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Supreme Court rules Congress has power to resolve state, local mail order sales tax issue.

In a two-part decision the U.S. Supreme Court paved the way for Congress to resolve the issue of "whether, when, and to what extent" the states may require out of state mail order vendors to collect sales taxes.

Over the course of the past two decades, the refusal of mail order vendors to collect and remit use taxes has resulted in state and municipal governments losing millions of dollars in uncollected revenues. Although NLC repeatedly urged Congress to clarify and affirm the authority of state and municipal taxing authorities under the Commerce Clause, Congress has refrained from taking action, arguing that the Supreme Court was the appropriate forum to resolve municipal and state use tax concerns.

The Court's ruling in Quill has stripped the Congress of any rationale for refusing to address and resolve the ability of taxing authorities to require out-of-state vendors to collect and remit use taxes.

The justices unanimously ruled last Tuesday in Quill Corporation v. North Dakota, that the Constitution's Due Process Clause does not bar enforcement of a state's use tax against an out-of-state vendor "engaged in continuous and widespread solicitation of business within a state...irrespective of a corporation's lack of physical presence in the taxing state."

The High Court affirmed in an 8 to 1 ruling the bright-line, physical presence requirement enunciated in National Bellas Hess, Inc. v. Department of Revenue of Illinois and concluded that the state tax collection requirement imposes an unconstitutional burden on interstate commerce. In so ruling, however, the Court noted that whether a use tax imposes an impermissible burden on interstate commerce is "not only (an issue) that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve."

The case arose out of a North Dakota Supreme Court ruling that upheld the state use tax collection requirement while concluding that "wholesale changes" in both the economy and the law made it inappropriate to follow Bellas Hess today.

NLC, through the State and Local Legal Center had filed an amicus brief asking the Supreme Court to grant certiorari and in support of the state of North Dakota once certiorari was granted.
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Author:Herber, Kate
Publication:Nation's Cities Weekly
Date:Jun 1, 1992
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