Amicus Curiae Brief — South Dakota, Petitioner v. Wayfair, Inc., et al.

No. 17-494

================================================================

In The

Supreme Court of the United States

-----------------------------------------------------------------SOUTH DAKOTA,

Petitioner,

v.

WAYFAIR, INC., OVERSTOCK.COM, INC.,

and NEWEGG, INC.,

Respondents.

-----------------------------------------------------------------On Writ Of Certiorari To The

Supreme Court Of South Dakota

-----------------------------------------------------------------BRIEF OF PROFESSOR JOHN S. BAKER, JR. AS

AMICUS CURIAE SUPPORTING NEITHER PARTY

------------------------------------------------------------------

LINDSEY KEISER‡

300 Massachusetts Ave. NW

Washington, D.C. 20001

‡Only Admitted in Indiana

JOHN S. BAKER, JR.

Counsel of Record

Professor of Law Emeritus,

LOUISIANA STATE UNIVERSITY

5209 Sea Chase Dr. 5

Amelia Island, FL 32034

Telephone: (225) 773-5027

John.Baker@law.lsu.edu

Counsel for Amicus Curiae

================================================================

COCKLE LEGAL BRIEFS (800) 225-6964

WWW.COCKLELEGALBRIEFS.COM

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TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE ........................

1

SUMMARY OF ARGUMENT ................................

1

ARGUMENT ...........................................................

4

I.

Internet Sales Often Involve Foreign Commerce and Many Fall Under the ImportExport Clause ..............................................

4

II. In Quill, the Court Did Not Need to Consider International Sales, but the South Dakota Law Requires Such Consideration ......

5

III.

Application of South Dakota’s Tax to International Sales Over the Internet Requires

Analysis Under the Import-Export Clause ....

8

IV. South Dakota’s Law Also Presents Enforcement Problems in Relation to Foreign Sellers

with No Presence in the United States ....... 11

CONCLUSION .......................................................

15

ii

TABLE OF AUTHORITIES

Page

CASES

Almy v. California, 65 U.S. (24 How.) 169 (1860) .........9

Bristol-Myers Squibb v. Superior Court of California, 137 S. Ct. 1773 (2017) .................................13

Brown v. Maryland, 25 U.S. 419 (12 Wheat.)

(1827) ................................................................... 8, 11

Camps Newfound/Owatonna v. Town of Harrison, 520 U.S. 564 (1997) ............................................7

Dep’t of Revenue v. Ass’n of Washington Stevedoring Companies, 435 U.S. 734 (1978) ................ 3, 9

Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124 (2015) ........ 7

Direct Mktg. Ass’n v. Brohl, 814 F. 3d 1129 (10th

Cir. 2016) ....................................................................... 7

Michelin Tire Co. v. Wages, 423 U.S. 276 (1976) ..... passim

Quill Corp. v. North Dakota, 504 U.S. 298 (1992) ..... passim

Thurlow v. Massachusetts, 46 U.S. 504 (5 How.)

(1847) .......................................................................10

Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869) ........... 9

STATUTES AND OTHER AUTHORITIES

U.S. CONST. art. I, § 8, cl. 3 ..........................................15

U.S. CONST. art. I, § 10, cl. 2 ...................................... 2, 8

S.B. 106, 2016 Legis. Assemb. 91st Sess. (S.D.

2016) ................................................................ 2, 6, 12

S.D. CODIFIED LAWS § 15-7-2 (2016) ...........................12

iii

TABLE OF AUTHORITIES – Continued

Page

National Science Foundation, A Brief History of

NSF and the Internet (Aug. 13, 2003) ......................4

William W. Crosskey, Politics and the Constitution in the History of the United States 296-97

(1953) .......................................................................11

1

INTEREST OF AMICUS CURIAE1

Professor John S. Baker, Jr. is Professor of Law

Emeritus at Louisiana State University Law School

and a Visiting Professor at Georgetown University

Law Center. He has taught Constitutional Law and

litigated constitutional cases for many years. Professor

Baker approaches his legal scholarship and litigation

efforts with an Originalist understanding of the Constitution.

------------------------------------------------------------------

SUMMARY OF ARGUMENT

So far, the parties – in the Petition, the Response,

and the Petitioner’s Brief – have failed to address the

impact of South Dakota’s tax on transactions over the

internet between buyers in the United States and foreign sellers. Simply to argue how the internet has altered the way commerce is conducted in the United

States since the decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), is too parochial. The internet’s World Wide Web has created an international

marketplace.

The language of the South Dakota statute applies

to all purchases over the internet. The tax scheme

1

Pursuant to Rule 37.6, amicus curiae certifies that no counsel for a party authored this brief in whole or in part and that no

person or entity, other than amicus or his counsel, has made a

monetary contribution to the preparation or submission of this

brief. Counsel for both parties have provided blanket consent for

amicus curiae brief filings.

2

covers “any seller selling tangible personal property,

products transferred electronically, or services for delivery into South Dakota. . . .” S.B. 106, § 1, 2016 Legis.

Assemb. 91st Sess. (S.D. 2016). Nothing in the statute’s

language would exclude internet purchases delivered

into the state from another country. That South Dakota’s tax would apply to foreign sellers means the tax

should be analyzed under the Constitution’s Commerce Clause and Import-Export Clause.

Your Amicus respectfully suggests that briefs addressing only the continued viability of the dormantcommerce-clause rationale in Quill Corp. are insufficient.

This brief points to issues that your Amicus believes

this Court would wish to consider.

The words of the Import-Export Clause provide

that “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports,

except what may be absolutely necessary for executing

its inspection Laws. . . .” U.S. CONST. art. I, § 10, cl. 2.

Unlike the extended analyses of the Due Process

Clause and Dormant Commerce Clause in Quill, the

wording of the Import-Export Clause – as applied to

foreign commerce – would seem to involve only a determination as to whether a state tax is an impost or a

duty on that commerce.

This Court’s current reading of the Import-Export

Clause came in Michelin Tire Co. v. Wages, 423 U.S. 276

(1976) (finding the ad valorem property taxes on imported goods permissible by reviewing the reasons

prompting the inclusion of the Import-Export Clause

3

in the Constitution); see also Dep’t of Revenue v. Ass’n

of Washington Stevedoring Companies, 435 U.S. 734,

761 (1978) (holding the Washington business and occupation taxes to not be included in the Import-Export

Clause prohibition because the application violated

none of the constitutional policies identified in Michelin).

Michelin Tire adopted a threefold test as to

whether a non-discriminatory state tax violates the

Import-Export Clause. 423 U.S. at 285-86. The test

looked to whether the tax (1) impedes the federal government’s ability to “speak with one voice” in implementing the nation’s foreign relations, (2) results in

diverting import revenues from the federal government to the states, or (3) causes interstate rivalry and

friction among states when a state receives import

taxes on goods destined for other states. Id.

South Dakota’s tax would seem to be an impost.

That is, it is a tax on the privilege of foreign sellers

shipping items or selling services directly into South

Dakota and it applies only once the goods arrive in the

state. The tax is linked to the time and place of importation. South Dakota’s tax would need to be analyzed

under the Michelin threefold test.

Along with considering the constitutionality of the

tax itself, this Court should also consider its enforceability. The South Dakota statute asserts the right to

sue out-of-state sellers. To do so, of course, the state

would have to invoke its long-arm statute. To reach

out-of-state websites with no presence or contacts with

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the state, the state would be extending the reach of its

jurisdiction beyond what this Court has approved as

consistent with the Due Process Clause.

Before this Court issues a major ruling involving

state taxes applicable to internet transactions, your

Amicus respectfully urges the Court to have the benefit of full briefing on the Import-Export Clause, as well

as on the foreign component of the Commerce Clause.

------------------------------------------------------------------

ARGUMENT

I.

Internet Sales Often Involve Foreign Commerce and Many Fall Under the ImportExport Clause.

The sale of goods over the internet was virtually

non-existent when this Court decided Quill Corp. v.

North Dakota, 504 U.S. 298, in 1992. The general public first gained access to the internet in 1991 with

the introduction of the World Wide Web. See National

Science Foundation, A Brief History of NSF and the Internet.2 It was the creation of the Web and later developments that made internet marketing possible. South

Dakota has argued that the unprecedented disruption

in the way goods are sold since this Court’s decision in

Quill has rendered its dormant-commerce-clause rationale completely outdated. South Dakota, however,

has failed to follow through on its own argument by

2

Available at https://www.nsf.gov/news/news_summ.jsp?cntn_

id=103050 (last updated Aug. 13, 2003).

5

considering the foreign commerce dimension of internet sales.

Internet sales are erasing the line between domestic and foreign commerce. Like others, I have personally ordered a product on the internet from a foreign

company, which delivered it directly to me. I could

have, but did not, order that particular foreign product

through Amazon. Other Americans have undoubtedly

ordered from a foreign website while assuming, and

without checking whether, it is based in the United

States. Some websites with a U.S. address state in

their Terms and Conditions that its products may be

shipped to the purchaser directly from other countries.

These changes created by internet sales certainly

challenge constitutional distinctions within the Commerce Clause and between the Commerce Clause and

the Import-Export Clause. Under Michelin Tire Co. v.

Wages, 423 U.S. 276 (1976), it is possible that the

Import-Export Clause would block some, but not all, of

the international sales covered by the South Dakota

law. Your Amicus respectfully suggests that any reconsideration of Quill would not be well-informed without

considering the Import-Export Clause and the foreign

component of the Commerce Clause.

II.

In Quill, the Court Did Not Need to Consider

International Sales, but the South Dakota

Law Requires Such Consideration.

In Quill Corp. v. North Dakota, 504 U.S. 298 (1992),

this Court did not need to consider international sales

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for at least two reasons. First, internet sales had not

yet been born. Moreover, Quill’s holding that a state

could not tax an out-of-state seller with no location

within the taxing state also necessarily protected

sellers operating from other countries. If this Court

were to overturn Quill’s dormant-commerce-clause

holding, however, it would not follow that sellers operating from other countries could constitutionally be

compelled to comply with the South Dakota law.

Neither South Dakota in its Petition for a Writ of

Certiorari or in its brief on the merits, nor respondents

in their Brief in Opposition to the Petition for a Writ of

Certiorari have addressed international sales over the

internet.3 Yet, the South Dakota statute clearly applies

to all goods and services purchased over the internet

for delivery into the state:

[A]ny seller selling tangible personal property,

products transferred electronically, or services for delivery into South Dakota, who does

not have a physical presence in the state, is

subject to chapters 10-45 and 10-52, shall remit the sales tax and shall follow all applicable procedures and requirements of law as if

the seller had a physical presence in the

state. . . .

S.B. 106, § 1, 2016 Legis. Assemb. 91st Sess. (S.D.

2016). Nothing in this language would exclude from

3

Given that an amicus brief supporting neither party is due

within seven days of the filing of the Petitioner’s Brief, your Amicus

did not have the benefit of Respondents’ Brief on the Merits.

7

the tax goods coming into the state from another country.

South Dakota seems to assume that the question

to be decided is a simple and straightforward one

of whether Quill’s dormant-commerce-clause holding

should be overturned. See Petitioner’s Brief for Writ of

Certiorari (“Pet. Cert. Brief ”). Petitioner may be giving

too much significance to past statements by Justices

Kennedy, Gorsuch, and Thomas. Neither Justice Kennedy nor then-Judge Gorsuch addressed international

internet sales when they expressed their readiness to

overturn Quill and its dormant-commerce-clause rationale. See Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124,

1134-35 (2015) (Kennedy, J., concurring); Direct Mktg.

Ass’n v. Brohl, 814 F.3d 1129, 1147-51 (10th Cir. 2016)

(Gorsuch, J., concurring). Petitioner is correct that Justice Thomas has advocated for ending the use of the

“virtually unworkable” Dormant Commerce Clause,

Pet. Cert. Brief at 24, but he has also expressed the

view that the Import-Export Clause is the correct analysis. See Camps Newfound/Owatonna v. Town of Harrison, 520 U.S. 564, 620 (1997) (Thomas, J., dissenting)

(arguing that the terms “imports” and “exports” in

the Import-Export Clause encompassed not only trade

with foreign countries, but also trade with other

States). Petitioner has failed to consider the international dimension of its tax.

That the South Dakota law would apply to foreign sellers with no presence in the United States

necessarily means that the tax involves foreign commerce. The tax, therefore, requires analysis under the

8

Import-Export Clause. Deciding only whether Quill’s

dormant-commerce-clause rationale should remain

good law will not adequately address the constitutional questions involved.

III. Application of South Dakota’s Tax to International Sales Over the Internet Requires

Analysis Under the Import-Export Clause.

The words of the Import-Export Clause provide

that “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports,

except what may be absolutely necessary for executing

its inspection Laws. . . .” U.S. CONST. art. I, § 10, cl. 2.

Unlike the extended analyses of the Due Process

Clause and Dormant Commerce Clause in Quill Corp.

v. North Dakota, 504 U.S. 298 (1992), the wording of

the Import-Export Clause – at least as applied to foreign commerce – would seem to involve only a determination as to whether a state tax is an impost or a

duty on that commerce.

This Court’s relatively few cases on the ImportExport Clause have undergone sharp changes in interpretation. In Brown v. Maryland, Chief Justice

Marshall gave a dictionary or lexicographical interpretation of the Import-Export Clause’s unqualified

language and wrote that the Court believed “the principles laid down in this case, to apply equally to importations from a sister State.” 25 U.S. (12 Wheat.)

419, 449 (1827) (invalidating state tax on importers of

9

goods produced abroad). Chief Justice Taney followed

Marshall’s reading that the clause applies as between

states in Almy v. California, 65 U.S. (24 How.) 169

(1860) (finding a state tax on bills of lading unconstitutional). Woodruff v. Parham, 75 U.S. (8 Wall.) 123

(1869), however, rejected Marshall’s reading that the

clause applied as between states, concluding that in

“the ordinary use of these terms,” impost and import

only applied to items brought in from a foreign country.

This Court’s current understanding of the ImportExport Clause came in Michelin Tire Co. v. Wages, 423

U.S. 276 (1976) (finding the ad valorem property taxes

on imported goods permissible by reviewing the reasons prompting the inclusion of the Import-Export

Clause in the Constitution); see also Dep’t of Revenue

v. Ass’n of Washington Stevedoring Companies, 435

U.S. 734, 761 (1978) (holding the Washington business

and occupation taxes to not be included in the ImportExport Clause prohibition because the application violated none of the constitutional policies identified in

Michelin).

While changing the analytical approach, the Court

in Michelin Tire did so based on its understanding of

the purpose of the Import-Export Clause:

One of the major defects of the Articles of Confederation, and a compelling reason for the

calling of the Constitutional Convention of

1787, was the fact that the Articles essentially

left the individual States free to burden commerce both among themselves and with foreign countries very much as they pleased.

10

Before 1787 it was commonplace for seaboard

States with port facilities to derive revenue to

defray the costs of state and local governments by imposing taxes on imported goods

destined for customers in other States. At the

same time, there was no secure source of revenue for the central government.

Michelin, 423 U.S. at 283.

Michelin Tire adopted a threefold test as to

whether a non-discriminatory state tax violates the

Import-Export Clause. 423 U.S. at 285-86. The test

looked to whether the tax (1) impedes the federal government’s ability to “speak with one voice” in implementing the nation’s foreign relations, (2) results in

diverting import revenues from the federal government to the states, or (3) causes interstate rivalry and

friction among states when a state receives import

taxes on goods destined for other states. Id.

Michelin Tire distinguished the non-discriminatory state property tax, at issue and upheld there, from

“a tax on the thing imported, while it remains a part of

foreign commerce, and is not introduced into the general mass of property in the State.” 423 U.S. at 301

(quoting Thurlow v. Massachusetts, 46 U.S. (5 How.)

504 (1847)). A tax on goods and services provided directly from abroad to a purchaser in South Dakota

would seem to fall within Michelin Tire’s interpretation of the Import-Export Clause’s prohibition on imposts and duties.

The Petitioner should be asked to explain how the

South Dakota tax is not an impost. Imposts and duties

11

are taxes on the commercial privilege of bringing goods

into a country. Michelin Tire, 423 U.S. at 287. Specifically, imposts are charges imposed at the time and

place of importation. Id. at 291 (citing William W.

Crosskey, Politics and the Constitution in the History

of the United States 296-97 (1953)).

South Dakota’s tax applies only to sellers who ship

more than $100,000 worth of product into the state or

make 200 or more shipments into the state. Pet. Cert.

Brief at 6. The Petitioner may think that South Dakota

has acted reasonably because the tax applies only once

sellers meet certain requirements. However, Petitioner

would have to explain how those minimums change

the nature of the tax. See Brown v. Maryland, 25 U.S.

(12 Wheat.) 419 (1827) (finding that whether the tax is

imposed at the time of sale or the time of importation

is irrelevant because it is still a tax on the same privilege at either time). If the South Dakota tax is an unconstitutional impost under Michelin, then it must fail.

IV. South Dakota’s Law Also Presents Enforcement Problems in Relation to Foreign Sellers

with No Presence in the United States.

The South Dakota law provides for enforcement

against those who do not comply voluntarily. The law

allows for a state-court declaratory judgment process

against any out-of-state seller believed to owe state

taxes:

Notwithstanding any other provision of law,

and whether or not the state initiates an audit

12

or other tax collection procedure, the state

may bring a declaratory judgment action under chapter 21-24 in any circuit court against

any person the state believes meets the criteria

of section 1 of this Act to establish that the obligation to remit sales tax is applicable and

valid under state and federal law. The circuit

court shall act on this declaratory judgment

action as expeditiously as possible and this action shall proceed with priority over any other

action presenting the same question in any

other venue.

S.B. 106, § 2, 2016 Legis. Assemb. 91st Sess. (S.D. 2016)

(emphasis added).

But how will South Dakota assert personal jurisdiction over out-of-state and out-of-country websites

with no presence in the state other than its electronic

“presence”? South Dakota’s long-arm statute asserts

the broadest possible personal jurisdiction over out-ofstate defendants, ending with a catch-all provision allowing plaintiffs to assert personal jurisdiction over

“The commission of any act, the basis of which is not

inconsistent with the Constitution of this state or with

the Constitution of the United States.” S.D. CODIFIED

LAWS § 15-7-2.

Consideration of South Dakota’s tax law should

include the constitutional viability of the state’s process for enforcing the tax. Given this Court’s Due Process limits on long-arm statutes, South Dakota cannot

assert specific personal jurisdiction over most out-ofstate websites, much less those operating from abroad,

13

without going far beyond what this Court has recognized as consistent with Due Process. As this Court reinforced last term in Bristol-Myers Squibb v. Superior

Court of California, specific jurisdiction requires the

lawsuit to arise out of or directly relate to the defendant’s contacts with the state. 137 S. Ct. 1773, 1780

(2017). Furthermore, the Court explained that:

The primary concern in assessing personal jurisdiction is the burden on the defendant. Assessing this burden obviously requires a court

to consider the practical problems resulting

from litigating in the forum, but it also encompasses the more abstract matter of submitting

to the coercive power of a State that may have

little legitimate interest in the claims in question.

Id. (internal citations and quotations removed).

Enforcement of the South Dakota tax involves obvious practical problems and concerns for the coercive

power of the state. Out-of-state and out-of-country

websites do not target any particular state. Websites –

at least those in English – hope to sell to a worldwide

audience.

Websites are “present” only in the state(s) where

they have employees, agents, or distribution centers.

Otherwise, they are not present in any meaningful

way. The vast majority are small operations, which are

hoping to – and sometimes do – grow larger. If they

do become a large operation, like Amazon, they find

14

advantages to becoming “present” in more states and,

thereby, subject themselves to taxes in those states.

Unless this Court is prepared to expand its Due

Process analysis to allow for state long-arm statutes to

reach websites with no presence in or meaningful connection to the state, it would be confusing and counterproductive to have states asserting a right that, as a

practical matter, is unenforceable against out-of-state

web sellers.

Moreover, this Court should consider whether establishing a right (even if unenforceable) for South Dakota to assert personal jurisdiction over a website

located outside the United States would be a dangerous precedent. Such a holding would be a precedent

available to China and other countries to likewise assert personal jurisdiction over every U.S. website that

sells products to citizens in their countries. Having any

and every government in the world able to assert

jurisdiction over virtually every website would be welcome to those countries seeking control over the internet.

If this Court were both to uphold the South Dakota law and to allow a further expansion of state longarm jurisdiction, the tax could be enforced within the

American judicial system against websites based in

the United States. Nevertheless, enforcement against

websites in other countries would be unachievable

without a treaty. That reality, of course, reinforces the

Framers’ purpose of protecting, through the ImportExport Clause, the federal government’s powers over

15

foreign commerce. See also U.S. CONST. art. I, § 8, cl. 3

(giving power to regulate commerce with foreign countries to the federal government).

------------------------------------------------------------------

CONCLUSION

For all of the foregoing reasons, the Court should

require in this case, or in some future case, briefing on

the Import-Export Clause as applied to foreign commerce.

Respectfully submitted,

LINDSEY KEISER‡

300 Massachusetts Ave. NW

Washington, D.C. 20001

‡Only Admitted in Indiana

JOHN S. BAKER, JR.

Counsel of Record

Professor of Law Emeritus,

LOUISIANA STATE UNIVERSITY

5209 Sea Chase Dr. 5

Amelia Island, FL 32034

Telephone: (225) 773-5027

John.Baker@law.lsu.edu

Counsel for Amicus Curiae