Today, the Retail Litigation Center and more than 20 retail and wholesale trade associations filed an amicus brief urging the U.S. Supreme Court to use South Dakota v. Wayfair, Overstock, and Newegg to renounce a narrow rule that the Court adopted in the pre-Internet era and that now significantly distorts the competitive playing field between online retailers and their local counterparts. The brief was drafted for the retailers by former U.S. Solicitor General Don Verrilli and Mark Yohalem of Munger Tolles & Olson.
"The Court should abrogate its Mad Men-era rule that today gives preferential treatment to giant online-only retailers at the expense of local brick and mortar stores," said Deborah White, General Counsel for the Retail Industry Leaders Association and President of the Retail Litigation Center. "The outsized impacts of the 'physical presence' test that the Court announced in 1967 and narrowly retained in 1992 were unforeseen and unforeseeable. But the same technology that has enabled online-only juggernauts to thrive in the past decade has simultaneously trivialized the compliance burdens that the Court feared would overwhelm catalog mail order companies in the 1960's."
Remote and online commerce has grown exponentially since the 1992 Quill decision. As noted in the brief, the out-of-state retailers that the Court considered in 1992 —mainly catalog companies—had sales of roughly $180 billion. Online sales today are almost $6 trillion.
"Today's online giants do not need or deserve the special tax treatment that the Court gave mail order catalog companies a half century ago," said White. "These online companies have taken advantage of a bygone decision in order to evade the tax collection duties that their brick and mortar competitors perform every day."
"Online retailers are omnipresent today – on consumers' smart phones, laptops, tablets, and computers – in a way that was inconceivable in 1967 or 1992. The 'physical presence' rule of those eras was enunciated by the Court long before virtual presence was even imaginable," added White. "The 'economic presence' test set forth in this case is a far better yardstick for State authority over absentee retailers and will ensure that large online retailers are playing by the same rules as their brick and mortar counterparts."
"The same computing sophistication that enables logistical and marketing magicians like the defendants to calculate shipping fees on the millions of products that they ship to every zip code in the country also enables them to collect and remit sales taxes as a routine matter," said White.
"Overturning Quill and restoring basic free market competition will not alter or impede the shopping experience," said White. "Modern retail is ubiquitous and ultrapersonal. Tomorrow's consumer will be the ultimate winner when every retailer competes on price, service, selection and value, without government's thumb on the scale."
Key excerpts from the retail community’s amicus brief in South Dakota v. Wayfair, et. al:
Absentee retailers have fought for the physical-presence requirement not because collecting taxes is a crippling burden, but because being exempt from that obligation gives them "a competitive advantage, a sort of judicially sponsored arbitrage opportunity or 'tax shelter.'" DMA II, 814 F.3d at 1150 (Gorsuch, J., concurring).
Amici's members have met e-commerce's market forces by incorporating technology into their businesses to provide superior service to their customers at reduced costs. But no amount of ingenuity can overcome the unfair advantage that Bellas Hess and Quill give to absentee retailers by making their online sales appear duty-free.'
E-commerce will—indeed, does—make ample profit without Quill's subsidy. There is thus no danger of e-commerce coming to an end if absentee, online-only retailers are required to collect sales taxes in more States than those in which they currently collect taxes. To the contrary, it is a virtual certainty that e-commerce will become cheaper and more efficient once online-only retailers are no longer encouraged to eschew a physical presence to obtain an apparent price advantage.
The full amicus brief can be read here.
The Retail Litigation Center is a public policy organization that identifies and engages in legal proceedings that 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.
RILA is the trade association of the world's largest and most innovative retail companies. RILA members include more than 200 retailers, product manufacturers, and service suppliers, which together account for more than $1.5 trillion in annual sales, millions of American jobs and more than 100,000 stores, manufacturing facilities and distribution centers domestically and abroad.