Opinion ID: 2112331
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Heading: The Supreme Court's Nexus Standard

Text: In the seminal case of Miller Brothers Co. v. Maryland, supra , Mr. Justice Jackson articulated the often quoted requirement that for a state to impose a collection obligation on an out-of-state seller there must be some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax. Id., 347 U.S. at 344-45, 74 S.Ct. at 539. The factual situation in Miller Brothers involved a Delaware retailer which only sold directly to customers at its store in Delaware. Residents of neighboring Maryland would go to Miller Brothers' store to make purchases, and occasionally Miller Brothers would arrange for delivery into Maryland either by common carrier or in its own truck. Miller Brothers had no resident agent or outlets in Maryland, nor did it advertise in Maryland media, although its advertisements in the Delaware media did make their way into Maryland. The State of Maryland sought to require Miller Brothers to collect a use tax from Maryland residents who purchased goods at the Delaware store. Based on these facts, the Supreme Court held that Maryland could not constitutionally impose a use tax obligation on Miller Brothers. The Court placed emphasis on a number of considerations. First, it concluded that because, under the facts, Maryland could not have reached the Delaware vendor with its sales tax, [i]t would be a strange law that would make [the vendor] more vulnerable to liability for use taxes due from Maryland residents. Id. at 345-46, 74 S.Ct. at 539. Second, as pointed out in subsequent Supreme Court opinions, it was impossible for Miller [Brothers] to determine that the goods sold for cash to a customer over the counter at its store were destined for use in Maryland. Scripto, Inc. v. Carson, 362 U.S. 207, 212, 80 S.Ct. 619, 622, 4 L.Ed.2d 660 (1960); National Geographic Society v. California Board of Equalization, 430 U.S. 551, 561-62, 97 S.Ct. 1386, 1392-93, 51 L.Ed.2d 631 (1977). Lastly, even though Miller Brothers made occasional deliveries into Maryland, and despite the fact that its Delaware advertisements reached the Maryland market, the Court found that Marylanders went to Delaware to make purchases, Miller Brothers did not go to Maryland to make sales. Accordingly, the Court held that there was no invasion or exploitation of the consumer market in Maryland. Miller Brothers Co. v. Maryland, supra, 347 U.S. at 347, 74 S.Ct. at 540. The next use tax obligation case to come before the Supreme Court was Scripto, Inc. v. Carson, supra , which involved a Georgia merchandising corporation that had no office, property or agents in the taxing state of Florida. Orders for Scripto's products were solicited in Florida by ten resident jobbers, who would forward orders to Georgia for shipment of the ordered goods. Stating that the fact that the jobbers were independent contractors was of no constitutional significance, the Court applied the same general standard adopted in Miller Brothers, but concluded that based on the facts presented, the requisite minimum connections with Florida were adequately satisfied. Following seven years after Scripto was National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed.2d 505 (1967), in which the state of Illinois sought to impose a use tax collection obligation on a Missouri based mail order house that had no property, outlets or sales representatives in the taxing state. National engaged in neither local deliveries nor local advertising. Its sole contacts with Illinois were via the United States mail or common carrier. Again applying the nexus test adopted in Miller Brothers, the Court held that a state could not require a seller to collect its use tax where the seller's only connection with customers in the state is by common carrier or through the mails. The most recent of Miller Brothers' progeny was National Geographic Society v. California Board of Equalization, supra . In that case, the state of California sought to compel the Society to collect use taxes on all its interstate mail order sales of maps, atlases, globes and books into California. In addition to its mail order contacts with California, the Society maintained two offices in the state. These offices, however, performed no activities related to the Society's interstate mail order business on which the state sought to impose the use tax collection obligation. Finding, in apparent contradiction of Miller Brothers, that the burdens imposed on interstate commerce are less in requiring a seller to collect a use tax, as opposed to requiring it to pay a sales tax, the Court held that the nexus required between the taxing state and the person, property or transaction sought to be taxed need not be as close in the use tax situation as in the sales tax context. Id., 430 U.S. at 557-58, 97 S.Ct. at 1390-91. Accord, McLeod v. J. E. Dilworth Co., 322 U.S. 327, 330, 64 S.Ct. 1023, 1025-26, 88 L.Ed. 1304 (1944) (A sales tax and a use tax in many instances bring about the same result. But they are different in conception, are assessments upon different transactions, and . . . may have to justify themselves on different constitutional grounds.) See also Note, supra, 64 Va.L.Rev. at 156. Furthermore, despite the fact that the existence of no nexus or relationship between the activity of the seller sought to be taxed and the seller's activity within the state would be fatal to a state's ability to impose a sales tax, the Court held that such dissociation does not bar the imposition of [a] use-tax-collection duty. National Geographic, supra, 430 U.S. at 560, 97 S.Ct. at 1392. A relationship or nexus between the seller and the taxing state would, in the Supreme Court's opinion, suffice. Id. While the Supreme Court itself has admitted that its decisions in this area are not always clear or consistent, Miller Brothers Co. v. Maryland, supra, 347 U.S. at 344, 74 S.Ct. at 538, there are certain common threads running throughout which will aid our resolution of the present case. First, it seems clear that the nexus requirement for sales taxes and use taxes is different, and that a lesser nature or extent of connections will pass constitutional muster in the latter case. Second, the presence of the out-of-state seller within the taxing state must be more than occasional deliveries by company truck as in Miller Brothers, but perhaps less than the degree of presence established by ten jobbers soliciting orders within the state in Scripto. Third, the requisite nexus can be found in the case of a mail order seller with retail outlets, solicitors or property within the taxing state as in National Geographic, but cannot be found where the out-of-state seller merely communicates with customers in the taxing state by mail or common carrier as in National Bellas Hess.