Alabama Lawsuit Sets up Second Possible Legal Challenge to Q

Retail Litigation Center (RLC) President Deborah White issued the following statement assessing the lawsuit filed today against the state of Alabama by Newegg, an online retailer. Newegg’s lawsuit challenges a recently enacted state rule that requires all retailers with sales in into the state of Alabama in excess of $250,000 to collect and remit the state’s sales tax – regardless of whether the retailer has a store or other physical facility in the state. Alabama’s rule appears to be an attempt to initiate a lawsuit to challenge the Supreme Court’s 1992 Quill decision, which held that out-of-state sellers were not required to collect sales tax where they lacked physical presence. Last year, in his concurring opinion in DMA v. Brohl, Justice Kennedy asked the legal system to develop a case so that the U.S. Supreme Court could reexamine the Court’s holding in Quill.

“Continued inaction by Congress on legislative efforts to address remote sales tax collection has increased pressure on states to seek a legal remedy. Alabama is now the second state to set up a potential challenge to Quill, a ruling that no longer reflects the realities of the 21st century marketplace.”     

The lawsuit filed against the state of Alabama follows litigation initiated by the state of South Dakota six weeks ago on the same core issue against several online retailers, including Newegg; Overstock and Wayfair are also defendants in the state’s suit.  The South Dakota lawsuit, filed in a state district court, asks the court through a declaratory judgment action to determine that the state may require tax payers to collect and remit sales taxes – regardless of whether the retailer has a physical presence in the state.  The complaint acknowledges that the state “ultimately seeks a decision from the U.S. Supreme Court to that effect in this case.” The day after South Dakota filed its suit, two trade associations representing remote sellers filed their own lawsuit against the state.   

In his 2015 concurring opinion Justice Kennedy said, ‘[t]he Internet has caused far-reaching systemic and structural changes in the economy’ so that ‘a business may be present in a State in a meaningful way without that presence being physical in the traditional sense of the word.’  Further noting the significant economic harms that were befalling state treasuries and local retailers, Justice Kennedy said that ‘it is unwise [for the US Supreme Court] to delay any longer a reconsideration of the Court’s holding in Quill’ and asked the ‘legal system [to] find an appropriate case for this Court to reexamine Quill.’   

“Today’s retailers—and their customers—can be virtually ‘present’ everywhere. It’s time for our laws and rules regulating all forms of commerce to catch up to the technological advancements of the modern marketplace.”  


The Retail Litigation Center is a public policy organization that identifies and engages in legal proceedings which affect the retail industry.  The RLC, whose members include some of the country's largest retailers, was formed to provide courts with retail industry perspectives on significant legal issues, and highlight the potential industry-wide consequences of legal principles that may be determined in pending cases.  

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