Will the Supreme Court Overturn ‘Quill’?

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

Bloomberg BNA regularly spotlights the insights of state and local tax (SALT) professionals at KPMG LLP. In this installment, SALT professionals in KPMG LLP’s Washington National Tax practice discuss the U.S. Supreme Court’s decision to review the Wayfair case and its impact on Quill.

Harley Duncan Shirley Sicilian Scott Salmon

By the State and Local Tax group in KPMG's Washington National Tax practice

Washington National Tax is the technical core of KPMG LLP’s tax practice, and serves as a premier resource in analyzing complex tax issues in connection with business decisions.

The U.S. Supreme Court will be reviewing the South Dakota Supreme Court’s Wayfair decision South Dakota v. Wayfair, Inc., cert. granted (Jan. 12, 2018) (No. 17-494). That decision raises the U.S. Supreme Court’s 1992 precedent in Quill v. North Dakota that prevents states from requiring remote sellers to collect use tax from customers in the state, unless the seller has a physical presence there. South Dakota and 13 states, however, have adopted statutes or regulations that, to varying degrees, do not follow Quill, and instead impose an economic nexus standard regardless of physical presence. South Dakota is asking the Court to overrule Quill and uphold the state’s statute.

What are the chances that the Supreme Court will reverse itself on this issue? We conducted an informal poll of experienced SALT professionals in KPMG’s Washington National Tax practice. And – surprise – we found a healthy diversity of opinion.


Fully 80% of our participating SALT professionals have a decent degree (ranging from 51-100 percent) of confidence that the Court agreed to review the case to change the law and eliminate the physical presence test.

Only 3 of the 15 SALT professionals participating believe that the Court will leave Quill standing. Notably, one of those who thinks the Court won’t change the standard is the group’s intrepid leader and seasoned SALT professional, Managing Director Harley Duncan, who has been quoted in this publication admitting that he has been wrong “pretty much all along the way” on this case.

Shirley Sicilian, National Director of State and Local Tax Controversy, observed that 35 states joined an amicus brief asking the Court to review it, which may only signify that the Court feels compelled to listen when it gets an emphatic request from another branch of government. And, it would be “a surprisingly relaxed view of the supremacy clause” for the Court to “just play along” when 13 states chose not to follow the Court’s clear precedent. On the other hand, conservative members may find it “hard to resist walking back a quasi-legislative test” that all members may think is outdated.

Scott Salmon, a partner in the SALT group, believes that the Court could uphold Quill and chastise Congress for not legislating in this area. He speculates that the Court may hold that it is not its responsibility to make those decisions and there is no reason to reconsider its previous decision other than proliferation of the industry through technology, which should not constitute grounds to overturn a stare decisis holding.

There’s consensus that the case will have huge repercussions in the sales and use tax world whether the Court overrules Quill or not.


Winners in the event of a Quill reversal, in addition to the bricks-and-mortar businesses, would include: online retailers who already collect state sales tax regardless of physical presence, lobbyists for the federal Main Street Fairness Act, tax consultants, providers of sales tax outsourcing services and other marketplace facilitators.

If Quill is overturned and states can force remote sellers to collect and remit sales tax, online sellers who haven’t been collecting and remitting sales tax will be hit hard with new obligations and less of a sales price competitive advantage.


Remote sellers that have not heretofore collected use tax are the obvious losers in a Quill reversal.

Another less obvious loser could be any taxpayers taking a position that a physical presence is required for a state to collect a direct tax. Query whether states would be further emboldened by such a decision and start a greater proliferation of factor-presence or lesser standards for direct tax nexus.

States could be losers if Congress overreacts to a Quill reversal. For example, Congress could enact restrictive legislation out of concern over the potential that a straight overturn of Quill would prove too burdensome on remote sellers. Congress could adopt a physical presence bill or a really high small seller exemption. Additionally, states may discover the amount of sales tax revenues associated with collections by remote sellers isn’t what they thought they would be.

And of course, if the Court affirms Quill, the decision could set the cause of the states back a decade or more.

The information in this article is not intended to be “written advice concerning one or more federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 because the content is issued for general informational purposes only. The information contained in this article is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. This article represents the views of the authors only, and does not necessarily represent the views or professional advice of KPMG LLP.

Copyright © 2018 Tax Management Inc. All Rights Reserved.

Request Daily Tax Report: State