Insight: ‘Wayfair': Covering the Waterfront—Amicus Briefs Supporting Respondents

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Oral arguments in South Dakota v. Wayfair, arguably one of the biggest state tax cases ever before the U.S. Supreme Court, are scheduled for April 17. In this article, Rimon P.C.'s David Fruchtman discusses the 23 amicus briefs filed in support of the e-retailers.

David Fruchtman

By David Fruchtman

Mr. Fruchtman chairs Rimon P.C. State and Local (Subnational) Taxation practice. On March 5, he submitted an amicus curiae brief in Wayfair in support of neither party pointing to issues uniquely related to sales taxation of services. While Mr. Fruchtman’s amicus brief supports neither party, Respondents, in their March 28 brief, attempt to extend their brief to address sales taxation of services, citing the amicus brief as supporting authority. Respondents’ Brief at 56.

On April 17, the U.S. Supreme court will hear oral arguments in South Dakota v. Wayfair, Inc., Overstock.com, Inc., and Newegg, Inc. Before then, the Justices or their clerks will have read 40 amicus curiae briefs. Some of the amicus briefs support South Dakota, some support Wayfair, and some support neither party. But all of those amicus briefs are the end product of substantial efforts to alert the Court to considerations that the amici believe to be important to this case.

For practitioners, these amicus briefs—well-researched, usually well-written, and part of the record at the U.S. Supreme Court—are valuable assets that can be used in assembling arguments for other administrative disputes or court cases. However, because few practitioners have the time to read 40 briefs to determine which contain analyses pertinent to issues of interest to them, this series digests all 40 amicus briefs.

Set forth below are one-paragraph summaries of central points of the 23 amicus briefs filed between March 28 and April 4, all of which support Respondents Wayfair, et al. Where appropriate, observations are also provided. (An earlier article summarizing central points of the 17 amicus briefs filed on or before March 5, all of which supported the state of South Dakota or neither party, is available on my Rimon P.C. professional biography.)

1. Brief of House Judiciary Committee Chairman Bob Goodlatte, et al. as Amici Curiae in Support of Respondents

This brief defends the authority of Congress to decide whether to overturn Quill . It notes that Congress has acted on Internet tax issues, but thus far has not overruled Quill. Id. at 5, 8-14, and 18-22. The brief is highly critical of South Dakota’s fast-track approach to this litigation and the minimal record that has been generated. Id. at 6-7 and 12.

Observations: This is a thoughtful and well-written brief. In my opinion, of the 40 amicus briefs filed, this is the one to read if you have time to read only one. On page 2, the brief states that the amici are “concerned with the unintended consequences of a potential decision by this Court to deem ‘virtual presence’ sufficient for jurisdictional purposes.” See, also, Id. at 31. The caution exhibited contrasts with the unvetted position in the United States’ amicus brief that Quill should be limited to mail-order vendors.

2. Brief for the State of New Hampshire as Amicus Curiae in Support of Respondents

This brief frames all of its arguments under a rubric of stare decisis. These arguments include a detailed discussion of the standard for changing a legal principle that was established via case law. Such changes require showing both that the precedent was wrong and that there is a “special justification” demonstrating a need to abandon precedent. Id. at 5. The elements required to show a special justification are discussed, including a lengthy discussion of the property interests and contract rights that will be affected if Quill’s physical presence rule is abrogated. Id. at 6-9. The brief argues that such reliance interests extend to New Hampshire consumers who, having chosen to live in a no-tax state, would now have to pay sales taxes on purchases formerly treated as nontaxable. Id. at 13. The brief includes an insightful observation regarding Congress’s ability to fashion prospective changes (in contrast to the Supreme Court’s much more limited capabilities in this regard). It also incorporates familiar arguments regarding Congressional inaction to evaluate the strength of the claim that stare decisis prevents abrogation of the physical presence requirement. Id. at 14-17.

Observations: This brief provides a good starting point for an analysis of stare decisis. Note, however, that it is doubtful that New Hampshire residents have a property interest, a contract interest, or a vested right of any sort in their decision to reside in a no-tax state.

3. Brief for the State of Montana as Amicus Curiae in Support of Respondents

This brief defends the interests of small and medium-sized businesses in states lacking a sales tax, of which Montana is one. In its first argument, the brief relies on stare decisis. Id. at 4. The brief then moves to its strongest argument: that overturning Quill will place unreasonable compliance burdens on businesses because (i) the six most populous states do not provide free software as provided pursuant to the Streamlined Sales and Use Tax Agreement (SSUTA), and (ii) even SSUTA software is expensive to set up and difficult to use for businesses not experienced in sales tax compliance. Id. at 5-6. The brief also sounds the alarm on due process considerations, arguing that the contacts required under South Dakota’s irrebuttable economic nexus threshold (annual sales involving at least 200 transactions or more than $100,000) are far less than the activity at issue in Quill (which was, 26 years earlier, $1 million in annual sales to 3,000 customers). The brief maintains that the substantially smaller amounts required by South Dakota’s economic nexus threshold do not per se establish that the vendor was targeting the South Dakota market. Id. at 10-13.

4. Brief of America’s Collectibles Network, Inc. d/b/a Jewelry Television as Amicus Curiae in Support of Respondents

This brief opens with a direct challenge to what it views as the Petitioner’s linchpin assertion: that practical difficulties in collecting multistate sales taxes have vanished. Id. at 6-8. It also argues persuasively that the complications that burden multistate tax collection are of the states’ own making. Id. at 8. The brief challenges, with specificity, Colorado’s law that is the high-water mark among all states in requiring remote vendors to comply with state tax regulatory requirements. Id. at 13-17 (this reporting law was upheld as being Constitutional in Direct Marketing Association v. Brohl , 81 F 3d 1129 (10th Cir 2016), cert. denied, 137 U.S. 591 (2016)). The brief concludes that Colorado’s requirements are impossibly complicated. Id. at 16. Thereafter, uniquely among the amicus briefs filed, the brief describes the complications that arise when customers return merchandise. Id. at 18. Refunding payments on returned items requires tracking the exact amount of sales tax the customer paid on the returned item.

Observations: This brief takes a detailed look at the practicalities of multistate sales tax compliance for smaller businesses. While it is impossible to know the order in which the Court’s law clerks and perhaps the Justices themselves will read the briefs, this brief and Montana’s brief make important contributions to the long line of briefs arguing that large businesses are already collecting sales taxes and that small businesses are going to be harmed by the elimination of the physical presence requirement. The overall sense from this brief, Montana’s brief, and other briefs analyzing South Dakota’s thresholds is that, within South Dakota’s statute:

  •  Two hundred transactions annually is the only truly relevant threshold (For a business to have $100,000 in Internet sales and fewer than 200 transactions, the business’s average transaction size would have to exceed $500). The upshot being that many small businesses with 200 in-state sales of $25-100 per transaction are going to have to collect state sales taxes of $400-1600 annually (using a combined state and local tax rate of 8 percent) even though their compliance costs assuredly are going to exceed the taxes collected. See also Etsy brief at 24 (discussed below).
  •  If $100,000 in sales is a reasonable threshold (i.e., at an 8 percent combined state and local rate and if all such sales are taxable, the annual sales taxes due will be $8,000), then the more realistic size of transactions to establish a meaningful in-state footprint is, say, $80, which implies 1250 transactions annually.
  •  Retroactivity takes two forms. First, it occurs annually as the statute seems to require that at the 200th transaction the business becomes liable for taxes not collected on the first 199 transactions. See also Etsy brief at 24. And second, if the Court abrogates Quill’s physical presence test, then, depending on how tailored the Court’s language is when it makes that abrogation, many businesses are going to be liable for many years of uncollected back taxes. For more on this, see the excellent amicus brief of the Tax Executives Institute, digested below.

5. Brief of U.S. Senators Ted Cruz, Steve Daines, and Mike Lee as Amici Curiae in Support of Respondents

This brief begins with a “Question Presented” that, different from the Question Presented per the Supreme Court, asks the following: “Should this Court defer to the federal legislative branch in determining national policy for interstate internet sales taxes, or should it overturn Quill v. North Dakota, leaving it to states to legislate in this area and thereby disrupt the ongoing federal legislative process?” The brief states that “When this Court decided Quill, it relied explicitly on Congress’ silence on this question. It would thus be highly inappropriate for this Court to now take the same silence as a reason to overturn that long-settled precedent.” Id. at 4. The amici also provide their thoughts on stare decisis and explain their belief that Quill was correctly decided.

Observations: These amici appear to be endlessly patient with the following concept: “The Constitution intentionally structured the legislative branch so that it would not move too quickly, and the House is merely meeting that expectation.” Id. at 9. However, after 26 years, there are indications that the Court’s patience may be exhausted. Indeed, the Court ought to consider the possibility that it, rather than any economic or legislative forces, has created the obstacles to Congressional action on this issue. As stated in the amicus brief of the Retail Litigation Center, Inc., et al. in support of Petitioner at p. 38: “[I]t is hard to see how the judiciary can wash its hands of a problem it created.” See Exxon Shipping Co. v. Baker , 554 U.S. 471, 507 (2008).

6. Brief for Washington State Tax Practitioners as Amici Curiae in Support of Respondents

This brief takes an in-depth look at the authorities and reasoning underlying Complete Auto Transit , and finds Petitioner’s understanding of the case to be incorrect. These cases all involved activities of the taxpayer in the state. In contrast, the Respondents did not have any recognized local activities, noting National Bellas Hess rejected “advertising nexus”. Id. at 14 and 17. The brief also observes that the tax at issue is imposed on the vendor who may, if it so chooses, obtain reimbursement from purchasers. The South Dakota Supreme Court incorrectly treated the tax at issue as involving a tax collection and remittance obligation. The amici reject Petitioner’s implicit assertion that this difference is immaterial to the issue at hand. Id. at 25-28.

Observation: This brief is an excellent resource for anyone wanting to understand Complete Auto Transit beyond what has become a ritualistic recitation of its four-part test.

7. Brief of Americans for Tax Reform as Amicus Curiae in Support of Respondents

This brief argues that some businesses satisfying South Dakota’s economic-nexus threshold will encounter undue compliance, audit, and other burdens. Id. at 5-14. For example, it notes that taxable characterizations of sales vary from state to state and require the exercise of judgment by the vendor. Id. at 7-8. The process is time-consuming, and the burden on remote vendors undue. The brief also takes offense at the process by which the state presented the issue—via test legislation and fast-track litigation—and asks the court to sustain Quill so as not to encourage the use of such an approach. Id. at 22-24.

Observations: In their brief, Americans for Tax Reform (ATR) raise familiar concerns regarding retroactivity ( Id. at 14-17) and deference to Congress to decide whether to retain or overturn Quill ( Id. at 17-22). However, ATR is confused regarding the position in my brief, which is stated as follows:

“The question presented is ‘Should this Court abrogate Quill’s sales tax only physical presence requirement?’ This Brief…takes no position as to whether this Court should respond ‘Yes’ or ‘No’ to the Question Presented. Rather, this Brief takes the position that if the Question Presented is answered ‘Yes,’ then the abrogation of Quill’s physical presence requirement should be limited to retail sales of tangible personal property.”

Fruchtman brief at p. 2. Inexplicably, ATR interpreted that statement of “no position” to mean that I am arguing that South Dakota’s economic-nexus threshold is constitutional. ATR brief at 22. To the contrary, I argue nothing of the sort.

8. Brief of Tax Executives Institute, Inc. as Amicus Curiae in Support of Respondents

This brief focuses entirely on the retroactivity issue. The brief notes that only three of 11 states with economic nexus standards have included provisions in their law limiting retroactivity. Id. at 5-8. It further notes that 20 states without economic nexus rules permit retroactive tax assessments, nine of which do not start the running of a statute of limitations until the remote seller files a sales tax return. Id. at 8-10. The brief lists states and identifies their relevant statutes.

Observations: While many briefs address retroactivity, this brief does an outstanding job of exposing how potentially out of control this consequence of Quill’s reversal can be. In this regard, the brief does precisely what the Court desires from an amicus brief. The continued existence of the retroactivity issue, which has long been known, is perplexing. The states have desired an opportunity to overturn Quill for decades. But now that they have that opportunity, they are unprepared. Every state desirous of overturning Quill should have enacted a law stating that, if the physical presence requirement of Quill is reversed, the change will be applied prospectively only. This would have eliminated one of the most important obstacles to Quill’s reversal.

9. Brief of American Catalog Mailers Association as Amicus Curiae in Support of Respondents

This brief’s first nine pages of argument are used to describe tax administration issues confronting catalog businesses. Id. at 8-16. The remainder of the brief is devoted almost entirely to catalog vendors’ twists on familiar issues. In addition, the brief objects to the argument in the United States’ amicus curiae brief that Quill should be applied to mail order companies only, which the amicus interprets to mean pure mail order companies. Id at 23.

Observations: This brief demonstrates why many experts believe this tax presence issue belongs before Congress. The Argument section contains pages of facts followed by pages of policy arguments. There is some legal argumentation, but it is not the brief’s focus.

10. Brief of Flipper LLC as Amicus Curiae in Support of Respondents

This brief involves one of Amazon.com’s third-party merchants. The brief’s premise is that Amazon.com’s third-party merchant program requires special attention in evaluating the Constitutionality of South Dakota law. Id. at 5.

Observations: The brief’s premise that Constitutional principles must consider any one company’s business model is dubious. The resolution of ambiguities in the business arrangements described in this brief are, first and foremost, private matters between the parties to the arrangements rather than Constitutional concerns. Moreover, regarding the third-party merchants, it is difficult to understand why any business, no matter how small, can or should be relieved of its tax collection and remittance responsibilities by engaging another company to service nearly every aspect of its customers’ purchases—from taking purchase orders to maintaining inventory to fulfillment. (Note that in general: (i) Participants in another business’s taxable sales or in another business’s tax administration process may be held responsible and liable for that business’s failure to collect and remit sales taxes; (ii) Under some scenarios, Amazon.com’s third-party merchants and Amazon.com may be held jointly and severally liable for under-remittances of sales taxes on sales to end-users; and (iii) Whether the third-party merchant or Amazon.com can obtain reimbursement from the other for taxes paid under points (i) or (ii) above is a private matter between those parties.)

11. Brief of eBay, Inc., et al. as Amici Curiae in Support of Respondents

This lengthy brief provides eBay’s thoughts on a number of issues already addressed in Respondents’ brief. It provides examples of complications in determining taxability, tax rates (even with zip codes), classifications of merchandise, and a short list of other complications not resolved by the mere provision of free software. Id. at 7-9. The brief observes that the likelihood of errors in amounts of tax collected invite qui tam lawsuits (private lawsuits brought when taxes are under-collected) and class action lawsuits (private lawsuits brought when taxes are over-collected). Id. at 13-15. The brief also contains an analysis of due process considerations—reminding the Supreme Court that Quill reduced, but did not eliminate, what must be shown to satisfy due process requirements in a sales tax nexus scenario. The level of activity required by South Dakota’s economic nexus test does not, per se, satisfy due process minimum connection requirements. Id. at 28-35 (see especially page 33, footnote 11).

Observations: (1) As much as anything else, this brief and others demonstrate the hazards of fast-tracking cases without a developed record. As is stated in the House Judiciary Committee brief at 6, litigating what is in large part a policy issue invites the filing of competing “Brandeis briefs,” which reference streams of studies conducted or funded by interested parties, but which escape the scrutiny that the legislative process provides. Indisputably, Congress is better-positioned to sort through these competing studies and policy arguments.

(2) Anyone interested in reading a post- Quill “eureka” moment when a state supreme court justice realized that due process personal jurisdiction requirements continue to present a separate and meaningful obstacle for state tax collectors should read Louisiana Chief Justice Calogero’s concurrence in Bridges v. Autozone, 900 So.2d 784 (La. S. Ct., 3/24/2005). For background and more on this case, see “Advising Foreign Businesses on U.S. State and Local Taxation,” Fruchtman, Tax Management International Journal, 42 TMIJ 205, 04/12/2013 (footnote 10) (available in full on my Rimon P.C. professional biography).

12. Brief of Chris Cox, Former Member of Congress; James S. Gilmore III, Former Governor of Virginia; and NetChoice as Amici Curiae in Support of Respondents

This brief does exactly what the Supreme Court asks of an amicus brief by providing significant new information—here with a 15-page analysis of the interaction between South Dakota law and the Internet Tax Freedom Act (ITFA). IFTA is a nationwide moratorium on discriminatory taxation of electronic commerce. Id. at 7 (footnote 7) and 11. The brief explains that Congress enacted IFTA after Quill was decided, and, following IFTA’s initial enactment, it has been reenacted by Congress four times until IFTA was made permanent in 2016. The brief asserts that organizations of state, county, and city legislators and executives fought IFTA’s enactment because IFTA impeded their desire to impose taxes of their choosing. Id. at 7-8. Nevertheless, Congress insisted on having “a national policy that does not burden small and micro enterprises on the Internet by forcing them to comply with thousands of varying state and local tax regimes.” Id. at 9-10. The brief further asserts that “Congress prohibited any state from even considering in its nexus determination the fact that consumers in the State can access the remote seller’s out-of-state computer server.” Id at 12 (emphasis in original). The amici conclude that South Dakota law violates IFTA. Id. at 14.

Observations: Congress’s activity on IFTA demonstrates that it is engaged with Internet tax issues. Therefore, one can reasonably infer that the lack of a Congressional adjustment to Quill’s physical presence test is intentional. Finally, the brief addresses due process issues and characterizes South Dakota’s petition as primarily attempting to establish new policy rather than setting forth legal arguments.

13. Brief of the Computer & Communications Industry Association as Amicus Curiae in Support of Respondents

This brief makes two important arguments. It argues that abrogation of Quill’s physical presence requirement will cause foreign businesses to become subject to state and local sales tax rules. The brief argues that the burden on such businesses would be substantial and could invite retaliation by other countries against U.S. internet vendors. Id. at 5. The brief also argues that even a reversal of Quill will not level the playing field between brick and mortar and e-commerce companies, as the compliance required of brick and mortar vendors will be much less burdensome than that required of remote vendors. The former need to comply with the laws of only one state, while the latter will need to comply with the laws of many states. Id. at 8.

Observations: The brief seems to imply that the abrogation of Quill’s physical presence rule could lead to “double taxation” of “Internet businesses operating overseas.” Id. at 3. Unfortunately, the brief does not explain how (or identify where) that might occur. If, for example, foreign jurisdictions impose sales taxes on the exporting of goods by treating the goods as sold at the shipping origin, that would be important to know (in contrast, state sales taxes generally are imposed at the shipping destination). Likewise, if a foreign value added tax is the concern, it would be important to know whether there is complete double taxation with state sales taxation or, instead, mere overlap in the portion of the sales price equivalent to the value added by the foreign vendor.

14. Brief of the American Academy of Attorney-Certified Public Accountants as Amicus Curiae in Support of Respondents

This brief provides background from a group of experienced tax practitioners as to selected burdens of South Dakota’s law. These include the difficulties of determining taxability, obtaining proper documentation to qualify sales as exempt and, of course, doing all that is required accurately in the few seconds between when a purchase order is received and when it is accepted. Id. at 4. Further, the vendor must do all of this, to the varying requirements of perhaps many states, while maintaining records in good form to be able to defend against audits that might occur years into the future and for which the vendor bears the burden of proof. Id. 6-7. It is a daunting task not diminished by the mere provision of software that calculates liability based on information input by the vendor. Id. The consequences of errors are discussed, including the possible assessment of civil penalties (likely), the imposition of criminal penalties (unlikely), and the filing of private lawsuits for under-collecting taxes ( qui tam lawsuits) or for over-collecting taxes (class action lawsuits). Id. at 11-15.

Observations: The brief states that there are 10,000 jurisdictions that have their own laws and regulations. Id. at 4. Other briefs in support of Respondents use a figure of 12,000 jurisdictions. Both of these figures are very much in dispute, with the states arguing for a much smaller number of jurisdictions. Also, much of this brief reads like testimony prepared for a legislative body rather than a brief to a court. See, e.g., page 8 which contains an argument relating to out-of-state audits and “gotcha tax audits,” both of which are presented without any authority cited.

15. Brief for the Cato Institute as Amicus Curiae in Support of Respondents

This brief, like some others, materially rewrites the Question Presented. The amicus here wants to respond to the following question: “Can a state compel all businesses engaged in inter-state commerce to monitor their sales in that state and collect that state’s sales tax, or can such a mandate only be applied to businesses with a physical presence in the state, as this Court held in Quill Corp. v. North Dakota, 504 U.S. 298 (1992)?”

This brief opens with a metaphysical assertion that South Dakota is trying to reach outside the state “to shift its revenue burden on to the national market.” Id. at 3. (The state, by contrast, asserts that it is grabbing vendors that reach into the state.) The brief further argues that South Dakota’s economic presence standard bears no necessary relationship to the fourth prong of Complete Auto Transit, which requires that the tax at issue must be “fairly related to the services provided by the state.” Id. at 7. The brief concludes with an argument that the state is looking for an easy way out of enforcing its use tax. Id. at 12-14.

Observations: The amicus has the better of the metaphysical argument, as in South Dakota the law imposes the sales tax on vendors and merely permits (but does not require) those vendors to obtain reimbursement from their customers. However, other amicus briefs have stronger analyses of potential due process issues.

16. Brief of the Competitive Enterprise Institute as Amicus Curiae in Support of Respondents

This brief takes a different tack from the others, adopting a nomenclature and approach unfamiliar to those in state tax field. The amicus brief’s seven-page summary is by far the longest of any of the amicus briefs and contrasts the interaction among the states (what the brief calls “horizontal federalism”) with the interaction between the states and the “general” government (“general” is apparently meant to refer to the federal government). The brief refers to interaction between the states and the general/federal government as “vertical” federalism. Id. at 4. The argument section opens with the indisputable statement that the constitution protects each state from encroachment by any other state. Id. at 10. But the obvious question is what constitutes “encroachment.” Unfortunately, this brief does not provide clear direction as to how one might answer this question. Ultimately, in the current environment, the brief prefers the Quill physical presence test to a situation not involving that test. Id. at 23.

Observations: At least to someone not in the fraternity of constitutional scholars, the brief seems to contain statements of constitutional knowledge that start and end without addressing any issue in this case. As one example, page 16 describes prohibitions on states entering into compacts with one another absent Congressional approval. “Unapproved compacts,” it explains, “can be challenged by persons injured thereby.” Id. at 16. However, it is not clear from the brief why this matters to the case at bar. (The discussion does not appear to be referencing SSUTA.) On page 26, the brief castigates South Dakota and other states for “seeking to commandeer outsiders for tax-collection services,” but it is not clear from this brief why vendors who are making a market nationwide (including in South Dakota) should be treated as “outsiders.”

17. Brief of National Auctioneers Association, et al. as Amicus Curiae in Support of Respondents

This brief begins by disabusing readers of any misperception they might have that the mega-auction houses of New York represent the norm in the auctioneering business. Rather, typical auction houses are small businesses that, of their nature, receive bids from potential purchasers near and far. The brief identifies a gamut of issues that will burden small and medium business if the physical presence requirement is overturned. These include multistate compliance burdens that no small business can satisfy by itself—meaning that it will have to pay for additional outside professional services and making irrelevant the SSUTA states’ boasts of free software. Id. at 3-4 and 15. The brief touches on the recent GAO report which indicates that the states’ sales tax losses are a fraction of what the states claim. Id. at 8. Then, returning to the compliance burden, the brief argues that the states’ economic presence thresholds lose their usefulness because, rather than requiring tax collection beginning in prospectively at the 201st sale in a state, they kick in retroactively at the 201st sale, making the vendor liable for taxes it did not collect on the earlier sales. Id. at 10.

Observations: Most, if not all, of the issues identified in this brief are covered in other briefs, frequently with greater depth. However, this brief adds value by compiling these concerns in one place and focusing on the impact that they will have on small businesses. The analysis of the illusory nature of the nexus thresholds is helpful, reflecting the frustration businesses and private practitioners have experienced over and over again with the states’ indifference to the unfairness and harm caused by the imposition of retroactive tax obligations. Unfortunately, the U.S. Supreme Court and other courts have been full partners in these retroactive miscarriages of justice.

18. Brief for National Taxpayers Union Foundation, et al. as Amici Curiae in Support of Respondents

This brief argues that Wayfair implicates more than state sales and use taxation. Id. at 2. The amici argue that the case implicates taxation without representation generally as well as extraterritorial regulation ( Id. at 7 and 14-18), inherent limits on state power ( Id. at 8), and “tyranny” of a remote taxing body over those governed who have no vote ( Id. at 15). The brief argues that the imposition of a responsibility to collect taxes is more unpopular than remote taxation itself. Id. at 10. It also raises due process arguments that can be found in other briefs as well. Id. at 28.

19. Brief for Colony Brands, Inc. as Amicus Curiae in Support of Respondents

This brief argues at length that South Dakota’s statute violates the “speaking with one voice” requirement of the foreign Commerce Clause. Id. at 6-19. Specifically, it argues that accessing a foreign internet server from within the United States does not create a permanent establishment under the meaning of the United States tax treaties with foreign countries, and therefore such access should not create a presence for state tax purposes. Id. at 9.

Observations: This brief confronts two fundamental challenges: First, it argues that South Dakota violates the “speaking with one voice” foreign Commerce Clause requirement. However, even though the United States is an active participant in this case, it never mentions that concern. Second, there is no evidence that the Respondents have foreign interests that would cause them to share amicus’s concern. Also noteworthy is that it is only on page 16 that the brief acknowledges that the states are not bound by U.S. income tax treaties. This is a crucial point, as it is well-established that state taxes are permitted to operate by different tax presence rules than federal income taxes. For example, under Article 5 of the U.S. Model Income Tax treaty (11/15/06), the following three in-state contacts do not result in the creation of a permanent establishment for federal income tax purposes, but under the U.S. Constitution, as interpreted and applied by the states, these contacts create sales tax presence: (i) Maintaining a stock of goods belonging to the foreign business solely for the purpose of storage, display, or delivery; (ii) Maintaining a fixed place of business solely for the purpose of purchasing goods or collecting information for the foreign business; and (iii) Maintaining a stock of goods belonging to the foreign business solely for the purpose of processing by another enterprise. Moreover, the brief does not acknowledge that international concepts of tax presence are evolving. For example, in April, 2016, the Israel Tax Authority issued Circular 4/2016, which asserted tax jurisdiction over foreign businesses having a “significant digital presence” in Israel. In all, it seems that this amicus brief’s greatest value will be in its being considered by future litigants and thought-leaders in tandem with Professor John S. Baker’s amicus brief filed in support of neither party.

20. Brief for Etsy, Inc. as Amicus Curiae Supporting Respondents

This amicus curiae for this brief is an online marketplace used by, among others, almost 2 million businesses having fewer than nine employees. Etsy’s users sell handmade goods, crafts, and vintage products. Id. at 1 and 4. The brief therefore raises a sound challenge to Petitioner’s assertions that this case involves small, local businesses against mammoth e-commerce businesses. Id. at 5. Clearly, many small businesses rely on the lack of costs of entry to sell minor amounts of merchandise over the Internet. The arguments raised here have been discussed in other briefs, including the error of thinking that other states will adopt South Dakota’s thresholds or that those thresholds are appropriate for more populous states, and deference to stare decisis.

Observations: Under Etsy’s business model, the marketplace receives payments from customers and disburses amounts to vendors. Etsy raises valid points regarding the uncertain taxability of transactions, but these either are true of all vendors or can be addressed in a contract with its vendors. However, one can easily imagine the states requiring Etsy to administer their sales tax laws properly, without being particularly sympathetic to the concerns Etsy raises regarding the difficulty of administering nationwide online sales. As is discussed above in the observations to eBay’s brief, the states generally have it within their power to collect unremitted tax from the vendor or the administrator of the online marketplace.

21. Brief of Online Merchants Guild as Amicus Curiae in Support of Respondents

Amici are merchants who sell goods via Amazon, Etsy, eBay, and Walmart platforms. Id. at 1. Amici offer that Petitioner’s professed desire to save brick and mortar stores from unfair competition is, in fact, a pretext for Petitioner’s real goal—to collect taxes on sales made by the small companies selling through platforms such as those identified above. Id. at 3.

Observations: This is an unusual brief that it repeatedly charges Petitioner with making untrue statements and charges the Multistate Tax Commission with offering a tax “sham-nesty” program. See e.g., pp. 3, 4, and 7. The story behind this brief seems to extend beyond this case and seems to involve a suspicion that the states and Amazon have reached a deal under which (allegedly) Amazon will not be treated as a retailer of goods sold through its marketplace and (apparently or allegedly) will not be held derivatively liable for deficiencies in sales tax on the sales that it administers. There is no way to unwind this theory in this space. Therefore, I note only that Counsel of Record on this brief is an apparently experienced state tax lawyer and part-time professor at Pace University. Anyone wanting to learn more should contact him directly.

22. Brief of the United Network Equipment Dealers Association and the Owners’ Rights Initiative as Amici Curiae in Support of Respondents

This brief argues that abrogation of Quill’s physical presence rule will increase the number of audits to which remote businesses will be subject. Id. at 5. Especially when those businesses are small, the cost and overall attention required by multistate audits will be “ruinous” to those businesses. Id. Over three pages, the brief lists examples of burdens resulting from audits. Id. at 12-14.

23. Brief for the American Legislative Exchange Council as Amicus Curiae in Support of Respondents

This amicus describes itself as a nonpartisan collection of 2,000 state legislators nationwide. Its brief opens with an educational, in-depth, analysis of the Commerce Clause. Id. at 5-21. On page 23, the brief opines that “hardworking individual and business taxpayers deserve protection from out-of-state tax collectors and regulators….Overturning the Quill precedent will erode the protection of state borders as effective limits on state tax power. ” Id. at 23. The brief thereafter argues for the value of a bright line test, Id. at 24, and against the imposition of multistate tax collection responsibilities on small retailers. Id. at 25-28.

Observations: Some might criticize this brief for lacking the pure advocacy of other briefs, but in the view of this author the brief is elevating and meaningful precisely because it seeks to inform as well as persuade. In that, it has much in common with the Washington State Tax Practitioners’ brief, which assists the Court by explaining the history and meaning of Complete Auto Transit.

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