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Abstract

In today’s age of technology, does it really matter where we are physically present? For example, a person in rural Montana can buy items online, just as if that person were in a brick-and-mortar store in New York City or San Francisco. An Internet business having employees and offices only in Chicago could sell products to customers located in all 50 states. If physical presence has become a bygone of the past, then why still talk about it? The answer is the 1992 U.S. Supreme Court decision in Quill Corp. v. North Dakota. Quill involved whether an out-of-state office supply company selling products to customers located in North Dakota was required to collect sales and use taxes from those customers. Despite Quill being the 6th largest office supply company in North Dakota and having 3,000 customers in the state, the Court held Quill was not required to collect sales and use taxes because it did not have “physical presence” in the state (e.g., brick-and-mortar store, distribution center, or warehouse). The volume of sales in North Dakota did not matter. The amount of revenues generated in North Dakota also did not matter. Fast forward to today, the age of the Internet, and it is probably easy to see the problem created by Quill. Many Internet retailers may only have physical presence in one state or a small handful of states. For example, physical presence may exist only in the state where the company maintains its corporate office. Or the company may have physical presence in only a small handful of states because it has a corporate office in one state and a warehouse or distribution center in other states. But despite having physical presence in only one state, or just a small handful of states, the company may sell merchandise in many states or perhaps even nationwide. Because Quill prevents remote sellers from collecting sales and use taxes, this has resulted in lost tax revenue to the states. The impact is less money for public education, police protection, road repairs, and other necessary state government services. There have been many excellent articles written about why the time has come to “Kill Quill.” This article provides additional support to the “Kill Quill” movement by making observations to the wine industry and the aftereffects of the U.S. Supreme Court’s decision in Granholm v. Heald, a 2005 case involving wineries and their ability to make online sales and ship wine directly to customers located in other states. It is mportant to understand that a reversal of Quill would not create a new tax. The media sometimes inaccurately reports this. The reason consumers may believe a reversal of Quill would create a new tax is because they are not aware of their already existing responsibility to pay, directly to the state, any taxes not collected by remote retailers. For example, if you are a Florida resident and you buy a tennis racquet online and sales tax is not collected from you by the retailer at the time of sale, then you are responsible for paying the taxes directly to the Florida Department of Revenue. Thus, a reversal of Quill would not create a new tax, it would only create a better way to collect the tax (i.e., collection by the retailer). This article is extremely timely. On January 12, 2018, the U.S. Supreme Court granted the petition for writ of certiorari to hear a South Dakota case, South Dakota v. Wayfair, Inc, and oral arguments were held on April 17, 2018. This case has the potential to reverse Quill. The observations discussed in this article have the ability to impact the “Kill Quill” debate.

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Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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