Marketplace Fairness Act

Following its predictable loss before the South Dakota Supreme Court, South Dakota is expected to ask the U.S. Supreme Court to rule that its law requiring out-of-state retailers to collect sales tax is constitutional. Doing so will require the U.S. Supreme Court to take the unusual step of overruling precedent.  

In Quill Corp. v. North Dakota, decided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax.

A state trial court judge in South Dakota has ruled that a South Dakota law requiring remote sellers to collect sales tax is unconstitutional. This ruling was expected for precisely the reason the judge stated—a lower court must follow Supreme Court precedent.   

In Quill Corp. v. North Dakota, decided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. The South Dakota law directly contradicts this precedent.

The Supreme Court refused to hear a case involving the question of whether a Colorado law requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue is unconstitutional. As is always the case, the Supreme Court gave no reason for denying the petition.   

In Quill Corp. v. North Dakota, decided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. In 2010 the Colorado legislature passed the law described above to improve sales tax collection. The Direct Marketing Association sued Colorado claiming the law unconstitutionally discriminates against interstate commerce and is unconstitutional under Quill.   

In March 2015 Justice Kennedy wrote a concurring opinion stating that the “legal system should find an appropriate case for this Court to reexamine Quill.” A new challenge coming out of South Dakota might be just the case Justice Kennedy had in mind. 

In Quill Corp. v. North Dakota, decided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. Justice Kennedy criticized Quill in Direct Marketing Association v. Brohl for many of the same reasons the State and Local Legal Center stated in its amicus brief. Specifically, internet sales have risen astronomically since 1992 and states are unable to collect most taxes due on sales from out-of-state vendors.

The Tenth Circuit held that a Colorado law requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue is constitutional.

In Quill Corp. v. North Dakota, decided in 1992, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect use tax. To improve tax collection, in 2010 the Colorado legislature began requiring remote sellers to inform Colorado purchasers annually of their purchases and send the same information to the Colorado Department of Revenue. The Direct Marketing Association sued Colorado in federal court claiming the law was unconstitutional under Quill

Pages