The Retail Industry Leaders Association (RILA) issued the following statement in response to a decision by the U.S. Supreme Court not to grant certiorari in the case of DMA v. Brohl. The decision not to grant certiorari means that states will continue to creatively address the challenge of collecting the sales tax that is legally due on purchases made by their residents from Internet and other remote sellers. The decision also sets the stage for one of the better cases that are currently developing to reach the Supreme Court in order to present a square challenge to the now outdated precedents set by the Court in 1967 (Bellas Hess v. Illinois) and 1992 (Quill v. North Dakota).
“It is unquestionably true that the Supreme Court’s decisions in Quill and Bellas Hess are now anachronisms that should be abrogated by the Court at the earliest possible opportunity. But this case was not the right vehicle,” said Deborah White, executive vice president and general counsel. “The 10th Circuit had properly recognized the limits of the Supreme Court’s earlier decisions and cases that present the issue more squarely are developing. Main Street retailers welcome the decision announced today and look forward to a better opportunity to resolve this decades-old problem once and for all.”
DMA v. Brohl arises from a challenge to a Colorado law that requires retailers that do not collect sales or use taxes to notify Colorado customers of the state's use tax obligation and to report tax-related information to those customers and the Colorado Department of Revenue. In February, the 10th Circuit Court of Appeals upheld the law because it compels remote sellers to report information -- not to collect taxes -- and can thus co-exist with the Quill precedent.
For states and retailers, the Quill loophole allows out of state retailers to avoid the obligation to collect and remit the sales tax due on every purchase. These taxes are collected by all local retailers that have a physical store in a given taxing jurisdiction. By absolving remote sellers of an obligation placed on local retailers, the loophole creates the perception of a price advantage for Internet retailers; this perception ultimately costs local retailers business.
In 2015, U.S. Supreme Court Justice Anthony Kennedy invited “the legal system [to] find an appropriate case for this Court to reexamine Quill.” Given this and persistent Congressional inaction on the issue, states have passed their own laws to address the current situation. However, each law is limited or faces constitutional challenges because of the precedent reiterated in Quill. Retailers have applauded these actions, as they pave the way for the Supreme Court to revisit the question of whether states can compel collection from sellers without a physical presence in the state.
“While this case did not squarely or cleanly respond to Justice Kennedy’s invitation, several states are preparing cases that will do just that,” added White.
Oral arguments were held last week in federal district court in a challenge to a South Dakota law that requires all retailers with a sufficiently high level of business in the state (“economic nexus”) to collect and remit the legally owed sales tax, regardless of whether those retailers have a physical presence in the state. Alabama is moving forward with litigation regarding its economic nexus regulation, which is similar in substance to the South Dakota law. Additional states are preparing to follow South Dakota and Alabama in 2017.
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.