Source: http://www.thebuffalolawyer.com/ab-initio-law-blog/category/all
Timestamp: 2019-04-25 05:56:37+00:00

Document:
Two lease provisions can save residential landlords time and money in the event that an eviction is necessary. Time and time again I am forced to inform clients that they will have to file a complaint in small claims court in order to recover attorney fees, filing fees, and other court costs associated with an eviction summary proceeding. Small claims can be avoided altogether if a residential lease is drafted properly; all landlords are aware of the problems associated with small claims recovery -- for example, tenants often disappear after an eviction and it can be very difficult to subsequently locate them; therefore, it is all but impossible to have them served (side note: I find that this can be avoided by postponing the execution of the warrant of eviction until a small claims suit can be filed; that way, the small claims court will have jurisdiction over the tenant).
The first suggested lease provision is what I like to call the "as rent" provision. During an eviction summary proceeding a court is limited by statute to only provide money judgments for rental arrears. Therefore, if you have a lease provision that calls for the payment of attorneys fees and associated costs (side note: such a provision will be considered reciprocal for both the landlord and tenant even in such a case as: "Tenant agrees to pay attorney fees and associated costs in the event that litigation arises out of this contract" [if the tenant is successful in court the landlord will have to pay such costs]) if the magic words "as rent" are not included in the provision, the court will be unable to provide relief pursuant to the terms of the provision. Simply put, to recover attorney and associated fees the phrase "as rent" must be included in a lease provision. An example of an "as rent" provision is as follows: "The undersigned Lessee(s), agree(s) that any costs, including but not limited to attorney fees, filing fees, court costs, service of process fees, executions of warrants of eviction, or any other such disbursements, will be charged to the undersigned Lessee(s) as rent if the undersigned Lessee(s) becomes in default of the obligations memorialized by this lease agreement by materially breaching the terms set forth herein or by nonpayment of rent that has become due."
The second time and money saving lease provision which I have found is often overlooked in residential lease agreements is a joint and several liability provision. Many times when there are multiple tenants named in a petition it is very difficult to get personal service on each individual for obvious reasons. As most landlords are aware, personal service is required to be awarded a money judgment in the case of a default. Therefore, if you are able to get personal service on one of the tenants, and have to settle for substitute service on the remaining tenants, but you have a joint and several liability provision in your lease, you will be able to get money judgments against all of the tenants named in the petition. Here is an example of such a provision: "All obligations of the Lessees are joint and several and may not be waived or apportioned except by written assent of the Lessor. Lessor may recover any outstanding rent, use and occupancy, damages or other monies owed as a result of the tenancy from any one or all Lessees at Lessor's sole option."
Landlords, if these provisions are not currently in your leases, it is time to add them. Trust me, you will thank me later.
NOTE: This post is only applicable to New York law and does not create an attorney-client relationship. Instead, this post is for informational purposes only.
This post is the final in a series about the Marketplace Fairness Act. Basically, it lays out the advantages of federal legislation, the underpinnings of the Act, and a brief history of similar proposals to address the inequities caused by online retailers' cyber presence.
Generally speaking, federal taxation is directed primarily towards income tax. That being said, there is nothing in the Constitution that delimits or prevents the federal government from imposing other types of taxation. For example, the Affordable Care Act calls for a tax to be imposed on artificial tanning. The Constitution grants seemingly endless powers to the federal government to tax as they deem appropriate.  Additionally, the troubling condition discussed in the previous blog post implicates the Commerce Clause, therefore, via Supreme Court decisions the federal government has further reaching jurisdiction to impose taxation. Furthermore, theQuill decision expressly mentions that Congress has the power to legislate what constitutes sufficient taxable nexus as they wish. That is, if Congress does not believe that physical presence should be required, then they can overrule Quill and establish a more reasonable standard, so long as the Constitution is not violate. Stated more broadly, the Constitution grants the federal government plenary power to regulate interstate commerce; however, Congress must still be mindful of the limitations found in the Due Process Clause.
administration in order to substantially reduce the burden of tax compliance.
Essentially, the Streamlined Sales Tax Project’s goal is to form a coalition of states that are willing to simplify their tax codes in order to allow for federal legislation to be passed related to sales and use tax specifically directed towards online retailers. For a state to become a member of the Streamlined Sales Tax Project, they are required to sign a contract called the Streamlined Sales and Use Tax Agreement (“SSUTA”). The SSUTA sets the boundaries for what member states may, may not, and must do in order to take advantage of the protections and benefits of being part of the Streamlined Sales Tax Project (“SSTP”). For example, the SSUTA requires states to follow certain procedure in the collection of sales and use tax; also, the SSUTA establishes a consistent rate of sales and use tax for each member jurisdiction.
The SSTP and SSUTA should be at the heart of any federal legislation, as it is with the Marketplace Fairness Act. If the federal government is to pass legislation changing the definition of taxable nexus to exclude the physical presence requirement, it must be uniform and it must be controlling over every state. Therefore, it is extremely unlikely that Congress would ever be able to pass legislation that expressly overrules Quill because there are too many competing interests involved, and such legislation would be especially susceptible to Constitutional challenges. However, it would be much easier for Congress to pass an interstate compact allowing for the collection of member states’ sales and use tax from online retailers.
Meanwhile, while the Main Street Fairness Act sat in purgatory, both the House and the Senateintroduced legislation that is fundamentally the same as the Main Street Fairness Act. All of these bills are substantively the same – they are enabling legislation for the SSTP and SSUTA. The Marketplace Fairness Act is the first of these series of bills to pick up traction.
Rectifying the troubling condition by way of federal legislation holds many advantages over the individualized actions of some of the states. First, federal legislation such as the Marketplace Freedom Act makes it easier for online retailers to calculate and collect taxes, which makes online retailers more apt to do so. This is evident from Amazon’s lobbying efforts to pass such federal legislation and its’ support of the SSTP. Second, such laws only apply to states that wish to participate in the legislation. For a state to be protected by the federal legislation they must sign the SSUTA; this addresses the sovereignty problems that may be implicated by the passing of such a law. Finally, the uniformity of such an act insulates other interests of the state, such as preventing job cuts by online retailers, the closure of distribution centers, and an increased bargaining power in favor of the online retailers. Basically, the passage of federal legislation eliminates the problems described in the previous posts of this blog related to the states’ individualized actions.
Due to the formalistic and practically unjust holding in Quill, online retailers have been able to escape the collection responsibility for state sales and use taxes. Online retailers’ cyber presence creates many problems for states’ ability to collect taxes and increase revenue in a troubling economic time. Additionally, it is apparent that online retailers receive a decisive advantage over brick-and-mortar retailers because of Constitutional safe harbors, such as the Supreme Court’s handling of the Commerce Clause relating to out-of-state retailers. It is time to level the playing field and hold online retailers accountable. States individualized actions are not the answer; there are too many adverse consequences associated with them. A uniform approach such as the SSTP is required; it is time for Congress to act. The Marketplace Fairness Act should be passed into law.
 Task Force on Business Activity, Report of the Task Force on Business Activity Taxes and Nexus of the ABA Section of Taxation State and Local Taxes Committee, 62 Tax Law 935, 940 (2009).
 For example, the Federal Government collects a variety of excise taxes, which are a specific type of sales tax also known as a “sin tax,” because it is levied on the sale of certain undesirable products, such as cigarettes and alcohol. See U.S. Congress Joint Committee on Taxation, Present Law and Historical Overview of the Federal Tax System 32-38 (Jan. 18, 2011), http://www.taxpolicycenter.org/legislation/upload/x-1-11.pdf.
 26 U.S.C § 5000B (2010).
 See generally Philip M. Tatarowicz, Federalism, the Commerce Clause, and Discriminatory State Tax Incentives: a Defense of Unconditional Business Tax Incentives Limited to In-State Activities of the Taxpayer, 60 Tax Law 835, 842-845 (2007).
 There is no doubt that policy is carried out via tax codes. For example, student loan interest is deductible from federal income tax because Congress wants people to go to college. However, there is no viable policy which can be achieved by exempting online retailers from collection responsibilities of state sales and use tax. It can be argued that perhaps Congress wishes to make information more available in rural areas where booksellers do not have storefronts, but if that were the case, Congress would be better served to exempt all sales/use tax on the sale of books, not just those books that are sold online. See generally Yair Listokin, Equity, Efficiency, and Stability: The Importance of Macroeconomics for Evaluating Income Tax Policy, 29 Yale J. on Reg. 45 (2012).
 Tatarowicz, supra note 153, at 844.
 Steve Mintz, Ethics Sage Blog, Should Sales Taxes be Charged on Online Purchases Made by Amazon Customers? (Sep. 5, 2011), http://www.ethicssage.com/2011/09/i-have-previously-blogged-about-whether-states-are-right-in-imposing-a-sales-tax-on-transactions-made-between-amazon-and-its.html; Quill, 504 U.S. at 318.
 See generally Robert T. Danforth, The Role of Federalism in Administering a National System of Taxation, 57 Tax Law 625, 627 (2004).
 See Streamlined Sales Tax Governing Board, State Info (2012), http://www.streamlinedsalestax.org/index.php? page=state-info.
 Streamlined Sales Tax Governing Board, About Us (2012), http://www.streamlinedsalestax.org/index.php? page=About-Us.
 Institute for Local Self-Reliance, supra nota 131; Streamlined Sales Tax Governing Board, supra note 180.
 See Press Release, National Conference of State Legislatures, States Make It Easier to Collect Online Sales Taxes: Voluntary Program for Retailers Goes into Effect, Provides Compensation, Immunity (Oct. 3, 2005),http://www.ncsl.org/programs/press/2005/pr051003.htm; S. 1452, 112th Cong. (2011); H.R. 3179, 112th Cong. (2011); S. 1832, 112th Cong. (2011). See also Samantha L. Cowne, The Streamlined Sales and Use Tax Agreement: How Entrepreneurs Can Plan for the Uncertain Future of E-Commerce Sales Taxation, 4 Entrepren. Bus. L.J. 133 (2009).
 Passing legislation is no easy task; especially, when such legislation has to do with taxes. While in actually, such federal legislation as the Main Street Fairness Act does not call for an increase in taxation, many legislators as well as constituents may perceive it as doing so, thereby making its’ enactment less likely. The Conservative majority in Congress is extremely adverse to new taxes. However, this same majority is very small business friendly. It will be interesting to see how this plays out. See generally Istackanalyst, The Curious Case Of Amazon And Sales Tax (Apr. 4, 2012), http://www.istock analyst.com/finance/story/5766107/the-curious-case-of-amazon-and-sales-tax.
 Institute for Local Self-Reliance, Main Street Fairness Act (Aug. 21, 2011), http://www.ilsr.org/rule/internet-sales-tax-fairness/3049-2/; S. 1452, 112th Cong. (2011).
 Art. I, § 10, cl. 3; See Paul D. Clement, Bancroft PLLC, Constitutional Difficulties of Proposed Streamlined Sales Tax Legislation 5-20 (2011), available at http://www.ebaymainstreet.com/files/SSTPWhitePaper.pdf.
 Govtrack.us, S. 1452: Main Street Fairness Act (2012), http://www.govtrack.us/congress/bills/112/s1452.
 Known as the Marketplace Equity Act (H.R. 3179, 112th Cong. (2011)).
 Known as the Marketplace Freedom Act (S. 1832, 112th Cong. (2011)).
 See Investopedia, Congress Ready to Act on Online Sales Tax (jan. 6, 2012), http://www.investopedia.com/financial-edge/0112/Congress-Ready-To-Act-On-Online-Sales-Tax.aspx#axzz1v8s ocaNv.
 Nicholas Sohr, Amazon to Pay Sales Tax, Lobby for Federal Internet Legislation: Sparks Renewed Hopes of Reaching a Similar Agreement in Md., The Baltimore Dailey Record, Sep. 30, 2011, available at http://www.lex isnexis.com/lawschool/research/default.aspx?ORIGINATION_CODE=00092&signoff=off.
 See supra Section II(C) of this paper.
​ This, the third blog post in a series about the Marketplace Fairness Act, is concerned with the mechanisms that states have employed to collect sales tax from online retailers, and the problems associated with these attempts. In my opinion, federal legislation such as the Marketplace Fairness Act, is the only viable way to level the playing field.
It is uncontested by the states that online retailers are subordinate to out-of-state retailers. That is, online retailers are a specific type of out-of-state retailers; therefore, state taxation authorities are required to abide by the precedent developed by the cases listed above. Quill is the controlling precedent.
The character of online retail, however, presents several issues not specifically covered by the Supreme Court in its line of out-of-state retailer cases. The primary issue is related to what has been termed “click-and-mortar businesses.” Basically, these hybrid types of retail businesses exist both in cyberspace and tangible storefronts physically located within certain states. For example, Target Corporation is considered a “click-and-mortar” business because buyers are able to purchase merchandise online or at one of the company’s many stores located throughout the United States. Generally speaking, these types of businesses have been held to have sufficient nexus when they have such physical locations within a state.
In recent years, however, these types of businesses have been structuring their businesses in particular ways to escape taxation. The most popular avoidance technique is entity isolation. Entity isolation is when a company structures its business in such a way so that different departments constitute different businesses. For example, if a business wishes to avoid a high sales tax from one state, but it is in the best interest of the company to have a presence in that state, the company will separately incorporate a department that’s sole responsibility is related to something different than sales or manufacturing. Additionally, many corporations will set up separate corporations that deal only in online retailing, so that the “brick-and-mortar” segment of the umbrella corporation does not constitute physical presence within other taxing states. Courts are not certain how to deal with this phenomena sinceQuill requires physical presence, corporate law doctrines allow for such incorporation techniques, but entity isolation is clearly nothing but a means to avoid taxation. It appears that the fear expressed by Justice Clark in the majority decision in Scripto has come true; the arbitrary bright-line rule of Quill has opened the flood gates to inequitable tax avoidance techniques.
Retailers to Participate in Their Taxing Schemes.
accountable for the collection of sales and use taxes in the face of Quill. This is only logical because states are desperately in need of additional funds, and online retailers seem to be a politically acceptable target. It is without question that online retailers have a great amount of lobbying power, but the current political, economic, and social sentiment combined with the equally powerful “brick-and-mortar” lobbing interest creates a perfect storm for online retailers.
A. Going After “Click-and-Mortar” Retailers.
Since most “click-and-mortar” retailers have sufficient taxable nexus, which includes physical presence, to a taxing state, many states’ taxing authorities have initiated actions to collect sales and use taxes from these online retailers.
The State of Virginia has attempted to pass legislation that would require online retailers with a physical presence within the state to collect and remit sales and use tax to the state’s taxing authority. Additionally, the State of Tennessee has recently interpreted its’ use tax statute to hold every person who “[m]aintains, uses, owns, or operates within this state, directly or by a subsidiary, agent or affiliate as defined in § 67-4-2004, any facility, office, distributing house, sales room or house, warehouse, or other place of business” liable for state’s sales and use tax purposes.
There are many other states that have attempted to hold online retailers accountable for the collection of sales and use taxes when such retailers have a physical presence within the state, such as distribution centers and the like. “Click-and-mortar” businesses are easy targets for state tax enforcement actions because they fall within the ambit of the physical presence standard established by Quill. However, for the most part, on a macro level they are ineffective. First, it costs a taxing state a great deal of money to litigate individual cases and the results of such cases generally do not carry the force of law for similarly situated companies because the facts of each case are usually different. Second, as mentioned earlier, courts have difficulty in handling cases involving entity isolation, which is the main affirmative defense usually brought forward by online retailers. Attempting to hold “click-and-mortar” businesses liable for such taxes is not the only means that states have used to go after online retailers.
B. Affiliate Taxes: Broadening the Scope of Nexus.
Fundamentally, an affiliate tax provides a state taxable nexus if an online retailer employs affiliates within the state. Much like the independent sales agents in Scripto, affiliates are seen as extensions of an online retailers’ workforce, and therefore establish the physical presence required by Quill. For the most part, affiliates are independent advertising agents that advertise for the online retailer on certain websites, including their own, for the financial benefit of the online retailer. Seemingly needless to say, the affiliates must reside and be physically present within a taxing state for the state’s taxing scheme to pass Constitutional muster.
Recently, affiliate taxes have been the most popular and most effective weapon used by the states in order to hold online retailers accountable for sales and use tax collection responsibilities. The first state to pass such a tax was New York – the tax is imposed on any online retailer that uses sales affiliates within the state and those affiliates procure greater than ten thousand dollars ($10,000) per year in sales for that retailer. The apparent reason for the ten thousand dollar ($10,000) cap seems to be to exclude small companies that make sales online, but don’t have the resources to perform the collection work. Also, the sales and use tax that would be generated by collecting such taxes from companies that gain less than the cap would be de minimus and not worth the costs associated with such collection.
Since New York’s affiliate tax has been held to be Constitutional, six other states passed similar taxes. In each of these jurisdictions, online retailers have challenged the Constitutionality of these laws to no avail. Additionally, as a corollary to an affiliate tax, two other states have passed legislation requiring online retailers to inform purchasers of the purchaser’s responsibility to remit use tax from any online purchase to the appropriate taxing authority.
C. Individual States’ Actions Come with Grave Consequences.
While it is certainly understandable that several states have taken steps towards holding online retailers accountable for the collection of sales and use taxes, it is not the best solution to the troubling condition, nor do these state actions come without consequence. Online retailers have had very negative reactions to state attempts to collect such taxes.
The first consequence of the states’ individualized attempts to tax online retailers is: many major online retailers have closed stores, manufacturing operations, and distribution centers when states have attempted to collect such taxes. For example, when Texas sent Amazon its demand letter in 2010, Amazon responded by closing a distribution center located in Irving, Texas, more than likely to avoid any further tax collection attempts by the State. Therefore, states’ attempts to hold “click-and-mortar” retailers accountable have resulted in the negative consequence of losing business within the state, and consequently, losing jobs.
In a similar vein, another adverse effect of a state’s individualized action is that online retailers are granted greater bargaining power. That is, major online retailers have refused to open new operations within certain states if those states do not specifically exempt the retailers from taxation. A prime example of this is: recently, Indiana in an attempt to bring jobs to the state amidst poor job growth numbers, has made an agreement with Amazon that if the company opens a distribution in the state, then Indiana will not seek to collect sales or use taxes until 2014. At first impression, this may not seem to be a blatantly burdensome agreement; however, the real effect is felt on the rest of the states. Indiana has a very low sales tax rate, so sales tax is not an important aspect of their taxing scheme. Other states, such as New York, rely on sales and use taxes to insulate their coffers. Therefore, Indiana is being granted a “double advantage” as compared to New York because Indiana has an already low sales tax rate, and New York has made it clear that they will take a hardline approach when it comes to online retailers and taxation.
A third adverse consequence of states going after online retailers is that the states which pass legislation or litigate cases against these online retailers often lose jobs within the state. In the case of Texas’s attempt to recover the tax delinquency from Amazon, one hundred and nineteen (119) people lost their jobs when Amazon closed the distribution center in Irving. As for affiliate tax imposition, the state of California lost over 10,000 jobs when Amazon terminated all of its affiliates within the state to avoid the effect of the passage of the state’s new affiliate tax law. In addition, Overstock fired all of its’ 3,400 affiliates in New York to escape future tax liability.
In light of the issues associated with states’ individualized efforts to collect sales and use tax, this method should not be preferred. The principal behind this statement is simple. States cannot attempt to collect these types of taxes without opening themselves up to a panoply of adverse consequences, all of which are not covered by this blog post. Individualized state actions result in some positives for the taxing state, but also incur many negatives, and taken as a whole, these specialized state actions can result in inequities for the entire country.
 Karen K. Harris, The Shriver Brief, Amazon: Giving Up the Fight on Internet Taxes? (Oct. 31, 2011), http://www.theshriverbrief.org/2011/10/articles/budget-and-tax-justice/amazon-giving-up-the-fight-on-internet-taxes/; These states are: Rhode Island (R.I. Gen. Laws § 44-18-15 (2012)), North Carolina (N.C. Gen. Stat. § 105-164.8(b)(3)(2012)), Illinois (35 ILCS 120/2 (2012)), Arkansas (A.C.A. § 26-51-202 (2012)), Connecticut (Conn. Gen. Stat. § 12-216a (2012)) and California (Cal. Rev. & Tax. Code § 6203 (2012)). See also Jason Dannemiller, Amazon Laws: An Idea Better In Theory Than In Practice, 19 Metropolitan Corporate Counsel 6 (2011), available athttp://www.lexisnexis.com/lawschool/research/default.aspx?ORIGINATION_CODE =00092&signoff=off.
 See, e.g., Dell Catalog Sales L.P v. Taxation and Revenue Dep't, 199 P.3d 863 (N.M. Ct. App. 2008); In re Appeal of Scholastic Book Clubs, Inc., 920 P.2d 947 (Kan. 1996).
 Institute for Local Self-Reliance, supra nota 131.
 See, e.g., Elizabeth Henderson, The Heartland Institute, Research & Commentary: Amazon Taxes (Dec. 22, 2011), http://heartland.org/policy-documents/research-commentary-amazon-taxes.
 Barry Harrell, The American Statesman, 119 to Lose Jobs When Amazon Closes Texas Facility (Feb. 11, 2011), http://www.statesman.com/business/119-to-lose-jobs-when-amazon-closes-texas-1248784.html.
 Cf. Cohen, supra note 135, at 16.
 See, e.g., Benjamin Spillman, Taxation Committee Drops Internet Sales Tax Amendment, Las Vegas Review Journal, May 19, 2011, available at http://www.lvrj.com/blogs/politics/Taxation_committee_drops_In ternet_sales_tax_amendment.html; Frank Lapanza, A Reversal on Amazon, The Herald South Carolina, May 30, 2011, available at http://www.istockanalyst.com/business/news/5190107/editorial-a-reversal-on-amazon.
 Braden Lammers, News and Tribune, Distribution Center Delivered? (Feb. 2, 2012), http://newsandtribune.com/ local/x1826119537/Distribution-center-delivered.
 Indiana’s sales and use tax rate is seven percent (7%). See Federation of Tax Administrators, supra note 1.
 See, e.g, NY CLS Tax § 1101 (2012).
 Marc Lifsher, Amazon Won't Collect Sales Tax; Cuts Off California Affiliates, L.A. Times, June 30, 2011, available athttp://latimesblogs.latimes.com/money_co/2011/06/amazon-wont-collect-sales-tax-cuts-off-california-affiliates.html.
 Cade Metz, The Register, Overstock and Patrick Byrne Sue New York Over Amazon Tax (June 2, 2008), http://ww w.there gister.co.uk/2008/06/02/overstock_sues_new_york/.
 Cf. Travis Cavanaugh, Iowa Can Do Better than the Affiliate Tax: A Proposal for an Intermediary Tax, 97 Iowa L. Rev. 567, 577-581 (2012).
 See generally Ryan J. Swartz, The Imposition of Sales and Use Taxes on E-Commerce: A Taxing Dilemma for States and Remote Sellers, 2 J. High Tech. L. 143, 149 (2004).
 Pamela Swidler, The Beginning of the End to a Tax-Free Internet: Developing an E-Commerce Clause, 28 Cardozo L. Rev. 541, 555 (2006).
 “Also called ‘bricks and clicks,’ it refers to businesses that offer online services via the Web as well as the traditional retail outlets (offline) staffed by people. Coined in 1999 by David Pottruck, co-CEO of the Charles Schwab brokerage firm, it refers to running the two divisions in a cooperative and integrated manner where they both support and benefitfrom each other.” IT Encyclopedia, PC Magazine, Click and Mortar (2012), http://www .pcmag.com/encyclopedia_term/0,1233,t=brick++click&i=39785,00.asp.
 Compare Orvis Co. v. Commissioner, 654 N.E.2d 954 (N.Y. 1995) (holding that Quill should be applied loosely, and that click-and-mortar businesses are subject to taxation) with SFA Falio Collections, Inc. v. Tracy, 652 N.E.2d 693 (Ohio 1995) (holding that Quill should be read strictly, and that click-and-mortar businesses are not subject to collect sales and use tax).
 See generally Mark J. Cowan, Tax Planning Versus Business Strategy: The Rise and Fall of Entity Isolation in Sales and Use Taxes, 44 Idaho L. Rev. 63, 65-66 (2007).
 For example, if that state has a high rate of residence that are experienced in certain technologies.
 See generally Scripto, at 211.
 See generally Declan McCullagh, CNET News, Privacy Inc., Politicians, Retailers Push for New Internet Sales Taxes (Apr. 17, 2012), http://news.cnet.com/8301-31921_3-57415505-281/politicians-retailers-push-for-new-internet-sales-taxes/.
 Joe Dashiell , WDBJ7, Schurz Communications, Virginia Legislation Targets Amazon.com (Jan. 30, 2012), http: //www.wdbj7.com/news/wdbj7-virginia-general-assembly-sales-tax-legislation-targets-amazoncom-20120130,0, 437201.story; Accord Wikipedia, Amazon Tax, http://en.wikipedia.org/wiki/Amazon_tax (using similar case examples as those provided in this paper for notes 117-122, and 127-136; however, the sources were found independently).
 Robert E. Cooper, State of Tennessee, Office of the Attorney General, Out-of-State Dealer’s Nexus with Tennessee Due to Activities of In-State Distributing Centers 2 (June 28, 2011), available at http://media.timesfreepr ess.com/news/documents/2011/06/28/Attorney_Generals_Opinion_on_Amazon_taxation.pdf.
 Dallasnews.com, The Dallas Morning News, Editorial: Texas is Right to Pursue Amazon for Uncollected Sales Taxes (Feb. 17, 2011), http://www.dallasnews.com/opinion/editorials/20110217-editorial-texas-is-right-to-pursue-amazon-for-uncollected-sales-taxes.ece.
 Tex. Tax Code § 151.024 (2012).
 See, e.g., Janet Novack, Forbes Online, Personal Finance, Pa. Sales Tax Crackdown Means Grief For Amazon Merchants(Dec. 6, 2011), http://www.forbes.com/sites/janetnovack/2011/12/06/pa-sales-tax-crackdown-means-grief-for-amazon-merchants/.
 The force of law argument is derived from Administrative Law principals.
 Cowan, supra note 112, at 68.
 Andrew J. Haile, Affiliate Nexus in E-Commerce, 33 Cardozo L. Rev. 1803, 1805 (2012).
 See generally Quill, 504 U.S. at 315-317; Scripto, 362 U.S. at 211-213.
 Institute for Local Self-Reliance, Internet Sales Tax Fairness (May 23, 2011), http://www.ilsr.org/rule/internet-sales-tax-fairness/; NY CLS Tax § 1101 (2012).
In the vast majority of states, sales and use tax makes-up a large percentage of the states’ total annual revenue. This claim is evidenced by the most recent statistics related to states’ taxation schemes. In 2010, nearly thirty-two percent (32%) of nationwide state tax revenue was derived from sales tax alone. Additionally, individual states that have a sales tax, make between twelve and a half percent (12.5%) and fifty-nine point six percent (59.6%) of their annual revenue by way of such taxation.  Therefore, it is fairly apparent that states rely on the collection of sales and use tax to function and provide essential services to their residence.
Despite the importance of sales and use tax upon states’ budgets, many, if not most, online retailers are not currently collecting or remitting such taxes to the appropriate taxing authorities within the states.  The reason for this is simple: under the current law, these online retailers are not required to do so. That being said, it is time to hold these retailers accountable for the protections that they are afforded by states in which they clearly do businesswithin, but refuse to contribute to. Furthermore, it is time to level the playing field for “brick-and-mortar” retailers that suffer at the hands of unjust tax holidays for online retailers created by illogical Supreme Court decisions.
Due to the inaction of online retailers, states lose out on a large portion of their potential tax base. According to a recent Chicago Tribune article, “the Illinois Department of Revenue estimates it misses out on $153 million to $170 million in uncollected sales taxes each year from online purchases.” Additionally, Public Sector Consultants, a Michigan based research and program management firm, recently published a report which estimates that Michigan will lose $141.5 million in 2012 revenue due to uncollected sales tax from online retailers. Furthermore, a study performed by the University of Cincinnati Economics Center shows that Ohio lost $200 million dollars in potential sales tax revenue last year alone. In a broader scope, it is estimated that nationally the overall effect of the troubling condition will be in excess of $11.4 billion dollars on state tax bases in 2012 alone. These examples are by no means an exhaustive list of the negative economic effects on the states caused by online retailers’ refusal to collect and remit sales and use taxes.
The report goes on to describe that while the states’ budgets are not at a comfortable level to run their governments effectively, the costs associated with doing so are on the incline: “Meanwhile, states' education and health care obligations continue to grow. Next year, states expect to educate 350,000 more K-12 students and 1.7 million more public college and university students in the upcoming school year than in 2007-08.
The fiscal realities expressed by this report compounds the effect of the troubling condition on states ability to balance their budgets. When a state is unable to balance their budget, many of the services provided by that state must be curtailed. For example, tax revenue is used to fund schools, hospitals, and social and emergency services – when a state cannot produce enough revenue to fund these services, cuts are required. In addition, state tax revenue funds a state’s judiciary which online retailers can utilize to litigate contract claims arising from business interactions within the state. Therefore, online retailers are availing themselves to the benefits of taxation without being burdened by the costs. The troubling condition creates both a practical and equitable problem when viewed through the lens of state tax base implications.
Another adverse effect caused by online retailers’ refusal to collect and remit sales and use tax is that it creates an unfair advantage in favor of such retailers when compared with traditional “brick-and-mortar” retailers. Knight Kiplinger, the Editor in Chief of Kiplinger Publications, makes a very valid point regarding the taxation of online retailers by stating “[t]o me, the fundamental principle of ethical taxation is equal treatment of similar transactions.” The preceding quote is meant to illustrate a basic concept of taxation, which is: taxes should be equitable. This, however, is not the case when comparing online retailers to businesses with tangible storefronts.
A third adverse effect of the troubling condition is: it causes unnecessary political strife. When proponents and politicians in favor of holding online retailers accountable for tax collection advocate as such, they are often met with criticism. At the heart of this criticism is usually the argument that the proponents are trying to increase taxes. This is an entirely unfair criticism because the tax that is sought to be collected is already owed to the taxing authority by way of a state’s use tax statute. However, political actors who are opposed to any tax increases, misrepresent the equitable treatment of taxation as just another tax hike.
A final adverse consequence of the troubling condition is “[i]t makes a regressive tax even more regressive.” In a recent article published by the Institute for Local Self-Reliance, this prior assertion is supported by the following: “because only those with internet access, a credit card, and a home or workplace where they can accept daytime deliveries are able to take advantage of the tax exemption.” An anecdotal example of this is: a working single mother of three who is subsidized by the state, will not be able to make purchases free from taxation because she cannot afford internet access or a computer and has to work at Burger King during the day; meanwhile, a wealthy businessman can, with the click of a mouse, purchase a tax free five thousand dollar ($5,000) stereo system.
Since states are allowed to implement taxation structures however they deem fit, residents of certain states that have high sales and use tax rates are affected more by a regressive-plus tax than residents of states with low rates or no sales tax at all. Regressive taxes are not ideal, especially in the United States which generally strives to have fair taxation. A general principle of American taxation is that the people that have greater resources should provide a higher rate of governmental sustenance. This is impractical in the context of sales tax because it would be all but impossible to levy a sales tax on every single purchase based on the purchaser’s economic means. However, when a regressive tax is required, such as with a sales tax, the taxing authority should make reasonable efforts to mitigate the negative impact of such a tax – this is not the case in the context of the troubling condition.
The reason that big online retailers posit for why they refuse to collect use tax for states is that it is too difficult and that the administrative costs would be too high. This explanation, however, does not carry much weight. In actuality, these companies have been given free software to do the collection work for them. This free software was given to these online retailers by the Streamlined Sales Tax Project, and the software calculates the exact amount owed to each state under that state’s taxing regime. The software tracks in what state each sale has been made by the online retailer, and the amount that should be charged to the consumer. Also, Amazon, the world’s largest online retailer, already collects tax, and has so for several years, for most states when the company collects taxes for Macy's and Target, which uses Amazon as their online retailer. Additionally, there are several different companies which specialize in state tax collection in compliance with the laws of each state; Netflix, who currently collects taxes in every state, uses these companies at a minimal cost. Furthermore, many online retailers, have been collecting such taxes for several states for the past few years.
The reason why these companies have been collecting such taxes for certain states, and not others, is because several states have passed legislation requiring them to do so (affiliate taxes). It is important to recognize that the individualized actions taken by the states are not a long-term or equitable solution to the troubling condition. Instead, federal legislation, such as the Marketplace Fairness Act, is required if states are to efficiently and effectively collect sales and use tax from online retailers.
 See Federation of Tax Administrators, 2010 State Tax Collection by Source (2011), http://www.taxadmin.org/fta/ rate/10taxdis.html.
 The year 2010 provides the most recent statistics related to States’ tax bases. Id.
 These statistics are limited to sales tax alone, and do not account for use tax collection. I was unable to collect data related to use tax, this may be because use tax collect is very rare due to individual’s lack of self-reporting.
 Id.; Accord Michael R. Gordon, Up the Amazon Without a Paddle: Examining Sales Taxes, Entity Isolation, and the "Affiliate Tax", 11 N.C. J.L. & Tech. 299, 315 (2010) (using a similar analysis of statistics for a related issue).
 See generally Donald Bruce, et al., University of Tennessee, State and Local Government Sales Tax Revenue Losses from Electronic Commerce (Apr. 13, 2009), http://cber.utk.edu/ecomm/ecom0409.pdf.
 This is the troubling condition. For purposes of this paper, when the term “troubling condition” is used, it is referring to: online retailers’ refusal to collect and remit sales or use taxes.
 Sandra M. Jones, Illinois Enacts Internet Sales Tax Law, Chi. Trib., Mar. 10, 2011, available at http://artic les.chicagotribune.com/2011-03-10/business/ct-biz-0311-amazon-tax-bill-20110310_1_amazon-and-overstock-main-street-fairness-act-sales-tax.
 Public Sector Consultants, Michigan Sales Tax Collection and the Internet: A Need for Fairness (July 2011),available at http://www.pscinc.com/LinkClick.aspx?fileticket=5JNb0oN3m3M%3d&tabid=65.
 WTAM 1100 News Radio, Clear Channel, Study: Ohio is Losing Nearly All Sales Tax From Internet Sales (Oct. 18, 2011), http://www.wtam.com/cc-common/news/sections/newsarticle.html?feed=122520&article=9272831.
 See, e.g., AP/WOAK, CBS, E-Commerce Tax to Target Out-of-State Retailers (Apr. 1, 2012), http://atlanta.cbsloca l.com/2012/04/01/e-commerce-tax-to-target-out-of-state-retailers/ (estimating that Georgia will lose out on $410 million in 2012); Nancy Mantell, et. al., Edward J. Bloustein School of Planning and Public Policy, Rutgers University,Estimates of New Jersey Sales and Use Tax Losses Resulting from E-Commerce 12-15 (May 2011), available athttp://www.policy.rutgers.edu/reports/other/NJRMA_Final_Report_May_2011.pdf (estimating the effect on New Jersey in 2009 was between $52 and $172 million).
 Elizabeth McNichol, et al., Center on Budget and Policy Priorities, States Continue to Feel Recession’s Impact(Mar. 21, 2012), http://www.cbpp.org/cms/index.cfm?fa=view&id=711#_ftn1.
 See generally Kirk J. Stark, The Federal Role in State Tax Reform, 30 Va. Tax Rev. 407, 417-422 (2010).
 See generally William Smith, Center on Budget and Policy Priorities, Policy Basics: Where Do Our State Tax Dollars Go? (Mar. 28, 2012), http://www.cbpp.org/cms/index.cfm?fa=view&id=2783; Leo P. Martinez, Tax Policy, Rational Actors, and Other Myths, 40 Loy. U. Chi. L. J. 297, 301 (2009).
 See, e.g., Division of the Budget, New York State, New York State Unified Court System Budget (2012), http://publications.budget.ny.gov/eBudget1213/agencyPresentations/appropData/Judiciary.html.
 The practical problem that the troubling condition creates is the actual amount of money that is lost by online retailers unwillingness to remit taxes. Further, the budgeting cuts that must be make because of financial shortfalls.
 The equitable problem is that online retailers are using services provided at the expense of the taxpayer without actually contributing to the tax base.
 David H. Gershel, The Day of Reckoning: The Inevitable Application of State Sales Tax to Electronic Commerce, 14 Tul. J. Tech. & Intell. Prop. 335, 361 (2011).
 Knight Kiplinger, Kiplinger Publications, Should Online Retailers Collect Sales Taxes? (Sept. 2011), http://www.kip linger.com/columns/ethics/archives/should-online-retailers-collect-sales-taxes.html.
 Independent Businesses, Institute for Local Self-Reliance, Internet Sales Tax Fairness (May 23, 2011), http://www .ilsr.org/rule/internet-sales-tax-fairness/.
 See generally On Techies Blog, Brick and Mortar vs. Online Retailers, a Decade Later (Jan. 31, 2012), www.onte chies.com/2012/01/31/brick-and-mortar-vs-online-retailers-a-decade-later/.
 Rhonda Abrams, ABC News, Small Business Strategies: Retail's Changing; So Should You (Feb. 17, 2012), http://abcnews.go .com/Business/small-business-strategies-retails-changing/story?id=15706425#.T6buncW7nyU.
 See, e.g., Siobhan Hughes, Washington Wire, Retailers Push GOP on Online Sales Tax (May 25, 2012), www.blogs.wsj.com/washwire/2012/05/25/retailers-push-gop-on-online-sales-tax/.
 See generally Alice Hines, The Huffington Post Online, Internet Sales Tax: Democrats, Republicans Support Closing Loophole (Dec. 1, 2011), http://www.huffingtonpost.com/2011/12/01/internet-sales-tax-bill_n_1123024.html.
 The Institute For Local Self-Reliance, Internet Sales Fairness Act (May 23, 2011), http://www.ilsr.org/rule/interne t-sales-tax-fairness/.
 See Susan Pace Hamil, The Vast Injustice Perpetuated by State and Local Tax Policy, 37 Hofstra L. Rev. 117 (2008).
 See generally Thomas Piketty & Emmanuel Saez, How Progressive is the U.S. Federal Tax System? A Historical and International Perspective (2007), http://elsa.berkeley.edu/~saez/piketty-saezJEP07taxprog.pdf.
 Randell Stross, Sorry, Shoppers, but Why Can’t Amazon Collect More Tax?, N.Y. Times, Dec. 27, 2009, at BU3,available at http://www.nytimes.com/2009/12/27/business/27digi.html.
 Michael Mazerov, Center on Budget & Policy Priorities, Amazon’s Arguments Against Collecting Sales Taxes Do Not Withstand Scrutiny 5 (Nov. 16, 2009), http://www.cbpp.org/files/11-16-09sfp.pdf.
 Michael R. Gordon, Up the Amazon Without a Paddle: Examining Sales Taxes, Entity Isolation, and the "Affiliate Tax", 11 N.C. J.L. & Tech. 299, 315 (2010).
 Id.; In reality, using companies such as these does not cost a corporation any profit because the expenses incurred can be deducted dollar-for-dollar from the corporation’s federal, and in most cases, state income tax/corporate tax returns.
 See David H. Gershel, The Day of Reckoning: The Inevitable Application of State Sales Tax to Electronic Commerce, 14 Tul. J. Tech. & Intell. Prop. 335, 355 (2011).
 See, e.g., S. 1452, 112th Cong. (2011).
​In light of the Senate passing the Marketplace Fairness Act on Monday, I have decided to blog about the legal underpinnings of a state's ability to collect and remit internet sales tax. So, here we go . . .
The Constitution as interpreted by the Supreme Court limits the ability of a state taxing authority to levy taxes on certain types of retail sales. The provisions of the Constitution that are often implicated when a state attempts to utilize its’ taxing power are the: (1) Due Process Clause, and (2) Commerce Clause. As in many areas of law, the Due Process Clause does not provide a great deal of protections. The basic idea behind Due Process is that individuals are entitled to fairness both in procedure and in practice. Retailers that believe they fall outside of a state’s taxing authority will often plead that their Due Process rights have been violated. However, the Court is reluctant to overturn a tax based on this Clause alone; that is, unless the tax is blatantly outside of a state’s taxing authority. The Court has held that a seller must only have “minimum contacts” with the taxing state for there to be sufficient nexus under the Due Process Clause.
The Commerce Clause is where states’ taxing authorities meet the greatest resistance, and where the Court has taken an inequitable turn. The Court in Quill v. North Dakota, which is the controlling precedent for cases involving the taxation of sales similar to those of online retailers, established that a retailer must have “substantial presence” within a taxing state for that state to establish sufficient taxable nexus under the Commerce Clause. Accordingly, an online retailer is required to be physically present within a taxing state for that state to impose collection responsibilities upon the retailer.
At the heart of the Commerce Clause is the idea that commerce within the United States should not be encumbered or impeded by restrictive regulation. It appears by the Court’s handling of the Commerce Clause in the context of sales and use tax cases where the retailer is located in a separate state than the purchaser that the Court is attempting to protect the right of taxation for the retailer’s state at the expense of the purchaser’s state. In addition, the Court may also be concerned with double taxation; that is, the Court does not want to grant too great of taxing power to a state so that the state can tax all sales transactions that occur generally in all states. Or for that matter, the Court does not want to have the purchaser taxed by both states – a sales tax in the retailer’s state, and a use tax in the purchaser’s own state. This however, is an unrealistic concern because in cases that two or more states have a legitimate claim of taxation, the Constitution requires that the taxes imposed by each state must be fairly apportioned between the states and must not be overly burdensome.
The Constitutional limitations explained above are derived from Supreme Court jurisprudence not specifically related to online retailers. Instead, they come from Supreme Court decisions prior to the explosion of the Internet. Therefore, the controlling law in the area of the states’ ability to tax online retailers is found in a series of cases involving out-of-state retailers. These cases are duly relevant because online retailers exist primarily in cyber space, and not in the taxing state.
1. Scripto, Inc. v. Carson, 362 U.S. 207 (1960).
Scripto, Inc., a manufacturer and retailer of writing utensils with a principal place of business in Georgia, used ten (10) brokers, who were independent contractors and not actual employees of the company, to solicit and make sales within Florida. These brokers did not receive a salary from Scripto; instead, they only received commission for the sales that they made. The State of Florida sought to hold Scripto deficient for uncollected use tax on the sales that were made by the brokers that occurred within Florida’s borders. Scripto filed suit against Florida alleging that the company was exempt from collecting use tax for the State because the Due Process and Commerce Clause would be violated.
The Supreme Court ruled that neither the Commerce Clause nor the Due Process Clause were violated by Florida’s use tax statute or Florida’s attempt to hold Scripto liable. According to the Scripto Court, retailers could be physically present in a state through agents acting for the company, and basically that the Commerce Clause only requires minimal contacts between the retailer and the taxing state. The Court reasoned that the difference between actual employees and independent contractors is meaningless; that is, the Court refused to make the arbitrary distinction control the outcome of this case – also, the majority’s dicta indicates that allowing such an arbitrary distinction to win the day would open the flood gates to a rash of avoidance techniques by companies seeking to shirk their tax obligations. Additionally, the Court took great care in expressing that states have the right to tax as they deem appropriate, so long as the tax is fair. That being said, the Court recognized that there needs to be some guidelines for adjudicating the fairness of a tax.
The Scripto case is important for several reasons. First, as oft analyzed, the Scripto opinion shows that the Court will ”care more about function than form” in cases involving taxable nexus of out-of-state retailers Basically, this means that the Court will look past technical distinctions and towards the functional reality of tax related issues, such as physical presence in the context of establishing sufficient taxable nexus. Second, this decision illustrates that the Court does not condone avoidance techniques, and therefore, structuring your business in such a way to just avoid taxation is not acceptable. Third, read broadly, the opinion seems to grant a good amount of deference to the states when establishing taxable nexus. Finally, Scripto appears to represent a liberal, flexible approach by the Court in matters of taxation.
2. National Bellas Hess, Inc, v, Department of Revenue of Illinois, 386 U.S. 753(1967).
Nation Bellas Hess, Inc., a mail order retailer with a sole place of business in Missouri, mailed retail catalogs to many states including Illinois. All orders placed by consumers in the various different states were processed in Missouri and subsequently shipped by mail or common carrier from the Nation Bellas Hess’s manufacturing center, which was also located in Missouri. The company did not have any physical structures or employees within any other state. The State of Illinois wished to require Nation Bellas Hess to collect and remit use tax from the orders that were placed from within Illinois. Illinois issued a deficiency notice, and the company filed suit alleging that the Constitution protected them from collecting use tax for a state in which their only connection was via mail or common carrier.  Basically, National Bellas Hess alleged that Illinois did not have a sufficient taxable nexus as required by the Due Process and Commerce Clauses.
In a six to three decision, the Court agreed with Bellas Hess – they held that there needs to be a greater connection between a state and an out-of-state company than mere mail interaction.   This holding is important because it requires there to be at least some form of physical presence within a state for a retailer to have a sufficient taxable nexus under the Commerce Clause. Additionally, it provides the foundation for the Quill decision, which is currently the controlling precedent. The physical presence requirement does not appropriately take into account the reality of modern business, especially e-business. Online retailers are everywhere; you turn on your computer, click on a web browser, and there you can shop for pretty much anything. The physical presence requirement is no longer useful, as technology changes so should the law.
3. Complete Auto Transit v. Brady, 430 U.S. 274 (1977).
Complete Auto Transit, a company that specialized in the of transporting of motor vehicles from state-to-state for an automobile manufacturer, had a principal place of business in Michigan, and transported vehicles by truck to several Mississippi car dealerships. The State of Mississippi held Complete Auto Transit liable for a tax on “the privilege of engaging or continuing in business or doing business” within the state. Complete Auto paid the tax, but then filed suit alleging that the tax was in violation of the Commerce Clause.
The Court held for the State of Mississippi. In doing so, the Court seemed to depart from the bright-line rule of physical presence established by Bellas Hess. The decision speaks about the practical effect of taxation on an out-of-state seller, and as with the Scripto decision, seems displeased with any arbitrary cut-and-dry analysis of the Commerce Clause. Therefore, the Complete Auto Court established a four-prong test for ascertaining if a state tax has violated the Commerce Clause. The first prong is related to nexus; that is, the out-of-state seller needs to have a sufficient connection with the taxing state, this does not necessarily require physical presence. The second prong is that the tax must be fairly apportioned, which means the taxing state must take into account what other states and at what rate other states are taxing the same transaction. The third prong requires a state not to discriminate in any manner, including tax rates, between an in-state seller and an out-of-state seller. The final prong requires that the tax imposed by the state must be reasonably related to the services that the state provides for the out-of-state retailer – these services do not actually have to be utilized by the retailer, instead they merely need to available if the retailer requires such services.
The test enumerated in Complete Auto seems to be much more workable than the strict physical presence rule. TheComplete Auto test grants the Court a good deal of discretion in formulating equitable resolutions. That being said, several years after the Complete Auto ruling, the Court backtracked and held that physical presence is required for a state to establish the first prong of the four-prong test. By doing so, the Court has essentially stripped the Complete Auto test of all of its’ equitable powers.
4. Quill Corp. v. North Dakota, 504 U.S. 298 (1992).
Quill is the seminal case involving the Constitutional limits on a state’s ability to impose a sales or use tax on an out-of-state or remote retailer. The factual identity of Quill is much like the prior cases covered in this paper. That is, Quill Corporation, which was headquartered in Delaware, was a mail-order company that sold office equipment and stationary with no tangible storefronts, distributing centers, manufacturing centers, employees or affiliates in North Dakota. Instead, Quill made sales in North Dakota by using catalogues and advertisements – the goods were delivery by common carrier. North Dakota sought to recover past due use tax from Quill, and Quill filed suit alleging that the taxation was in violation of both the Due Process and Commerce Clauses because the company did not have any physical presence or employees within the state.
The Supreme Court partially agreed with Quill. The crux of the case was regarding the first prong of theComplete Auto Test, nexus. The Court was tasked with interpreting what constitutes taxable nexus under theComplete Auto test. Justice Stevens delivered the opinion of the court which provided two separate analyses for Due Process and Commerce Clause challenges related to states’ ability to impose taxation on out-of-state sellers. First, the Court addressed the Due Process challenge. The Court held that Due Process does not require any form of physical presence within a state by an out-of-state retailer. The rationale behind this finding is related to purpose of the Due Process Clause. The Due Process Clause only requires that an individual or a company be treated fairly. Basically, the Court held that if a state’s imposition of a tax is beyond the realm of reason, and on its’ face unfair, then the Due Process Clause is violated. The Court did not believe that the tax imposed on Quill was in violation of the Due Process Clause.
The Quill decision is very surprising. Prior to the Court’s holding in Quill it appeared that the Constitutional analysis related to the Commerce Clause and a state’s ability to impose taxes on out-of-state retailers was becoming more flexible; this is evidenced by Complete Auto. The emphasis had shifted towards a more case-by-case equitable analysis. However, the Quill decision seems to be a complete one-eighty. The Court shifted back to the formalistic, bright-line analysis of Bellas Hess. The reason for this marked change in ideology is unclear. Perhaps it can be attributed to the composition of the Court its’ self. The Rehnquist Court while noted by their emphasis on federalism, also was known for a more formalistic approach to jurisprudence. Another reason for this shift may be that the facts presented in Bellas Hess and Quill were so similar that the Court felt obligated to follow stare decisis because Bellas Hess had never been overruled by Congress or the Court.
Regardless of the reason for the change, the Court’s decision in Quill has far-reaching effects on a state’s ability to impose tax collection responsibilities on out-of-state retailers. The Quill decision’s practical effects are not equitable, and the seemingly arbitrary bright-line rule related to nexus and physical presence has produced absurd consequences. The Quill Court explicitly stated that if Congress was unpleased with the bright-line rule, then they were empowered to change it. It is time that Congress took the Court up on that offer.
The dicta in the Quill decision indicates that the Court had hoped to establish a bright-line rule so that its’ application would be easier than it was under Complete Auto. The Court wanted to get away from subjective adjudication and provide a rubric for the lower courts in ruling on cases related to out-of-state retailers and state taxing authorities. The practical result, however, is that many lower courts have had a great deal of trouble in using the Quill nexus standard. The major issue that the lower courts have faced is specifically related to the application of the somewhat amorpic physical presence test.
Even though the Quill Court attempted to conceptualize what is meant by physical presence, the definition is still not clear. One court may hold that a traveling salesperson that has only been present in a state for one evening satisfies the physical presence requirement, whereas another court may not. Another example of a potential inconsistent result is: Court A holds that an employee of a company that is traveling for business purposes by airplane to State C, is physically present in State A by the fact that the airplane was in State A airspace for several hours, whereas Court B may hold that the employee was not physically present within State B based on the same facts. That being said, the lower courts have reached a general agreement that a continuing presence of one or more salespeople within a state constitutes physical presence.
Keith R. Gercken, Pillsbury Tax Page, E-Commerce: United States Sales and Use Tax Considerations (Nov. 2001), http://pmstax.com/state/bull0111.shtml.
 A good example of this is articulated in the case review provided later in this paper.
 See Id.; Quill Corp. v. North Dakota, 504 U.S. 298 (1992).
 Id. at 301; Gercken, supra note 6; National Bellas Hess, Inc. v. Department of Revenue of Illinois, 386 U.S. 753, 758 (1967).
 Id.; Quill, 504 U.S. at 312.
 This is an unrealistic concern because in cases that two or more states have a legitimate claim for taxation, the Court requires that the taxes imposed by each state must be fairly apportioned and cannot be overly burdensome.
 See Complete Auto Transit v. Brady, 430 U.S. 274 (1977).
 See generally Walter J. Baudier, Internet Sales Taxes from Borders to Amazon: How Long before All of Your Purchases are Taxed?, 2006 Duke L. & Tech. Rev. 5, 6 (2006).
 Scripto, Inc. v. Carson, 362 U.S. 207, 208 (1960); See Accord Chris Atkins, Important Tax Cases: Scripto v. Carson and the Agency Theory of Nexus (Aug. 26, 2008), http://taxfoundation.org/blog/important-tax-cases-scripto-v-carson-and-agency-theory-nexus..
 Chris Atkins, Important Tax Cases: Scripto v. Carson and the Agency Theory of Nexus (Aug. 26, 2008), http://taxfoundation.org/blog/important-tax-cases-scripto-v-carson-and-agency-theory-nexus.
 National Bellas Hess, Inc. v. Dep’t of Revenue of Illinois, 386 U.S. 753, 754 (1967).
 But see, Commissioner of Revenue v. J.C. Penney Co., 730 N.E.2d 266 (Mass. 2000) (holding the assessment of a use tax on catalogs and other publications providing promotional material that a Massachusetts merchant sends to residence of the Commonwealth by interstate mail is consistent with the plain language of the Massachusetts use tax statute).
 See Bellas Hess, at 759.
 See generally Id. at 284-285.
 See generally Id.; See also Chris Atkins, The Tax Foundation, Important Tax Cases: Complete Auto Transit v. Brady and the Constitutional Limits on States Tax Authority (May 19, 2005), http://taxfoundation.org/blog/important-tax-cases-complete-auto-transit-v-brady-and-constitutional-limits-state-tax-authority.
 Quill, 504 U.S. at 302.
 Id. at 311 citing Bellas Hess, at 758.
 See generally David G. Savage, Opinions on Rehnquist: Views on the Chief Justice's Impact are Still Mixed, 82A.B.A.J. 42 (1996).
 See generally See Walter J. Baudier, Internet Sales Taxes from Borders to Amazon: How Long before All of Your Purchases are Taxed?, 2006 Duke L. & Tech. Rev. 5, 9 (2006).
 Accord Protest of Barnesandnoble.com LLC v.Barnesandnoble.com LLC, 2012 N.M. App. LEXIS 32 (N.M. Ct. App. 2012); Musser’s Inc. v. United States, 2011 U.S. Dist. LEXIS 109629 (E.D.Pa. 2011).
Throughout the years the United States child welfare system has grown and changed to address unforeseen issues left unaddressed by prior Federal legislation. (See, E.g., Rhonda McMillion, Kids' Stuff: Prospects Brighten for Improvements in Foster Care System, 79 A.B.A.J. 104 (1993).) For example, the Adoption and Safe Families Act (“ASFA”) explicitly calls for a shifting of emphasis away from the traditional approach of attempting to keep children with their birth parents,( See Kathrine L. Shelly, NY Times, Clinton to Approve Sweeping Shift in Adoption, available at http://www.nytimes. com/1997/11/17/us/clinton-to-approve-sweeping-shift-in-adoption.html.) and towards placement in their best interest. (ASFA, PUBLIC LAW 105-89.) Even in light of attempts to reconcile apparent faults, the child welfare system in the United States, in its current state, is far from perfect. (See John Gibeaut, Nobody's Child: The Way Americans Go About Caring for Abused and Neglected Kids is a Mess, 83 A.B.A.J. 44 (1997).) Therefore, it is imperative to continue tweaking and amending legislation in order to nurture the system to become more effective at addressing the needs of the most vulnerable members of society.( Id.).
Two of the more pressing issues which need to be addressed by further Federal legislation are the: (1) problems faced by older children in foster care; and (2) interrelationship between domestic violence and child abuse/neglect. Accordingly, this blog post will: (1) discuss briefly the two previously stated issues; (2) suggest amendments to the current Federal law pertaining to such issues; (3) explain how the amendments take into account the balancing of competing interests (i.e. the rights of parents, the protection of children, and the role of the state); (4) analyze the collateral impact of the amendments on the role of the attorney for the child in child welfare cases; and (5) address the funding issues involved with such amendments.
Both issues covered in the prior paragraph need to be addressed with amendments to the current Federal law. This blog post will discuss potential amendments related to older children in care first. The current Federal law does not provide any support for children past the age of twenty-one. ( The Fostering Connections to Success and Increasing Adoptions Act of 2008 provides supports and services to promote permanency and improved well-being of older youth in foster care. These include a state option to continue providing Title IV-E reimbursable foster care, adoption, or guardianship assistance payments to children after the age of 18; a requirement that personal transition plans for youth aging out are developed within 90 days prior to youth exiting foster care; extending eligibility for Independent Living Program services to children adopted or placed in kinship guardianship at age 16 or older; and extending eligibility for education and training vouchers to children who exit foster care to kinship guardianship at age 16 or older. Fostering Connections, About the Law. Available at http://www.fosteringconnections.org/about_the_law?id=0001.) It appears that this age restriction is arbitrary. ( See Susan Vivian Mangold, Extending Non-exclusive Parenting and the Right to Protection for Older Foster Children: Creating Third Options in Permanency Planning, 48 BUF. L. R. 835 (2000).) That is, there is no valuable reason that support should be terminated when an individual in foster care turns twenty-one. Cutting-off financial, educational, emotional, and vocational support to individuals who are in foster care after they reach the age of twenty-one seems contrary to the primary purpose of the child welfare system. Basically, the child welfare system is in place to provide services for children that do not receive such services from their biological/adopted parents. See U.S. Dep’t of Health and Human Services, Admin. For Children and Families. (2011) How the Child Welfare System Works. Available at http://www.childwelfare.gov/pubs/factsheets/cpswork.cfm.) These needs will still exist after the foster child reaches a certain age; in fact; these needs will more than likely be heightened.
Older foster children need to learn important life skills in order to flourish in society. (See Allison Henig, Employment Help for Youth Aging Out of Foster Care, 47 FAM. CT. REV. 570 (2009)) The Foster Care Independence Act (“FCIA”) should be amended to not only provide subsidies to Independent Living Programs (Foster Care Independence Act , PUB.L. 106-169 (enacted December 14, 1999).) for eighteen to twenty-one year old foster children, but for all foster care children regardless of age. Also, this Amendment will call for greater funding, which will be addressed later in this blog post.
Since this Amendment to FCIA seems to destroy the endpoint for the issuance of public funds to foster children, a new one must be established. The Amendment should provide that Independent Living Programs receiving Federal funding must maintain panels of review. These panels should be mandated to review a resident’s situation on a month-by-month basis. When, in the opinion of the panel, the resident is ready to exit the program, they should be discharged from foster care. All panel decisions to terminate foster care will need to be affirmed by an administrative body. Furthermore, if the administrative body affirms the panel’s decision and the resident takes issue, the resident can appeal to the Family Court.
The Independent Living Programs implicated in this Amendment will have to maintain certain standards in order to receive Federal funding. First, the facilities will only be allowed to charge residents rent up to ten percent of their monthly income (if monthly income is available). Second, the Programs must provide career counseling, which includes: (1) helping young adults apply for jobs, draft resumes and cover letters; and (2) helping to complete college and vocational school applications. Third, the Programs shall teach residences life skills, which include: (1) managing finances; and (2) domestic work (i.e. cooking, cleaning, laundry). Finally, the Programs must provide mentors for each resident.
In regards to the interrelationship between domestic violence and child abuse/neglect, another amendment must be made to the current Federal legislation. For many years, social scientists and mental health practitioners have recognized and studied the interrelationship between child abuse/neglect and domestic violence. (See University of New Mexico. (2006) Child Abuse and Domestic Violence. Available at http://hsc.unm.edu/emer med/ped/physicians/residents/articles/child%20abuse%20and%20domestic%20viol ence.pdf.) However, the Federal government has failed to address this problem head-on. At the current time, there is no Federal legislation that explicitly deals with this interrelationship.
The Adoption and Safe Families Act (“ASFA”) should be amended to provide greater protection and more resources for children that are caught-up in households/relationships where domestic violence is existent. This Amendment’s primary goal should be to protect the child from any of the consequences of domestic violence. Another goal should be to provide resources to address and adjudicate domestic violence matters while remaining in the purview of child welfare system.
Additionally, this Amendment should establish both Child Advocacy Centers as well as Family Justice Centers. At the present time, these types of centers have been very successful in dealing with the interrelationship between domestic violence and child abuse/neglect. Therefore, providing Federal funding for such programs will obviously increase their prevalence, which will in turn provide greater support for children as well as victims of domestic violence.
If the current Amendments are passed the rights of parents will surely be affected. The rights of parents will be diminished if the definition of abuse/neglect is modified to include reoccurring incidences of domestic violence. That is, greater restrictions will be placed on parents involved in relationships where domestic violence is present – there will be more child placements outside of their traditional home.
The protection of children will also be changed if the proposed Amendments are passed. For example, older children and young adults will be protected by a consistent place to live, guidance regarding critical life decisions, and a network of emotional and financial support. Younger children will also have greater protections. The Amendments related to the interrelationship between domestic violence and child abuse/neglect will provide children with a level of protection that they have never had in the past in situations of domestic violence. Children will have places to go and address all of the problems caused by domestic violence. Also, if the domestic violence reaches a certain level, and the victim is unwilling to discontinue their relationship with the perpetrator, the children will be rescued from the home and placed in a better position.
The states will have an increased role and more responsibilities regarding the welfare of children if these Amendments are passed. Each state will have to provide more: (1) funding; (2) man power; (3) administrative cost; and (4) judicial oversight, if these Amendments are passed. Even though these Amendments may be costly in many areas, the long-term effect should be beneficial to Nebraska. Furthermore, the Amendments do not place too much stress on the States resources, nor do they give the States too many powers – the Amendments will not violate parents or children’s fundamental rights.
Since the proposed Amendments alter Federal law, many states that mandate an attorney for the child, such as New York, will be affected. For example, case loads for these attorneys will be increased because they will be serving a broader population of older children in care and more parental termination proceedings based on the new definition of abuse/neglect. Additionally, these attorneys will have greater resources in domestic violence/child welfare cases due to the establishment of Child Advocacy and Family Justice Centers. Other than that, the role of an attorney for the child will not be materially changed.
Funding is always one of the greatest obstacles in the way of change. A child welfare system is not possible without money, and in this trying economic time, money is difficult to come by. The Amendments proposed will be expensive to enact. However, they will save money in the long-term. The cycle of domestic violence will be broken and older foster children will become valuable/productive members of society. That being said, there is a major problem with the current way that Federal funds are allotted to State-run child welfare system – too much money is spent on administrative costs and does not help its intended targets. (Susan Vivian Mangold, Poor Enough to Be Eligible? Child Abuse, Neglect, and the Poverty Requirement, 81 STJLR 575 (2007).) The Federal government only provides funds to those children that have family’s making below an archaic base-line of income. This is a separate problem that will eventually call for another Amendment to Federal child welfare legislation.
The United States child welfare system, in its current state, will not withstand the tests of time. Therefore, it is critical to continue amending such legislation. The Amendments in this Memorandum are but an example of the problem-solving approach the government needs to take to improve the child welfare system.
Peter McGrath is the principal attorney at the McGrath Law Firm, PLLC. His writing interests include both practical and broad reaching theoretical legal theory.

References: § 5000
 § 10
 § 67
 § 44
 § 105
 § 26
 § 12
 § 6203
 v. 
 § 1101
 v. 
 v. 
 § 151
 § 1101
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.