Following a predictable loss before the South Dakota Supreme Court, the state of South Dakota is expected to ask the U.S. Supreme Court to rule that its law requiring out-of-state retailers to collect sales tax is constitutional. Doing so will require the U.S. Supreme Court to take the unusual step of overruling precedent.
In Quill Corp. v. North Dakota, decided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax.
In March 2015, Justice Kennedy wrote a concurring opinion stating that the “legal system should find an appropriate case for this Court to reexamine Quill.” Justice Kennedy criticized Quill in Direct Marketing Association v. Brohl for many of the same reasons the State and Local Legal Center stated in its amicus brief. Specifically, internet sales have risen astronomically since 1992 and states and local governments are unable to collect most taxes due on sales from out-of-state vendors.
Following the Kennedy opinion, a number of state legislatures passed or considered legislation requiring remote vendors to collect sales tax. South Dakota’s law is the first to be ready for review by the Supreme Court.
The South Dakota Supreme Court ruled that the South Dakota law is unconstitutional because it clearly violates Quill and “Quill remains the controlling precedent on the issue of Commerce Clause limitations on interstate collection of sales and use taxes. We are mindful of the Supreme Court’s directive to follow its precedent when it ‘has direct application in a case’ and to leave to that Court ‘the prerogative of overruling its own decisions.’”
The South Dakota Supreme Court also noted that while on the Tenth Circuit then-Judge-now Justice Gorsuch “raised similar concerns” as Justice Kennedy regarding Quill.
Review by the U.S. Supreme Court is discretionary — four of the nine Supreme Court Justices must agree to hear the case. If the petition for the Court to hear this case were filed soon, the Court would be able to decide this case by the end of June 2018.
About the author: Lisa Soronen is the executive director of the State and Local Legal Center (SLLC), which files Supreme Court amicus curiae briefs on behalf of the Big Seven national organizations, including the National League of Cities, representing state and local governments. She is a regular contributor to CitiesSpeak.