinion) (footnotes omitted).
By the time the Court decided Northwestern States Portland Cement Co. v. Minnesota, 358 U. S. 450 (1959), Justice Rutledge was no longer on the Court, but his view of the nexus requirement as grounded in the Due Process Clause was decisively adopted. In rejecting challenges to a state tax based on the Due Process and Commerce Clauses, the Court stated: "The taxes imposed are levied only on that portion of the taxpayer's net income which arises from its activities within the taxing State. These activities form a sufficient 'nexus between such a tax and transactions within a state for which the tax is an exaction.'" Id., at 464 (citation omitted). The Court went on to observe that "[i]t strains reality to say, in terms of our decisions, that each of the corporations here was not sufficiently involved in local events to forge 'some definite link, some minimum connection' sufficient to satisfy due process requirements." Id., at 464-465 (quoting Miller Brothers Co. v. Maryland, 347 U. S. 340, 344-345 (1954)). When the Court announced its fourpart synthesis in Complete Auto, the nexus requirement was definitely traceable to concerns grounded in the Due Process Clause, and not the Commerce Clause, as the Court's discussion of the doctrinal antecedents for its rule made clear. See Complete Auto, supra, at 281-282, 285. For the Court now to assert that our Commerce Clause jurisprudence supports a separate notion of nexus is without precedent or explanation.
such presence. But in today's economy, physical presence frequently has very little to do with a transaction a State might seek to tax. Wire transfers of money involving billions of dollars occur every day; purchasers place orders with sellers by fax, phone, and computer linkup; sellers ship goods by air, road, and sea through sundry delivery services without leaving their place of business. It is certainly true that the days of the door-to-door salesperson are not gone. Nevertheless, an out-of-state direct marketer derives numerous commercial benefits from the State in which it does business. These advantages include laws establishing sound local banking institutions to support credit transactions; courts to ensure collection of the purchase price from the seller's customers; means of waste disposal from garbage generated by mail-order solicitations; and creation and enforcement of consumer protection laws, which protect buyers and sellers alike, the former by ensuring that they will have a ready means of protecting against fraud, and the latter by creating a climate of consumer confidence that inures to the benefit of reputable dealers in mail-order transactions. To create, for the first time, a nexus requirement under the Commerce Clause independent of that established for due process purposes is one thing; to attempt to justify an anachronistic notion of physical presence in economic terms is quite another.
tive price advantage in selling products free of use taxes, and yet not have to collect such taxes if it lacks a physical presence in the taxing State. The majority clings to the physical-presence rule not because of any logical relation to fairness or any economic rationale related to principles underlying the Commerce Clause, but simply out of the supposed convenience of having a bright-line rule. I am less impressed by the convenience of such adherence than the unfairness it produces. Here, convenience should give way. Cf. Complete Auto, supra, at 289, n. 15 ("We believe, however, that administrative convenience ... is insufficient justification for abandoning the principle that 'interstate commerce may be made to pay its way' ").
Also very questionable is the rationality of perpetuating a rule that creates an interstate tax shelter for one form of business-mail-order sellers-but no countervailing advantage for its competitors. If the Commerce Clause was intended to put businesses on an even playing field, the majority's rule is hardly a way to achieve that goal. Indeed, arguably even under the majority's explanation for its "Commerce Clause nexus" requirement, the unfairness of its rule on retailers other than direct marketers should be taken into account. See ante, at 312 (stating that the Commerce Clause nexus requirement addresses the "structural concerns about the effects of state regulation on the national economy"). I would think that protectionist rules favoring a $180-billion-a-year industry might come within the scope of such "structural concerns." See Brief for State of New Jersey as Amicus Curiae 4.
however, that the Court's opinion can achieve its aims. Certainly our cases now demonstrate two "bright-line" rules for mail-order sellers to follow: Under the physical-presence requirement reaffirmed here, they will not be subjected to use tax collection if they have no physical presence in the taxing State; under the National Geographic rule, mail-order sellers will be subject to use tax collection if they have some presence in the taxing State even if that activity has no relation to the transaction being taxed. See National Geographic, 430 U. S., at 560-562. Between these narrow lines lies the issue of what constitutes the requisite "physical presence" to justify imposition of use tax collection responsibilities.
3 Instead of remanding for consideration of whether Quill's ownership of software constitutes sufficient physical presence under its new Commerce Clause nexus requirement, the majority concludes as a matter of law that it does not. See ante, at 315, n. 8. In so doing, the majority rebuffs North Dakota's challenge without setting out any clear standard for what meets the Commerce Clause physical-presence nexus standard and without affording the State an opportunity on remand to attempt to develop facts or otherwise to argue that Quill's presence is constitutionally sufficient.
ence" adequate to justify imposing responsibilities for use tax collection. And given the estimated loss in revenue to States of more than $3.2 billion this year alone, see Brief for Respondent 9, it is a sure bet that the vagaries of "physical presence" will be tested to their fullest in our courts.
The majority next explains that its "bright-line" rule encourages "settled expectations" and business investment. Ante, at 316. Though legal certainty promotes business confidence, the mail-order business has grown exponentially despite the long line of our post-Bellas Hess precedents that signaled the demise of the physical-presence requirement. Moreover, the Court's seeming but inadequate justification of encouraging settled expectations in fact connotes a substantive economic decision to favor out-of-state direct marketers to the detriment of other retailers. By justifying the Bellas Hess rule in terms of "the mail-order industry's dramatic growth over the last quarter century," ante, at 316, the Court is effectively imposing its own economic preferences in deciding this case. The Court's invitation to Congress to legislate in this area signals that its preferences are not immutable, but its approach is different from past instances in which we have deferred to state legislatures when they enacted tax obligations on the States' shares of interstate commerce. See, e. g., Goldberg v. Sweet, 488 U. S. 252 (1989); Commonwealth Edison Co. v. Montana, 453 U. S. 609 (1981).
sions or reliance interests that suggest any unfairness in overturning Bellas Hess. And the costs of compliance with the rule, in light of today's modern computer and software technology, appear to be nominal. See Brief for Respondent 40; Brief for State of New Jersey as Amicus Curiae 18. To the extent Quill developed any reliance on the old rule, I would submit that its reliance was unreasonable because of its failure to comply with the law as enacted by the North Dakota State Legislature. Instead of rewarding companies for ignoring the studied judgments of duly elected officials, we should insist that the appropriate way to challenge a tax as unconstitutional is to pay it (or in this case collect it and remit it or place it in escrow) and then sue for declaratory judgment and refund.4 Quill's refusal to comply with a state tax statute prior to its being held unconstitutional hardly merits a determination that its reliance interests were reasonable.
4 For the federal rule, see Flora v. United States, 357 U. S. 63 (1958); see generally J. Mertens, Law of Federal Income Taxation § 58A.05 (1992). North Dakota appears to follow the same principle. See First Bank of Buffalo v. Conrad, 350 N. W. 2d 580, 586 (N. D. 1984) (citing 72 Am. Jur. 2d § 1087).
those concerns directly rather than permit them to infect our formulation of the applicable substantive rule.

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