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U.S. SUPREME COURT DECIDES -- BUT DOES NOT RESOLVE -- MAIL ORDER CONTROVERSY

 U.S. SUPREME COURT DECIDES -- BUT DOES NOT RESOLVE --
 MAIL ORDER CONTROVERSY
 NEW YORK, May 27 /PRNewswire/ -- Yesterday's Supreme Court decision, Quill Corporation vs. North Dakota, comes as welcome relief to the mail order industry. According to Douglas J. Green, KPMG Peat Marwick's national director of state and local tax services, "The Quill decision has the most direct impact on those states that must now wrestle with sales and use tax collection laws that are apparently unconstitutional and unenforceable, while the mail order sellers have, in essence, been granted a reprieve from state tax collection responsibilities."
 Claiming that more than $3 to $4 billion of sales tax revenue is lost annually to mail order businesses, more than 30 states have enacted laws requiring tax collections by out-of-state vendors even in the absence of physical presence. In Quill, the court struck down one of these laws. Holding that sales and use tax collections cannot be required unless the seller has some type of physical presence in the state, "The court adopted a 'substantial nexus' requirement," explained Green, "but unfortunately, the court stopped short of defining what substantial nexus means, noting only that it is not mail order solicitation."
 In all likelihood, the states' efforts to require tax collections by mail order sellers will move once again to the U.S. Congress. "Indeed, the court views this issue as one that Congress should more appropiately address given its historical oversight of interstate commerce," said Green. He continued by cautioning, "however, since the 1970's, Congress has failed on a number of occasions to enact federal legislation that would impose a tax collection duty on virtually all mail order sellers."
 Green also noted, "While the decision provides mail order sellers with more guidance in this area than before, portions of the decision create additional uncertainties. For example, while the court tried to delineate carefully a bright-line physical presence test to determine which companies have a tax collection duty, it was not troubled with the presence of canned computer software in the state, noting simply that it does not meet the substantial presence requirement. Apparently, a minimal level of presence in a state does not lead to a tax collection obligation. Unfortunately, the bridge between these minimal contacts and substantial nexus is ill-defined. I expect controversies will certainly continue."
 Through 135 offices in the United States, KPMG Peat Marwick provides industry-specific accounting, taxation and consulting services to a broad range of businesses and other organizations in the financial, commercial and service sectors. KPMG has more than 76,000 people worldwide and operates in 125 countries.
 -0- 5/27/92
 /CONTACT: Beth De Lisi of KPMG Peat Marwick, 212-909-5128/ CO: ST: IN: SU: ECO


SM-OS -- NY074 -- 4414 05/27/92 16:35 EDT
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Date:May 27, 1992
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