Killing ‘Quill’ Doesn’t Secure Uniform State Tax Shift: Panelists

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By Ryan Prete

Overturning a 25-year-old U.S. Supreme Court opinion restricting states’ taxing authority over remote retailers wouldn’t guarantee a blanket standard for all states, according to a leading state and local tax practitioner.

Stephen Kranz, partner at McDermott Will & Emery, said he believes the high court will likely take up South Dakota Attorney General Marty Jackley’s (R) request for review of a Sept. 13 state Supreme Court ruling that found the state’s “economic nexus” law, S.B. 106 (codified as S.D. Codified Laws Chapter 10-64), unconstitutional under Quill Corp. v. North Dakota —the 1992 U.S. Supreme Court ruling that prohibits states from imposing sales and use tax collection obligations on vendors without a physical presence in-state ( South Dakota v. Wayfair, Inc., U.S., No. 17-494, friend-of-the-court briefs filed 11/2/17 ).

But Kranz questioned which states would feel the impact of a potential new standard after Quill’s death.

“We have no idea what the potential outcome could be if the Court takes up the case,” he said Nov. 6 during the Paul J. Hartman Memorial State and Local Tax Forum in Nashville, Tenn. “The Court could decide to reverse Quill completely, as a blanketed approach, or could reverse it for states who only have the same reporting laws as South Dakota.”

“The Court might also only have the new standard take effect in member states of the Streamlined Sales Taxes Initiative. What I’m saying is that there’s a wide array of possible conclusions here,” he added.

Scott Peterson, vice president of U.S. Tax Policy and Government Relations for Avalara Inc., agreed with Kranz.

“Even if the Court were to rule tomorrow, we’d still have 20 different definitions of nexus across states,” Peterson said.

Peterson, who works in sales tax automation, spoke of business woes mounting from the varying nexus models. “The Court should take the South Dakota case because all these different varieties of nexus that exist today make it virtually impossible for a business to keep up and stay in compliance,” he said.

Incentive to Review

South Dakota is furthest along among the states already embroiled in litigation over statutes and regulations targeting out-of-state sellers. Dozens of state attorneys general and interest groups have filed briefs urging the U.S. Supreme Court to grant review in the South Dakota case.

Peterson and Kranz said the larger-than-normal volume of friend-of-the-court briefs is an incentive for the high court to take up the issue.

In the meantime, similar “kill- Quill” cases are pending in other states—Alabama, Indiana, Tennessee and Wyoming. Crutchfield Corp. also filed suit Oct. 24 in Virginia Court challenging Massachusetts regulation 830 CMR 64H.1.7. The regulation, which took effect Oct. 1, orders online vendors to collect Massachusetts sales tax if they have property interests in or use in-state apps and “cookies.” Internet vendors must collect sales tax if they make 100 or more individual transactions and exceed $500,000 worth of in-state sales in a year. However, the Massachusetts DOR has said its regulation isn’t a “kill- Quill” measure.

Marketplace Sales

The panel, which included Loren Chumley, principal at KPMG LLP, and Carolynn Kranz, chief operating officer at Industry Sales Tax Solutions, also predicted that more states will pursue taxing third-party marketplace sales in the upcoming year—such as Minnesota, Washington and Rhode Island. Minnesota and Washington this year were the first two states to enact laws requiring marketplace providers, such as Inc., to collect tax on third-party marketplace transactions.

To contact the reporter on this story: Ryan Prete in Nashville at

To contact the editor responsible for this story: Cheryl Saenz at

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