The South Dakota Supreme Court heard oral arguments on August 29 in a case that ICSC believes will provide the United States Supreme Court with the opportunity to revisit Quill Corp v. North Dakota, a 1992 decision that prolonged the tax loophole allowing retailers without a physical presence to enjoy a distinct price advantage over their brick and mortar competitors.
In the 25 years since the decision, the retail marketplace has changed dramatically. While many policymakers have called for Congress to level the playing field for retailers, they have not fulfilled that responsibility, creating the need to push forward with litigation.
The South Dakota case is a result of the statute passed in the state in 2016 designed to create this legal challenge to Quill. The law requires out-of-state retailers to collect and remit sales tax if they transact more than $100,000 of business in the state or more than 200 sales. The law was advanced one year after U.S. Supreme Court Justice Anthony Kennedy recognized that, “[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.”
Justice Kennedy also noted the significant economic harm that the sales tax base erosion has caused for state budgets and local retailers, writing that “it is unwise [for the U.S. 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.”
ICSC is hopeful that a ruling from the South Dakota Supreme Court will be handed down later this month, setting the stage for a petition and ultimately hearing before the high court in 2018.