Glenn,
I've found the US Supreme Court case on Quill. Need to read it:
119 L.Ed.2d 91, 60 USLW 4423
QUILL CORPORATION, Petitioner
v.
NORTH DAKOTA By and Through its Tax Commissioner, Heidi HEITKAMP.
No. 91-194.
Supreme Court of the United States
Argued Jan. 22, 1992
Decided May 26, 1992.
State brought declaratory judgment action seeking declaration that out-of- state retailer was required to collect and remit applicable state use tax. Retailer's motion for summary judgment was granted by the District Court, Burleigh County, South Central Judicial District, Benny A. Graff, J., and state appealed. The North Dakota Supreme Court, VandeWalle, J., 470 N.W.2d 203, reversed. On petition for writ of certiorari, the Supreme Court, Justice Stevens, held that: (1) mail-order business did not need to have physical presence in state in order to permit state to require business to collect use tax from its in-state customers, but (2) physical presence in state was required for business to have "substantial nexus" with taxing state required by commerce clause.
Reversed and remanded.
Justice White concurred in part and dissented in part and filed opinion.
Justice Scalia concurred in part and concurred in judgment and filed opinion, in which Justice Kennnedy and Justice Thomas joined.
Quill Corp. v. North Dakota
[1]
83 COMMERCE
83II Application to Particular Subjects and Methods of Regulation
83II(E) Licenses and Taxes
83k62.70 Taxation in General
83k62.71 k. In general.
Formerly 83k62.70
U.S.N.D.,1992.
Due process and commerce clauses impose distinct limits on taxing powers of states. U.S.C.A. Const.Amend. 14; U.S.C.A. Const. Art. 1, S 8, cl. 3.
Quill Corp. v. North Dakota
[1]
92 CONSTITUTIONAL LAW
92XII Due Process of Law
92k281.5 k. Taxation in general.
U.S.N.D.,1992.
Due process and commerce clauses impose distinct limits on taxing powers of states. U.S.C.A. Const.Amend. 14; U.S.C.A. Const. Art. 1, S 8, cl. 3.
Quill Corp. v. North Dakota
[2]
92 CONSTITUTIONAL LAW
92XII Due Process of Law
92k281.5 k. Taxation in general.
U.S.N.D.,1992.
Due process requires both that some definite link or minimum connection exist between state and the person, property or transaction it seeks to tax, and that income attributed to state for tax purposes be rationally related to values connected with taxing state. U.S.C.A. Const.Amend. 14.
Quill Corp. v. North Dakota
[3]
92 CONSTITUTIONAL LAW
92XII Due Process of Law
92k285.4 k. Sales and use taxes.
U.S.N.D.,1992.
Mail-order business did not need to have physical presence in state in order to permit state, consistent with requirements of due process, to require it to collect use tax from its in-state customers; overruling National Bellas Hess, Inc. v. Department of Revenue of Ill., 87 S.Ct. 1389. U.S.C.A. Const.Amend. 14.
Quill Corp. v. North Dakota
[3]
371 TAXATION
371XVI Sales, Use, Service, and Gross Receipts Taxes
371XVI(A) Nature and Power to Tax
371XVI(A)1 In General
371k1205 Power to Impose
371k1206 k. Territorial limitations; nonresidents.
U.S.N.D.,1992.
Mail-order business did not need to have physical presence in state in order to permit state, consistent with requirements of due process, to require it to collect use tax from its in-state customers; overruling National Bellas Hess, Inc. v. Department of Revenue of Ill., 87 S.Ct. 1389. U.S.C.A. Const.Amend. 14.
Quill Corp. v. North Dakota
[4]
92 CONSTITUTIONAL LAW
92XII Due Process of Law
92k285.4 k. Sales and use taxes.
U.S.N.D.,1992.
Imposition of duty to collect use tax on out-of-state mail order business with no sales force and insignificant tangible property in state did not violate due process, where business annually mailed 24 tons of catalogs and flyers into state and had annual sales approaching $1 million to in-state customers. U.S.C.A. Const.Amend. 14.
Quill Corp. v. North Dakota
[4]
371 TAXATION
371XVI Sales, Use, Service, and Gross Receipts Taxes
371XVI(A) Nature and Power to Tax
371XVI(A)2 Regulations
371k1212 Validity of Acts and Ordinances
371k1218 k. Assessment and collection provisions.
U.S.N.D.,1992.
Imposition of duty to collect use tax on out-of-state mail order business with no sales force and insignificant tangible property in state did not violate due process, where business annually mailed 24 tons of catalogs and flyers into state and had annual sales approaching $1 million to in-state customers. U.S.C.A. Const.Amend. 14.
Quill Corp. v. North Dakota
[5]
83 COMMERCE
83I Power to Regulate in General
83k11 Powers Remaining in States, and Limitations Thereon
83k12 k. In general.
U.S.N.D.,1992.
Commerce clause is more than affirmative grant of power; it has negative sweep as well and prohibits certain state actions that interfere with interstate commerce. U.S.C.A. Const. Art. 1, S 8, cl. 3.
Quill Corp. v. North Dakota
[6]
83 COMMERCE
83II Application to Particular Subjects and Methods of Regulation
83II(E) Licenses and Taxes
83k62.70 Taxation in General
83k62.80 k. Multiple taxation; apportionment.
U.S.N.D.,1992.
Interstate commerce may be required, consistent with commerce clause, to pay its fair share of state taxes. U.S.C.A. Const. Art. 1, S 8, cl. 3.
Quill Corp. v. North Dakota
[7]
83 COMMERCE
83II Application to Particular Subjects and Methods of Regulation
83II(E) Licenses and Taxes
83k74.5 Sales and Use Taxes
83k74.5(1) k. In general.
U.S.N.D.,1992.
Vendor whose only contacts with taxing state are by mail or common carrier lacks "substantial nexus" with state and may not be required, consistent with commerce clause, to collect use tax from its in-state customers. U.S.C.A. Const. Art. 1, S 8, cl. 3.
See publication Words and Phrases for other judicial constructions and definitions.
Quill Corp. v. North Dakota
[8]
83 COMMERCE
83II Application to Particular Subjects and Methods of Regulation
83II(E) Licenses and Taxes
83k62.70 Taxation in General
83k62.71 k. In general.
Formerly 83k62.70
U.S.N.D.,1992.
"Substantial nexus" requirement imposed by commerce clause on state's ability to tax out-of-state entity is not, like "minimum contacts" requirement imposed by due process clause, a proxy for notice, but rather a means for limiting state burdens on interstate commerce. U.S.C.A. Const. Art. 1, S 8, cl. 3; U.S.C.A. Const.Amend. 14.
Quill Corp. v. North Dakota
[9]
83 COMMERCE
83II Application to Particular Subjects and Methods of Regulation
83II(E) Licenses and Taxes
83k62.70 Taxation in General
83k62.71 k. In general.
Formerly 83k62.70
U.S.N.D.,1992.
Corporation may have "minimum contacts" with taxing state, as required by due process clause, and yet lack "substantial nexus" with state as required by commerce clause. U.S.C.A. Const.Amend. 14; U.S.C.A. Const. Art. 1, S 8, cl. 3.
Quill Corp. v. North Dakota
[9]
92 CONSTITUTIONAL LAW
92XII Due Process of Law
92k281.5 k. Taxation in general.
U.S.N.D.,1992.
Corporation may have "minimum contacts" with taxing state, as required by due process clause, and yet lack "substantial nexus" with state as required by commerce clause. U.S.C.A. Const.Amend. 14; U.S.C.A. Const. Art. 1, S 8, cl. 3.
Quill Corp. v. North Dakota
[10]
83 COMMERCE
83II Application to Particular Subjects and Methods of Regulation
83II(E) Licenses and Taxes
83k62.70 Taxation in General
83k62.71 k. In general.
Formerly 83k62.70
U.S.N.D.,1992.
Tax may be consistent with due process and yet unduly burden interstate commerce. U.S.C.A. Const.Amend. 14; U.S.C.A. Const. Art. 1, S 8, cl. 3.
Quill Corp. v. North Dakota
[10]
92 CONSTITUTIONAL LAW
92XII Due Process of Law
92k281.5 k. Taxation in general.
U.S.N.D.,1992.
Tax may be consistent with due process and yet unduly burden interstate commerce. U.S.C.A. Const.Amend. 14; U.S.C.A. Const. Art. 1, S 8, cl. 3.
**1905 *298 Syllabus [FN*]
FN* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 287, 50 L.Ed. 499.
Respondent North Dakota, through its Tax Commissioner, filed an action in state **1906 court to require petitioner Quill Corporation--an out-of- state mail-order house with neither outlets nor sales representatives in the State--to collect and pay a use tax on goods purchased for use in the State. The trial court ruled in Quill's favor. It found the case indistinguishable from National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed.2d 505, which, in holding that a similar Illinois statute violated the Fourteenth Amendment's Due Process Clause and created an unconstitutional burden on interstate commerce, concluded that a "seller whose only connection with customers in the State is by common carrier or the ... mail" lacked the requisite minimum contacts with the State. Id., at 758, 87 S.Ct., at 1392. The State Supreme Court reversed, concluding, inter alia, that, pursuant to Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326, and its progeny, the Commerce Clause no longer
mandated the sort of physical-presence nexus suggested in Bellas Hess; and that, with respect to the Due Process Clause, cases following Bellas Hess had not construed minimum contacts to require physical presence within a State as a prerequisite to the legitimate exercise of state power.
Held:
1. The Due Process Clause does not bar enforcement of the State's use tax against Quill. This Court's due process jurisprudence has evolved substantially since Bellas Hess, abandoning formalistic tests focused on a defendant's presence within a State in favor of a more flexible inquiry into whether a defendant's contacts with the forum made it reasonable, in the context of the federal system of Government, to require it to defend the suit in that State. See Shaffer v. Heitner, 433 U.S. 186, 212, 97 S.Ct. 2569, 2584, 53 L.Ed.2d 683. Thus, to the extent that this Court's decisions have indicated that the Clause requires a physical presence in a State, they are overruled. In this case, Quill has purposefully directed its activities at North Dakota residents, the magnitude of those contacts are more than sufficient for due process purposes, and the tax is related to the benefits Quill receives from access to the State. Pp. 1909-1911.
2. The State's enforcement of the use tax against Quill places an unconstitutional burden on interstate commerce. Pp. 1911-1916.
*299 a) Bellas Hess was not rendered obsolete by this Court's subsequent
decision in Complete Auto, supra, which set forth the four-part test that continues to govern the validity of state taxes under the Commerce Clause. Although Complete Auto renounced an analytical approach that looked to a statute's formal language rather than its practical effect in determining a state tax statute's validity, the Bellas Hess decision did not rely on such formalism. Nor is Bellas Hess inconsistent with Complete Auto. It concerns the first part of the Complete Auto test and stands for the proposition that a vendor whose only contacts with the taxing State are by mail or common carrier lacks the "substantial nexus" required by the Commerce Clause. Pp. 1911-1913.
(b) Contrary to the State's argument, a mail-order house may have the "minimum contacts" with a taxing State as required by the Due Process Clause and yet lack the "substantial nexus" with the State required by the Commerce Clause. These requirements are not identical and are animated by different constitutional concerns and policies. Due process concerns the fundamental fairness of governmental activity, and the touchstone of due process nexus analysis is often identified as "notice" or "fair warning." In contrast, the Commerce Clause and its nexus requirement are informed by structural concerns about the effects of state regulation on the national economy. P. 1913.
(c) The evolution of this Court's Commerce Clause jurisprudence does not indicate repudiation of the Bellas Hess rule. While **1907 cases
subsequent to Bellas Hess and concerning other types of taxes have not adopted a bright-line, physical presence requirement similar to that in Bellas Hess, see, e.g., Standard Pressed Steel Co. v. Department of Revenue of Wash., 419 U.S. 560, 95 S.Ct. 706, 42 L.Ed.2d 719, their reasoning does not compel rejection of the Bellas Hess rule regarding sales and use taxes. To the contrary, the continuing value of a bright-line rule in this area and the doctrine and principles of stare decisis indicate that the rule remains good law. Pp. 1914-1916.
(d) The underlying issue here is one that Congress may be better qualified to resolve and one that it has the ultimate power to resolve. P. 1916.
470 N.W.2d 203 (N.D.1991), reversed and remanded.
STEVENS, J., delivered the opinion for a unanimous Court with respect to Parts I, II, and III, and the opinion of the Court with respect to Part IV, in which REHNQUIST, C.J., and BLACKMUN, O'CONNOR, and SOUTER, JJ., joined. SCALIA, J., filed an opinion concurring in part and concurring in the judgment, in which KENNEDY and THOMAS, JJ., joined, post, p. 1923. WHITE, J., filed an opinion concurring in part and dissenting in part, post, p. 1916.
*300 John E. Gaggini argued the cause for petitioner. With him on the briefs were Don S. Harnack, Richard A. Hanson, James H. Peters, Nancy T. Owens, and William P. Pearce.
Nicholas J. Spaeth, Attorney General of North Dakota, argued the cause for
respondent. With him on the brief were Laurie J. Loveland, Solicitor General, Robert W. Wirtz, Assistant Attorney General, and Alan H. Friedman, Special Assistant Attorney General.*
* Briefs of amici curiae urging reversal were filed for the State of New Hampshire et al. by John P. Arnold, Attorney General of New Hampshire, and Harold T. Judd, Senior Assistant Attorney General, Charles M. Oberly III, Attorney General of Delaware, and John R. McKernan, Jr., Governor of Maine; for the American Bankers Association et al. by John J. Gill III, Michael F. Crotty, and Frank M. Salinger; for the American Council for the Blind et al. by David C. Todd and Timothy J. May; for Arizona Mail Order Co., Inc., et al. by Maryann B. Gall, Timothy B. Dyk, Michael J. Meehan, Frank G. Julian, David J. Bradford, George S. Isaacson, Martin I. Eisenstein, and Stuart A. Smith; for Carrot Top Industries, Inc., et al. by Charles A. Trost and James F. Blumstein; for the Clarendon Foundation by Ronald D. Maines; for the Coalition for Small Direct Marketers by Richard J. Leighton and Dan M. Peterson; for the Direct Marketing Association by George S. Isaacson, Martin I. Eisenstein, and Robert J. Levering; for the National Association of Manufacturers et al. by Bruce J. Ennis, Jr., David W. Ogden, Jan S. Amundson, and John Kamp; for Magazine Publishers of America, Inc., et al. by Eli D. Minton, James R. Cregan, Ian D. Volner, and Stephen F. Owen, Jr.; and for the Tax Executives Institute, Inc., by Timothy J. McCormally.
Briefs of amici curiae urging affirmance were filed for the State of Connecticut et al. by Richard Blumenthal, Attorney General of Connecticut, and Paul J. Hartman, Charles W. Burson, Attorney General of Tennessee, Daniel E. Lungren, Attorney General of California, Winston Bryant, Attorney General of Arkansas, Robert A. Butterworth, Attorney General of Florida, Michael J. Bowers, Attorney General of Georgia, Larry EchoHawk, Attorney General of Idaho, Roland W. Burris, Attorney General of Illinois, Bonnie J. Campbell, Attorney General of Iowa, Frederic J. Cowan, Attorney General of Kentucky, William J. Guste, Jr., Attorney General of Louisiana, J. Joseph Curran, Jr., Attorney General of Maryland, Scott Harshbarger, Attorney General of Massachusetts, Frank J. Kelley, Attorney General of Michigan, Mike Moore, Attorney General of Mississippi, Frankie Sue Del Papa, Attorney General of Nevada, Robert Abrams, Attorney General of New York, Lee Fisher, Attorney General of Ohio, Susan B. Loving, Attorney General of Oklahoma, Ernest D. Preate, Jr., Attorney General of Pennsylvania, T. Travis Medlock, Attorney General of South Carolina, Dan Morales, Attorney General of Texas, Paul Van Dam, Attorney General of Utah, Jeffrey L. Amestoy, Attorney General of Vermont, Mary Sue Terry, Attorney General of Virginia, Ken Eikenberry, Attorney General of Washington, Mario J. Palumbo, Attorney General of West Virginia, and John Payton; for the State of New Jersey by Robert J. Del Tufo, Attorney General, Sarah T. Darrow, Deputy Attorney General, Joseph L. Wannotti, Assistant Attorney General, Richard G.
Taranto, and Joel I. Klein; for the State of New Mexico by Tom Udall, Attorney General, and Frank D. Katz, Special Assistant Attorney General; for the City of New York by O. Peter Sherwood, Edward F. X. Hart, and Stanley Buchsbaum; for the International Council of Shopping Centers, Inc., et al. by Charles Rothfeld; for the Multistate Tax Commission by James F. Flug and Martin Lobel; for the National Governors'Association et al. by Richard Ruda; and for the Tax Policy Research Project by Rita Marie Cain.
For U.S. Supreme Court Briefs See:
1991 WL 538773 (Pet.Brief)
1991 WL 538776 (Resp.Brief)
1992 WL 551426 (Reply.Brief)
For Transcript of Oral Argument See:
1992 WL 687848 (U.S.Oral.Arg.)
*301 Justice STEVENS delivered the opinion of the Court.
This case, like National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed.2d 505 (1967), involves a State's attempt to require an out-of-state mail-order house that has neither outlets nor sales representatives in the State to collect and pay a use tax on goods purchased for use within the State. In Bellas Hess we held that a similar Illinois statute violated the Due Process Clause of the Fourteenth Amendment
and created an unconstitutional burden on interstate commerce. In particular, we ruled that a "seller whose only connection with customers in the State is by common carrier or the United States mail" lacked the requisite minimum contacts with the State. Id., at 758, 87 S.Ct., at 1392.
In this case, the Supreme Court of North Dakota declined to follow Bellas Hess because "the tremendous social, economic, commercial, and legal innovations" of the past quarter-century have rendered its holding "obsole [te]." 470 N.W.2d 203, 208 (1991). Having granted certiorari, 502 U.S. 808, 112 S.Ct. 49, 116 L.Ed.2d 27, we must either reverse the State Supreme Court *302 or overrule Bellas Hess. While we agree with much of the state court's reasoning, we take the former course.
I
Quill is a Delaware corporation with offices and warehouses in Illinois, California, and Georgia. None of its employees work or reside in North Dakota, and its ownership of tangible property in that State is either insignificant or nonexistent. [FN1] Quill sells office equipment and supplies; it solicits business through catalogs and flyers, advertisements in national periodicals, and telephone calls. Its annual national sales exceed $200 million, **1908 of which almost $1 million are made to about 3,000 customers in North Dakota. It is the sixth largest vendor of office supplies in the State. It delivers all of its merchandise to its North Dakota customers by mail or common
carrier from out-of-state locations.
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.
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 S 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." S 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 S 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.
Quill has taken the position that North Dakota does not have the power to compel it to collect a use tax from its North Dakota customers. Consequently, the State, through its Tax Commissioner, filed this action to require Quill to pay taxes (as well as interest and penalties) on all such sales made after July 1, 1987. The trial court ruled in Quill's favor, finding the case indistinguishable from Bellas Hess; specifically, it found that because the State had not shown that it had spent tax revenues for the benefit of the mail- order business, there was no "nexus to allow the state to define retailer in the manner it chose." App. to Pet. for Cert. A41.
The North Dakota Supreme Court reversed, concluding that "wholesale changes" in both the economy and the law made it inappropriate to follow Bellas Hess today. 470 N.W.2d, at 213. The principal economic change noted by the court was the remarkable growth of the mail-order business "from a relatively inconsequential market niche" in 1967 to a "goliath" with annual sales that
reached "the staggering figure of $183.3 billion in 1989." Id., at 208, 209. Moreover, the court observed, advances in computer technology greatly eased the burden of compliance with a " 'welter of complicated obligations' " imposed by state and local taxing authorities. Id., at 215 (quoting Bellas Hess, 386 U.S., at 759-760, 87 S.Ct., at 1393).
Equally important, in the court's view, were the changes in the "legal landscape." With respect to the Commerce Clause, the court emphasized that Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977), rejected the line of cases holding that the direct taxation of interstate commerce was *304 impermissible and adopted instead a "consistent and rational method of inquiry [that focused on] the practical effect of [the] challenged tax." Mobil Oil Corp. v. Commissioner of Taxes of Vt., 445 U.S. 425, 443, 100 S.Ct. 1223, 1234, 63 L.Ed.2d 510 (1980). This and subsequent rulings, the court maintained, indicated that the Commerce Clause no longer mandated the sort of physical-presence nexus suggested in Bellas Hess.
Similarly, with respect to the Due Process Clause, the North Dakota court observed that cases following Bellas Hess had not construed "minimum contacts" to require physical presence within a State as a prerequisite to the legitimate exercise of state power. The state court then concluded that "the Due Process requirement of a 'minimal connection' to establish nexus is
encompassed within the Complete Auto test" and that the relevant inquiry under the latter test was whether "the state has provided some protection, opportunities, or benefit for which it can expect a return." 470 N.W.2d, at 216.
Turning to the case at hand, the state court emphasized that North Dakota had **1909 created "an economic climate that fosters demand for" Quill's products, maintained a legal infrastructure that protected that market, and disposed of 24 tons of catalogs and flyers mailed by Quill into the State every year. Id., at 218-219. Based on these facts, the court concluded that Quill's "economic presence" in North Dakota depended on services and benefits provided by the State and therefore generated "a constitutionally sufficient nexus to justify imposition of the purely administrative duty of collecting and remitting the use tax." Id., at 219. [FN2]
FN2. The court also suggested that, in view of the fact that the "touchstone of Due Process is fundamental fairness" and that the "very object" of the Commerce Clause is protection of interstate business against discriminatory local practices, it would be ironic to exempt Quill from this burden and thereby allow it to enjoy a significant competitive advantage over local retailers. 470 N.W.2d, at 214-215.
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