Cengage Advantage Books: Foundations of the Legal Environment of Business 3rd Edition by Marianne Jennings

تمرين 10

Quill Corporation v. North Dakota 504 U.S. 298 (1992)
Is North Dakota a Taxing State?
Facts
Quill is a Delaware corporation with offices and warehouses in Illinois, California, and Georgia. None of its employees works or lives in North Dakota, and it owns no property in North Dakota.
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, of which almost $1 million are made to about three thousand customers in North Dakota. 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 carriers from out-of-state locations.
North Dakota also 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. In 1987, North Dakota amended its statutory definition of the term "retailer" to include "every person who engages in regular or systematic solicitation of a consumer market in th[e] state." State regulations in turn define "regular or systematic solicitation" to mean three or more advertisements within a 12-month period. 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 an 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.
The North Dakota Supreme Court reversed, holding that the state use tax did not violate either the Due Process Clause or the Commerce Clause, and Quill appealed.
Judicial Opinion
STEVENS, Justice
The Due Process Clause "requires some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax," and that the "income attributed to the State for tax purposes must be rationally related to 'values connected with the taxing State.'" For example, the presence of sales personnel in the State, or the maintenance of local retail stores in the State, justified the exercise of that power.
In this case, there is no question that Quill has purposefully directed its activities at North Dakota residents, that the magnitude of those contacts are more than sufficient for due process purposes, and that the use tax is related to the benefits Quill receives from access to the State. We therefore agree with the North Dakota Supreme Court's conclusion that the Due Process Clause does not bar enforcement of that State's use tax against Quill.… [but] while a State may, consistent with the Due Process Clause, have the authority to tax a particular taxpayer, imposition of the tax may nonetheless violate the Commerce Clause.
Although our Commerce Clause jurisprudence now favors more flexible balancing analyses, we have never intimated a desire to reject all established "bright-line" tests.
The bright-line rule of Bellas Hess [386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed.2d 505 (1967)] furthers the ends of the dormant Commerce Clause. Undue burdens on interstate commerce may be avoided not only by a case-bycase evaluation of the actual burdens imposed by particular regulations or taxes, but also, in some situations, by the demarcation of a discrete realm of commercial activity that is free from interstate taxation. Bellas Hess followed the latter approach and created a safe harbor for vendors "whose only connection with customers in the [taxing] State is by common carrier or the United States mail." Under Bellas Hess , such vendors are free from state-imposed duties to collect sales and use taxes.
Whether or not a State may compel a vendor to collect a sales or use tax may turn on the presence in the taxing State of a small sales force, plant, or office. This artificiality, however, is more than offset by the benefits of a clear rule. Such a rule firmly establishes the boundaries of legitimate state authority to impose a duty to collect sales and use taxes and reduces litigation concerning those taxes.
Moreover, a bright-line rule in the area of sales and use taxes also encourages settled expectations and, in doing so, fosters investment by businesses and individuals. Indeed, it is not unlikely that the mail-order industry's dramatic growth over the last quarter century is due in part to the bright-line exemption from state taxation created in Bellas Hess.
Accordingly, Congress is now free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes.
Reversed and remanded.
Case Questions
1. Did Quill Corporation own any property in North Dakota? Were any Quill offices or personnel located in North Dakota?
2. What is the Commerce Clause issue in the case? Where does the "bright-line rule" fit into the decision?
3. What is the standard now for states collecting taxes from out-of-state companies?
4. What is the requirement for a presence in a state for collecting taxes?