Source: https://www.bloomberglaw.com/public/desktop/document/QuillCorpvNorthDakota504US298112SCt1904119LEd2d912ILRD24260USLW44/1?1596927165
Timestamp: 2020-08-08 22:52:48
Document Index: 145528451

Matched Legal Cases: ['§ 57', '§ 57', '§ 81', '§ 10', '§ 58', '§ 1087']

Quill Corp. v. North Dakota, 504 U.S. 298, 112 S. Ct. 1904, 119 L. Ed. 2d 91, 2 ILRD 242, 60 U.S.L.W. 4423 (1992), Court Opinion
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60 U.S.L.W. 4423
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2 ILRD 242 60 U.S.L.W. 4423
Syllabus > Majority Opinion > Concurring in Part, Dissenting in Part > Concurring in Part, Dissenting in Part > Table of Cases
Decided May 26, 1992[**1905]
[1] - Collection of sales and use tax by out-of-state corporation - Commerce Clause ►TX.4 [Show Topic Path]
Imposition by the state of North Dakota of a sales and use tax on a mail order house which had no physical presence in North Dakota, but contacted the state only through the United States mail or common carriers, was prohibited by the Commerce Clause of the Constitution. The Commerce Clause's "substantial nexus" requirement, unlike the "minimum contacts" requirement of the Due Process Clause, is not a proxy for notice, but is a substantive means of limiting state burdens on interstate commerce. A bright-line rule requiring some form of physical presence in the taxing state furthers the ends of the Commerce Clause, firmly establishing the boundaries of legitimate state authority to impose a duty to collect sales and use taxes and reducing litigation concerning those taxes. Moreover, a bright-line rule encourages settled expectations and fosters investment by businesses and individuals.
[2] - Collection of sales and use tax by out-of-state corporation - Due Process Clause ►TX.4 [Show Topic Path]
Imposition by the state of North Dakota of a sales and use tax on a mail order house which had no physical presence in North Dakota, but contacted the state only through the United States mail or common carriers, did not violate the Due Process Clause of the Constitution. It was clear that the corporation had purposefully directed its activities at North Dakota residents, engaging in continuous and widespread solicitation of business within the state. The magnitude of the corporation's contacts with the forum state was sufficient to satisfy Due Process requirements, and the use tax was related to the benefits that the corporation received from access to the state.
2. The State's enforcement of the use tax against Quill places an unconstitutional burden on interstate commerce. Pp. 309-319.[*299]
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.[*300]
As a corollary to its sales tax, North Dakota imposes a use tax upon property purchased for storage, use, or consumption within the State. North Dakota requires every "retailer maintaining a place of business in" the State to collect the tax from the consumer and remit it to the State. N. D. Cent. Code § 57-40.2-07 (Supp. 1991). In 1987, North Dakota amended the statutory definition of the term "retailer" to include "every person who engages in regular or systematic [*303] solicitation of a consumer market in th[e] state." § 57-40.2-01(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 § 81-04.1-01 - 03.1 (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.
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.[*309]
Notwithstanding the benefits of bright-line tests, we have, in some situations, decided to replace such tests with more contextual balancing inquiries. For example, in Arkansas Electric Cooperative Corp. v. Arkansas Pub. Serv. Comm'n, 461 U. S. 375 (1983), we reconsidered a bright-line test set forth in Public Util. Comm'n of R. I. v. Attleboro Steam & Electric Co., 273 U. S. 83 (1927). Attleboro distinguished between state regulation of wholesale sales of electricity, which was constitutional as an "indirect" regulation of interstate commerce, and state regulation of retail sales of electricity, which was unconstitutional as a "direct regulation" of commerce. In Arkansas Electric, we considered whether to [*317] "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 [***110] 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[**1916] 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.
By decoupling any notion of a transactional nexus from the inquiry, the National Geographic Court in fact repudiated the free trade rationale of the Bellas Hess majority. Instead, the National Geographic Court relied on a due process-type minimum contacts analysis that examined whether a link existed between the seller and the State wholly apart from the seller's in-state transaction that was being taxed. Citations to Bellas Hess notwithstanding, see 430 U. S., at 559, it is clear that rather than adopting the rationale of Bellas Hess, the National Geographic Court was instead politely brushing it aside. Even were I to agree that the free trade rationale embodied in Bellas Hess' rule against taxes of purely interstate sales was required by our cases prior to 1967, therefore, I see no basis in the majority's opening premise that this substantive underpinning of Bellas Hess has not since been disavowed by our cases.2[***115]
[*325] II
fn1 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.
fn6 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) .
fn8 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 Bd. 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.
fn11 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, 100th 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).
Concur In Part #2 Footnotes
fn1 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).
fn4 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 ).
, 386 U. S. 753 (1967)
Complete Auto Transit, Inc. v. Brady, 430 U. S. 274 (1977)
Mobil Oil Corp. v. Commissioner of Taxes of Vt., 445 U. S. 425, 443 (1980)
Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenue, 483 U. S. 232 (1987)
International Shoe Co. v. Washington, 326 U. S. 310, 315 (1945)
International Harvester Co. v. Department of Treasury, 322 U. S. 340, 353 (1944)
Miller Brothers Co. v. Maryland, 347 U. S. 340, 344-345 (1954)
Moorman Mfg. Co. v. Bair, 437 U. S. 267, 273 (1978)
, 326 U. S. 310 (1945)
Milliken v. Meyer, 311 U. S. 457, 463 (1940)
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, 471 U. S. 462 (1985)
, 9 Wheat. 1, 231-232, 239 (1824)
South Carolina State Highway Dept. v. Barnwell Brothers, Inc., 303 U. S. 177, 185 (1938)
Brown v. Maryland, 12 Wheat. 419 (1827)
Leloup v. Port of Mobile, 127 U. S. 640, 648 (1888)
Sanford v. Poe, 69 F. 546 (CA6 1895), aff'd sub nom.Adams Express Co. v. Ohio State Auditor, 165 U. S. 194, 220 (1897)
Western Live Stock v. Bureau of Revenue, 303 U. S. 250, 256-258 (1938)
Freeman v. Hewit, 329 U. S. 249, 256 (1946)
Railway Express Agency, Inc. v. Virginia, 358 U. S. 434, 441 (1959)
National Geographic Society v. California Bd. of Equalization
, 430 U. S. 551, 559 (1977)
Goldberg v. Sweet, 488 U. S. 252, 263 (1989)
D. H. Holmes Co. v. McNamara, 486 U. S. 24, 33 (1988)
Commonwealth Edison co. v. Montana, 453 U. S. 609, 626 (1981)
Philadelphia v. New Jersey, 437 U. S. 617 (1978)
Kassel v. Consolidated Freightways Corp. of Del., 450 U. S. 662 (1981)
Standard Pressed Steel Co. v. Department of Revenue of Wash., 419 U. S. 560 (1975)
Tyler Pipe Industries, Inc. v. Washington State Dept. of Revenu
e, 483 U. S. 232 (1987)
National Geographic Society v. California Bd. of Equalization, 430 U. S. 551 (1977)
Northwestern States Portland Cement Co. v. Minnesota, 358 U. S. 450, 457-458 (1959)
Arkansas Electric Cooperative Corp. v. Arkansas Pub. Serv. Comm'n, 461 U. S. 375 (1983)
Public Util. Comm'n of R. I. v. Attleboro Steam & Electric Co., 273 U. S. 83 (1927)
Runyon v. McCrary, 427 U. S. 160, 190-191 (1976)
Prudential Insurance Co. v. Benjamin, 328 U. S. 408 (1946)
National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753 (1967)
Travelers Health Assn. v. Virginia ex rel. State Corp. Comm'n, 339 U. S. 643, 646-650 (1950)
National Geographic Society v. California Bd. of Equalization, 430 U. S. 551, 558 (1977)
Scripto, Inc. v. Carson, 362 U. S. 207, 211 (1960)
Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U. S. 102 (1987)
American Trucking Assns., Inc. v. Smith, 496 U. S. 167, 204 (1990)
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)
Payne v. Tennessee, 501 U. S. 808, 828 (1991)
Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U. S. 477, 484 (1989)
Case of State Freight Tax, 15 Wall. 232, 279 (1873)
Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 285 (1977)
National Geographic Society v. California Bd. of Equalization, 430 U. S. 551, 559 (1977)
Trinova Corp. v. Michigan Dept. of Treasury, 498 U. S. 358, 373 (1991)
Freeman v. Hewit, 329 U. S. 249 (1946)
Memphis Natural Gas Co. v. Stone, 335 U. S. 80 (1948)
Northwestern States Portland Cement Co. v. Minnesota, 358 U. S. 450 (1959)
James B. Beam Distilling Co. v. Georgia, 501 U. S. 529 (1991)
D. H. Holmes Co. v. McNamara, 486 U. S. 24, 31 (1988)
Commonwealth Edison Co. v. Montana, 453 U. S. 609, 623-624 (1981)
National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753, 759-760 (1967)
National Geographic Society v. California Bd. of Equalization, 430 U. S. 551, 556 (1977)
Northwestern States Portland Cement Co. v. Minnesota, 358 U. S. 450, 452 (1959)
Heublein, Inc. v. South Carolina Tax Comm'n, 409 U. S. 275, 280 (1972)
Mobil Oil Corp. v. Commissioner of Taxes of Vt., 445 U. S. 425, 437 (1980)
First Bank of Buffalo v. Conrad, 350 N. W. 2d 580, 586 (N. D. 1984)