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

Supreme Court briefApr 4, 2018

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No. 17-494

IN THE

Supreme Court of the United States

————

SOUTH DAKOTA,

Petitioner,

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

AND NEWEGG, INC.,

Respondents.

————

On Writ of Certiorari to the

Supreme Court of South Dakota

————

BRIEF FOR COLONY BRANDS, INC.

AS AMICUS CURIAE

IN SUPPORT OF RESPONDENTS

————

JEFFREY R. SURLAS

Vice President &

General Counsel

COLONY BRANDS, INC.

1112 7th Avenue

Monroe, WI 53566

(608) 328-8400

Jeff.Surlas@sccompanies.com

WARREN L. DEAN, JR.

Counsel of Record

KATHLEEN E. KRAFT

THOMPSON COBURN LLP

1909 K Street, N.W.

Washington, D.C. 20006

(202) 585-6900

wdean@thompsoncoburn.com

JAMES M. BURGER

SEAN CROWLEY

THOMPSON COBURN LLP

1909 K Street, N.W.

Washington, D.C. 20006

(202) 585-6900

jburger@thompsoncoburn.com

April 4, 2018

WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D. C. 20002

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ................................

iii

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

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

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

I. STATES ARE OBLIGATED TO CONFORM TO FEDERAL LAW AND

POLICY IN THE REGULATION AND

TAXATION OF INTERNET SALES........

A. The Internet Is A Global System, And

The Regulation And Taxation Of

Internet Sales Implicates The Foreign

Commerce Of The United States ........

B. Where The Foreign Commerce Of The

United States Is Implicated, State

Action Must Conform To Federal

Policy And Practice..............................

C. The United States And The International Community Do Not Recognize

The Availability Of A Website As

Creating A “Fixed Place of Business”

(A “Presence”) Within The Jurisdiction Of A Sovereign State....................

II. ASSERTION OF STATE TAX JURISDICTION BY REASON OF THE “ACCESSIBILITY” OF A WEBSITE WOULD

UPSET THE FEDERAL SYSTEM OF

GOVERNANCE ........................................

(i)

TABLE OF CONTENTS—Continued

Page

A. The Virtual Capabilities Of The Internet And Its Related Technologies Are

In Their Infancy...................................

B. The Assertion Of State Jurisdiction

On The Bases Of Virtual Technologies

Will Eliminate Boundaries On State

Sovereignty And Create 50 Subordinate Federal Governments .................

III. IN THE ABSENCE OF FEDERAL LEGISLATION GOVERNING TAXATION OF

REMOTE SALES, THE REQUESTED

ABROGATION OF QUILL THREATENS THE VIABILITY OF THE DIRECT

MARKETING INDUSTRY .......................

A. Remote Sales By Direct Marketers

Is A Historical Business Model That

Pre-Dates The Formation Of The

Republic ...............................................

B. The Imposition Of State Regulatory

And Tax Obligations Occasioned By

The Abrogation Of Quill Would Unduly

Burden Catalog, Direct Mail, And

Other Traditional Forms Of Solicitation, As Well As The Consumers

That Purchase Through These Sale

Methods................................................

C. States Have No Authority To Impose

On Internet Sales Regulatory And Tax

Obligations Not Borne By More Traditional Means Of Direct Marketing .....

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

iii

TABLE OF AUTHORITIES

CASES

Page(s)

Commissioner of Internal Revenue v.

Piedras Negras Broadcasting Co.,

127 F.2d 260 (5th Cir. 1942) .....................

Comm’r v. Groetzinger,

480 U.S. 23 (1987) ..................................... 9, 12

Complete Auto Transit v. Brady,

430 U.S. 274 (1977) ...................................

5, 7

Direct Marketing Ass’n v. Brohl,

814 F.3d 1129 (10th Cir. 2016), on

remand from 135 S. Ct. 1124 (2015) ........

ITO v. Right Florists Limited, I.T.A.

No. 1336 ....................................................

Japan Line, Ltd. v. County of Los Angeles,

441 U.S. 434 (1979) ............................... 5, 6, 7, 8

Michelin Tire Co. v. Wages,

423 U.S. 276 (1976) ...................................

Pac. Nw. Venison Producers v. Smitch,

20 F.3d 1008 (9th Cir. 1994) .....................

Pike v. Bruce Church, Inc.,

397 U.S. 137 (1970) ...................................

Quill Corp. v. North Dakota,

504 U.S. 298 (1992) ..................................passim

U.S. v. Locke,

529 U.S. 89 (2000) .....................................

Webster v. LLR, Inc.,

2:17-cv-00225-DSC (W.D. Pa. filed

Feb. 17, 2017) ............................................

TABLE OF AUTHORITIES—Continued

STATUTORY PROVISIONS

AND LEGISLATION

Page(s)

Internet Tax Freedom Act, Pub. L. No. 105–

277, § 1100, 112 Stat. 2681-719 (1998)

(made permanent in Pub. L. No. 114–

125, § 922(a), 130 Stat. 281 (2016)

(codified at 47 U.S.C. § 151 note)) ............ 27, 28

I.R.C. § 872(b) ...............................................

8, 9

I.R.C. § 882(a) ...............................................

8, 9

OTHER AUTHORITIES

A. Thierer & A. O’Sullivan, Projecting the

Growth and Economic Impact of the Internet of Things, Mercatus Center: Technology Policy (June 15, 2015), https://www.

mercatus.org/publication/projecting-grow

th-and-economic-impact-internet-things ..

About OECD, http://www.oecd.org/about/ ...

Advisory Commission on Electronic Commerce, Report to Congress (2000) .............

Arthur J. Cockfield, Reforming the Permanent Establishment Principle Through a

Quantitative Economic Presence Test, 38

Can. Bus. L.J. 400 (2003) .........................

Barry M. Leiner et al., Brief History of the

Internet, Internet Society (1997), https://

www.internetsociety.org/internet/historyinternet/brief-history-internet/.................

TABLE OF AUTHORITIES—Continued

Page(s)

David Hardesty, Electronic Commerce:

Taxation & Planning ¶ 12.02 (Thomson

Reuters 2018) .................................. 9, 12, 13, 14

Divya Pahwa, The History of the Catalog,

Medium (Aug. 15, 2014), https://medium.

com/@pahwadivya/the-history-of-the-cat

alog-b5334841e941 ...................................

Dyfed Loesche, The Biggest App Stores,

Statista: The Statistics Portal (Jan. 9,

2018), https://www.statista.com/chart/12

455/number-of-apps-available-in-leadingapp-stores/ .................................................

Emilie Le Beau Lucchesi, The Lost Charm

of Mail-Order Catalogs in America,

CountryLiving (Oct. 25, 2016), https://

www.countryliving.com/shopping/news/a

40276/mail-order-catalogs/ .......................

Jaimy Ford, Tracking Sales Tax Rates

Across Thousands of Jurisdictions, Avalara

(June 25, 2015), https://www1.avalara.

com/trustfile/en/blog/tracking-sales-taxrates-across-thousands-of-jurisdictions.

html ...........................................................

James Manyika & Charles Roxburgh, The

great transformer: The impact of the

Internet on economic growth and prosperity (Oct. 2011), https://www.mckinsey.

com/industries/high-tech/our-insights/th

e-great-transformer ..................................

TABLE OF AUTHORITIES—Continued

Page(s)

Jim Gibbs, Five Pivotal Moments in Catalog History, The Dingley Press, http://

dingley.com/five-pivotal-moments-in-cat

alog-history/ (last visited Apr. 1, 2018) ....

Joel D. Kuntz et al., U.S. International

Taxation (Thomson Reuters 2018) ...........

John Stevens, Internet Stats & Facts for

2017, Hosting Facts (Aug. 17, 2017),

https://hostingfacts.com/internet-facts-st

ats-2016/ ....................................................

Kelly Phillips Erb, Flipping Through History: Online Retailers Owe Popularity

and Tax Treatment to Mail Order Catalogs, Forbes (Aug. 18, 2014, 10:10 PM),

https://www.forbes.com/sites/kellyphillip

serb/2014/08/18/flipping-through-historyonline-retailers-owe-popularity-and-taxtreatment-to-mail-order-catalogs/#7b5b

0f414ad9 .................................................... 22, 23

KPMG LLP, Locally Administered Sales

and Use Taxes, Institute for Professionals in Taxation (2016), http://www.ipt.

org/IPT/SponsoredResearch.aspx .............

Layout Showing the Major ISPs, Internet

Mapping Project: Map Gallery, http://

www.cheswick.com/ches/map/gallery/ispss.gif...........................................................

Mail-order business, New World Encyclopedia, http://www.newworldencyclopedia.

org/entry/Mail-order_business ................. 22, 23

vii

TABLE OF AUTHORITIES—Continued

Page(s)

Monica Gianni, The OECD’s Flawed and

Dated Approach to Computer Servers

Creating Permanent Establishments, 17

Vand. J. of Ent. & Tech. L. 1 (2014) ......... 14, 15

New Report Calculates the Size of the Internet Economy, The Internet Association

(Dec. 10, 2015), https://internetassociati

on.org/121015econreport/ ............................

OECD Comm. on Fiscal Affairs, Clarification on the Application of the Permanent

Establishment Definition in E-Commerce:

Changes to the Commentary on the Model

Tax Convention on Article 5 (2000),

http://www.oecd.org/tax/treaties/192338

0.pdf ..................................................... 12, 13, 14

OECD, Model Tax Convention on Income

and on Capital: Condensed Version

(2010) .........................................................

Office of Tax Policy, U.S. Dep’t of Treas.,

Selected Tax Policy Implications of Global Electronic Commerce (Nov. 1996) ...... 9, 16

U.S. Model Income Tax Convention ............

Wendy Woloson, How Benjamin Franklin

Invented the Mail-Order Business,

Bloomberg (Mar. 13, 2013, 1:47 PM),

https://www.bloomberg.com/view/articles/

2013-03-13/how-benjamin-franklin-inve

nted-the-mail-order-business ...................

INTEREST OF AMICUS CURIAE1

Colony Brands, Inc. (originally known as The Swiss

Colony, Inc.) is a Wisconsin corporation that directly

or indirectly owns a majority interest in many different

corporate subsidiaries and their divisions and brands,

including Montgomery Ward, The Swiss Colony,

Seventh Avenue, Midnight Velvet, Ginny’s, Monroe

and Main, Country Door, Ashro, The Tender Filet, and

The Wisconsin Cheeseman. All these subsidiaries are

catalog mail-order and electronic retail businesses

that, in the aggregate, feature extensive offerings to

United States consumers in furniture, home decor,

apparel, housewares, entertainment products, electronics, and a variety of food products. Combined, they

are one of the largest privately-owned direct marketers in the United States and compete with companies

located both inside and outside of the United States,

including Canada. While today a majority of Colony

Brands’ subsidiaries’ orders from consumers are received

by telephone or online attributable mostly to catalog

advertising, Colony Brands’ subsidiary companies and

brands still receive tens of millions of dollars each year

from mailed-in orders. In reliance on the “physical

presence” substantial nexus standard reaffirmed in

Pursuant to Supreme Court Rule 37.6, counsel for amicus

represents that no counsel for a party authored this brief in whole

or in part, and no party or counsel for a party made a monetary

contribution intended to fund the preparation or submission of

this brief. Frank W. Cawood contributed funds for the preparation or submission of this brief. On January 31, 2018 and

February 5, 2018, respectively, Petitioner and Respondents gave

blanket consent to amicus briefs. These blanket consents were

docketed more than 10 days before the due date of this brief.

Quill Corp. v. North Dakota,2 each of these retailers

making consumer sales collects and remits sales taxes

in only the select handful of states in which the

retailer has chosen to have a physical presence. In

cases where they do not collect and remit sales taxes,

the consumers are required to pay use taxes on those

transactions; and, where required by state law, the

retailers report annual summaries of transactions to

the consumers and/or the applicable departments of

revenue.

A decision by this Court abrogating the principles

reinforced in Quill – namely the requirement that a

retailer must have a physical presence in a state for

that state to force it to collect and remit sales taxes –

will have a significant negative impact on the businesses of Colony Brands and its subsidiaries. For that

reason and others, Colony Brands has an institutional

interest in this case and supports the position of

Respondents that the decision of the South Dakota

Supreme Court should be affirmed.

SUMMARY OF ARGUMENT

This case raises the question of whether, and to

what extent, the Constitution sets limits on the ability

of states to collect sales and use taxes from out-of-state

sellers.

Petitioner South Dakota asks this Court to abrogate

Quill’s reaffirmation of the bright line “physical presence” test to show a business’s “substantial nexus”

with a taxing authority under the Commerce Clause.

Pet’r Br. at 17-21. The United States argues in

support of Petitioner that the states have ample

504 U.S. 298 (1992).

authority to collect sales taxes from remote sellers

because the accessibility of their websites in a state

creates a “virtual presence” there. U.S. Br. at 7-10.

Together, Petitioner and the United States effectively request that the Court pave the way for states

to impose on any seller of products, no matter how

remote their relation to that state may be, a legal

obligation to monitor each and every transaction that

leads to a “delivery” within the state for the purpose

of ensuring compliance with the state’s statutory tax

collection regime. This monitoring obligation would

attach regardless of the location or domicile, domestic

or foreign, of the seller and of the purchaser and

regardless of the level of actual presence in the taxing

state. And, assuming that a state’s unilaterallydetermined thresholds are met, the remote seller then

would be required to collect and remit state sales and

use taxes for every transaction that results in a delivery to that state. The seller would be subject to that

state’s enforcement jurisdiction, regardless of the scope

and extent (if any) of its actual contacts or presence in

the state. An Illinois resident’s purchase of goods from

a New York retailer for delivery to South Dakota

would trigger this monitoring requirement and South

Dakota’s enforcement jurisdiction. South Dakota also

would have enforcement jurisdiction over a Mexico

City, Mexico resident’s purchase of goods from a

Canadian retailer for delivery to South Dakota, and

the Canadian retailer would be obligated to monitor

its sales for each such occurrence. Constitutional tests

would be satisfied on the basis of the “virtual” reality

of new technologies.

To date, this Court’s decisions have preserved the

viability of the centuries-old business model of remote

direct sales, thereby preventing states from imposing

unreasonable burdens that might threaten or harm

that model of interstate commerce. This continuing

viability is now under review on the basis of technological innovations that were inconceivable only a few

years ago.

The Internet is in the process of revolutionizing the

conduct of commerce globally. The Internet, however,

is not a physical facility or thing. It is a suite or set of

intangible protocols that permits electronic communications networks to interconnect and act as a global

system. That system links devices in two-way

communication on a worldwide basis. It creates a

network of networks consisting of private, public, academic, business, and government networks, both local

and global in scope, linked by a broad array of electronic, wireless, and optical networking technologies.

It interconnects the globe.

The global system does not in any way, however,

transfer the location of the devices it connects and

therefore creates no additional presence for those

devices. What is virtual is, by definition, not real. It

does not create a presence. Unlike the switched telephone connections within older dedicated telephone

networks that did create a physical link between

sellers and purchasers, the Internet does not even

create a tangible connection. Whatever reality it may

be perceived to create is entirely virtual, and in that

respect its capabilities should be considered to be in

their infancy.

Whatever those capabilities may be at any given

time, a crucial characteristic of the Internet is that

it is a global, and not just an interstate, system. If

a remote seller in one state were deemed to have a

presence in another state simply by reason of the

accessibility of its website in that state, a remote seller

in one country might be deemed to have a presence in

another country by reason of the accessibility of its

website there.

This case is not just an interstate commerce case.

Internet commerce is global commerce, and states

must conform their policies to the rules for that commerce that have been established by the United States

and its trading partners. Therefore, the tax implications of such a result would require scrutiny, not only

under the four-factor analysis of Complete Auto Transit

v. Brady,3 but also under the more elaborate inquiry of

Japan Line, Ltd. v. County of Los Angeles.4 It would

fail that scrutiny. Far from being an “outlier,” the

physical presence test continues to reflect the international norm for the taxation of global e-commerce.

As such, Petitioner urges this Court to establish

a new precedent that would contradict established

U.S. and international tax policy and obligations and

threaten to undermine the centuries of custom and

practice that contributed to the growth of the directmarketing (including by catalog) industry. It is for

the above reasons that the Court’s determination in

Quill – that these matters are best left to Congress –

remains as valid today as it was when Quill was first

decided.

430 U.S. 274 (1977).

441 U.S. 434 (1979).

ARGUMENT

I. STATES ARE OBLIGATED TO CONFORM

TO FEDERAL LAW AND POLICY IN

THE REGULATION AND TAXATION OF

INTERNET SALES

A. The Internet Is A Global System, And

The Regulation And Taxation Of

Internet Sales Implicates The Foreign

Commerce Of The United States

The Internet is a global network connecting hundreds of millions of devices and several billion users in

over 190 countries. There are over one billion websites

in the world. John Stevens, Internet Stats & Facts for

2017, Hosting Facts (Aug. 17, 2017), https://hosting

facts.com/internet-facts-stats-2016/. An assertion of

regulatory and/or tax collection jurisdiction by a state

that relies on the availability of a website in that state

necessarily involves the assertion by that state of its

authority over the foreign commerce of the United

States. It is not a question of purely interstate commerce. While the states retain a role in interstate commerce subject to the requirements of the Constitution

and federal law, the foreign commerce of the United

States is “preeminently a matter of national concern.”

Japan Line, 441 U.S. at 449. The states have “no

standing” in the realm of foreign relations. U.S. v.

Locke, 529 U.S. 89, 108 (2000).

B. Where The Foreign Commerce Of

The United States Is Implicated, State

Action Must Conform To Federal Policy

And Practice

The Petitioner argues that a state’s assertion of tax

collection jurisdiction over the Respondents should be

governed not by Quill, but by the Court’s broader four-

factor analysis set forth in Complete Auto Transit

(in particular its “substantial nexus” test) and that

Quill’s physical presence test is an “outlier.” Pet’r Br.

at 22-27. Conversely, the United States argues that

not even Complete Auto Transit is applicable; rather,

the United States suggests that Pike v. Bruce Church,

Inc.5 should govern the Court’s Commerce Clause

analysis of state regulations concerning tax collection.6

U.S. Br. at 8.

Those arguments are incorrect. Where state action

implicates the foreign commerce of the United States,

the Court must proceed under the even broader jurisprudence of Japan Line. As it applies to the foreign

commerce of the United States, the physical presence

test would be an “outlier” only if it had not been

adopted by the United States (and other countries) as

a matter of federal tax law and policy. As demonstrated below, the physical presence test is precisely

the test the United States and other nations continue

to use in the taxation of e-commerce. As articulated by

this Court in Japan Line, the United States must be

397 U.S. 137 (1970).

Where state regulation has an effect on foreign commerce,

“additional scrutiny is necessary to determine whether the

regulations ‘may impair uniformity in an area where federal

uniformity is essential,’ or may implicate ‘matters of concern to

the whole nation ... such as the potential for international

retaliation.’” Pac. Nw. Venison Producers v. Smitch, 20 F.3d 1008,

1014 (9th Cir. 1994) (internal citations omitted); see also Japan

Line, 441 U.S. at 446 (“When a State seeks to tax instrumentalities of foreign commerce, two additional considerations, beyond

those articulated in [the doctrine governing the Interstate

Commerce Clause], come into play.”). The application of the

balancing analysis set forth in Pike does not negate the obligation

to consider whether the challenged regulations impair uniformity

in an area where federal uniformity is essential.

able to speak with “one voice” in the regulation of the

foreign commerce of the United States.7 It would be

fundamentally inappropriate for the several states to

assert power over foreign commerce that the United

States government itself does not exercise.

In sum, this case is not just an interstate commerce

case. Internet commerce is global commerce, and

states must conform their policies to the rules for that

commerce that have been established by the United

States and its trading partners.

C. The United States And The International Community Do Not Recognize

The Availability Of A Website As

Creating A “Fixed Place of Business”

(A “Presence”) Within The Jurisdiction

Of A Sovereign State

With respect to the taxation of foreign taxpayers in

the United States not eligible for the benefits of a tax

treaty with the United States, United States tax law

generally analyzes whether the foreign taxpayer is

engaged in a “trade or business” within the United

States (which is a lower threshold than a fixed place

of business (i.e., presence)). I.R.C. §§ 872(b), 882(a).

Commentators have noted that “[a]t a minimum, for

an activity to constitute a trade or business the

company’s business activities within the United States

In his amicus brief supporting neither party, Professor John

S. Baker argues that the tax collected by South Dakota must be

evaluated under the Import-Export Clause and the threefold test

articulated by this Court in Michelin Tire Co. v. Wages, 423 U.S.

276 (1976). J. Baker Br. at 8-11. That test includes consideration

of whether the tax impedes the federal government’s ability to

“speak with one voice” in conducting the nation’s foreign

relations. That is the same test articulated in Japan Line, which

the South Dakota tax collection regime fails.

must be regular, continuous, and profit oriented.”

David Hardesty, Electronic Commerce: Taxation &

Planning ¶ 12.02 (Thomson Reuters 2018) (citing

Comm’r v. Groetzinger, 480 U.S. 23 (1987)). Therefore,

commentators have noted that “[i]t is unlikely that a

foreign online company will be engaged in the conduct

of a [United States trade or business] if it has no

physical presence in the United States, and no U.S.

agents.” Id.; see generally Office of Tax Policy, U.S.

Dep’t of Treas., Selected Tax Policy Implications of

Global Electronic Commerce (Nov. 1996).

In general, the accessibility of a foreign website in

the United States, by itself, does not cause a foreign

taxpayer to be engaged in a United States trade or

business.8 Commentators state, while discussing the

taxation of web servers, that “[t]here seems to be no

support for the finding [of] a ‘U.S. trade or business’

without some actual U.S. presence” and, thus, “[i]t

follows that a taxpayer with no activities in the United

States could not be engaged in the conduct of a ‘U.S.

trade or business.’” See Hardesty, supra, ¶ 12.02[3]

(analyzing whether the operation of a web server

results in a foreign taxpayer being treated as operating a U.S. trade or business). The same commentator

also states, in the context of discussing web servers,

that “[i]n most cases, a foreign taxpayer will not be

considered to be engaged in the conduct of a U.S. trade

or business if neither it nor its agents are regularly

performing business activities while present in the

United States.” Id. This determination is partly based

U.S. tax law taxes the income of a foreign corporation effectively connected with a U.S. trade or business. I.R.C. §§ 872(b),

882(a). To date, the United States has not determined that the

accessibility of a website in the United States constitutes a U.S.

trade or business.

on Commissioner of Internal Revenue v. Piedras

Negras Broadcasting Co.,9 which, in a context different

from but analogous to the use of a website, addressed

the issue of whether a Mexico company broadcasting

radio into the United States would be viewed as doing

business simply by accepting payments from customers in the United States.

In Piedras Negras, United States-based advertisers

compensated a Mexico broadcasting company by sharing gross receipts from United States sales that

resulted from ads broadcast by the Mexico company.

127 F.2d at 260. The Mexico company’s business was

“the operation of a radio broadcasting station located

at Piedras Negras, just across the Rio Grande from

Eagle Pass, Texas.” Id. However, the majority of the

Mexico company’s responses from listeners came from

the United States, and 95 percent of its income was

from advertisers within the United States. Id. With

that said, the Mexico company’s income-producing

contracts were executed in Mexico, and all services

required of the Mexico company under the contracts

were rendered in Mexico. Id. Based on the foregoing,

the Fifth Circuit determined that the Mexico company

was not treated as doing business in the United States.

Id. By analogy to Piedras Negras, if a foreign company

has a website and a web server situated outside the

United States and all of the services the foreign

company rendered in connection with its website

were performed in the foreign country, the foreign

company’s website should not be treated as doing

business in the United States (i.e., a lower threshold

than a fixed place of business (i.e., a presence)).

127 F.2d 260 (5th Cir. 1942).

With respect to foreign taxpayers that are eligible

for the benefits of a tax treaty with the United States,

such tax treaties (see, for example, the United States

Model Income Tax Convention) generally analyze

whether the foreign taxpayer has a “permanent establishment” within the United States. U.S. Model Income

Tax Convention, art. 7, § 1; id., art. 5, § 1. Under the

United States Model Income Tax Convention, a foreign taxpayer is subject to taxation on business profits

in the United States only to the extent those profits

are attributable to a permanent establishment in the

United States. Id., art. 5, § 1 (stating that “[f]or the

purposes of this Convention, the term ‘permanent

establishment’ means a fixed place of business

through which the business of an enterprise is wholly

or partly carried on”); id., art. 5, § 2 (stating that “[t]he

term ‘permanent establishment’ includes especially: a)

a place of management; b) a branch; c) an office; d) a

factory; e) a workshop; and f) a mine, an oil or gas well,

a quarry, or any other place of extraction of natural

resources”). A “permanent establishment” is generally

defined by the United States Model Income Tax Convention as “a fixed place of business through which

the business of an enterprise is wholly or partly carried on.” Id., art. 5, § 1. Therefore, with respect to

foreign taxpayers that are eligible for the benefits of a

tax treaty with the United States, under the United

States Model Income Tax Convention, the question is

whether a website, by itself, can create a fixed place of

business (i.e., a presence) within the United States. As

noted, a commentator has stated that, with respect to

whether a website constitutes a United States trade or

business (i.e., a lower threshold than a fixed place

of business (i.e., a presence)), “[i]t is unlikely that a

foreign online company will be engaged in the conduct

of a [United States trade or business] if it has no

physical presence in the United States, and no U.S.

agents.” Hardesty, supra, ¶ 12.02 (citing Groetzinger,

480 U.S. 23). Therefore, similar to a United States

trade or business, the accessibility of a foreign website

in the United States does not establish a fixed place of

business (i.e., a presence) within the United States.

In this regard, the Organization for Economic Cooperation and Development (OECD)10 has published

guidance regarding whether a website constitutes a

permanent establishment and, thus, a fixed place of

business (i.e., a presence) in a country. See OECD,

Model Tax Convention on Income and on Capital:

Condensed Version art. 5 ¶¶ 42.2, 42.3, 42.4 (2010); see

also OECD Comm. on Fiscal Affairs, Clarification on

the Application of the Permanent Establishment

Definition in E-Commerce: Changes to the Commentary on the Model Tax Convention on Article 5 ¶¶ 42.2,

42.3, 42.4 (2000) (hereinafter, the “OECD Commentaries”), http://www.oecd.org/tax/treaties/1923380.pdf.

According to the OECD Commentaries, “a distinction

needs to be made between computer equipment, which

may be set up at a location so as to constitute a permanent establishment under certain circumstances, and

the data and software which is used by, or stored on,

that equipment.” OECD Commentaries ¶ 42.2. The

Commentaries go on to state the following:

For instance, an Internet web site, which is a

combination of software and electronic data,

does not in itself constitute tangible property.

The OECD is an intergovernmental economic organization

with 35 member countries, founded in 1961 and headquartered

in Paris, France. See About OECD, http://www.oecd.org/about/.

The mission of the OECD is to promote policies that will improve

the economic and social well-being of people around the world. Id.

The United States is included among the 35 member counties. Id.

It therefore does not have a location that can

constitute a “place of business” as there is

no “facility such as premises or, in certain

instances, machinery or equipment” . . . as far

as the software and data constituting that

web site is concerned. On the other hand, the

server on which the web site is stored and

through which it is accessible is a piece of

equipment having a physical location and

such location may thus constitute a “fixed

place of business” of the enterprise that

operates that server.

Id. Hardesty notes that “[t]he Commentaries make a

careful distinction between a website and a web server

because, among other things, the website and web server may each be operated by two separate and independent companies.” Hardesty, supra, ¶ 11C.03[4][a][i].

The key distinction, consistent with United States tax

principles, between a website and a web server is that

a (i) website is not comprised of tangible assets and (ii)

a web server is comprised of equipment and other

tangible assets that can be physically located within a

jurisdiction and, thus, constitute a fixed place of

business (i.e., a presence). OECD Commentaries ¶¶

42.2, 42.3, 42.4.

With respect to the authoritative effect of the OECD

and the OECD Commentaries, according to a leading

commentator in the field of international taxation,

“[i]n interpreting a U.S. treaty clause based on a

clause in the OECD model treaty, the [Internal

Revenue Service] may place great weight on the intent

of the model treaty, [and a] court may also look at the

OECD model treaty and its commentary.” Joel D.

Kuntz et al., U.S. International Taxation ¶ C4.01[5]

(Thomson Reuters 2018). Moreover, many United

States tax treaties “are based on or at least very similar to the OECD Model Tax Convention, so their interpretation may be influenced by the Commentaries.”

Hardesty, supra, ¶ 11C.03[4][a]. In addition, despite

the United States not taking an official position with

respect to whether a website can create a fixed place

of business (i.e., a presence), the United States would,

in general, be expected to follow the OECD position.11

Finally, in a report to Congress, the Advisory Commission on Electronic Commerce proposed “affim[ing]

support for the principles of the OECD’s framework

conditions for taxation of e-commerce, and support[ing]

the OECD’s continued role as the appropriate

forum (1) fostering effective international dialogues

concerning these issues and (2) building international

consensus.” Advisory Commission on Electronic Commerce, Report to Congress 42 (2000) (affirming support

for the OECD). Based on the foregoing, as one commentator has noted, “[o]ne can only conjecture what

the US position might be regarding whether a

computer server can create a US trade or business or

See Monica Gianni, The OECD’s Flawed and Dated Approach

to Computer Servers Creating Permanent Establishments, 17

Vand. J. of Ent. & Tech. L. 1, 26 (2014). According to Joseph

Guttentag, a former senior U.S. Treasury official, “[t]he [new

server and permanent establishment] rules present a reasonable

compromise . . . .” Arthur J. Cockfield, Reforming the Permanent

Establishment Principle Through a Quantitative Economic

Presence Test, 38 Can. Bus. L.J. 400, 406 (2003). In addition,

when the OECD issued the OECD Article 5 Commentary that

treated a web server as a permanent establishment, the United

States did not officially object to this position (however, in

contrast, the United Kingdom did officially object to the OECD

Article 5 Commentary). Gianni, supra, at 26; see also OECD

Commentaries ¶ 45.5.

permanent establishment.” Gianni, supra note 11, at

27.

In addition to the OECD, other jurisdictions have

analyzed whether a website, by itself, can constitute a

fixed place of business (i.e., a presence) within a

country and, thus, result in a permanent establishment.12 For example, the Kolkata (India) Tax Tribunal

determined that a website, by itself, could not

constitute a fixed place of business (i.e., a presence).13

In ITO vs. Right Florists Limited, the Kolkata Tax

Tribunal analyzed whether Google (situated in

Ireland) and Yahoo (situated in the United States) had

permanent establishments in India under the relevant

tax treaties. As part of such analysis, the Kolkata Tax

Tribunal considered the OECD’s commentary that a

website, by itself, could not constitute a permanent

establishment due to the absence of a fixed place of

business (i.e., a presence). Taking the OECD’s

commentary into account, the Kolkata Tax Tribunal

concluded that, because Google and Yahoo did not

have a web server in India through which the website

See, e.g., ITO v. Right Florists Limited, I.T.A. No. 1336

(Income Tax Appellate Tribunal, Kolkata, 2011). “The United

Kingdom has taken the express position that a server that

conducts electronic commerce through a website on the server

cannot constitute a permanent establishment.” Monica Gianni,

supra note 11, at 27. “Other countries, including Singapore and

Hong Kong, have also officially stated that a server by itself

cannot create a permanent establishment.” Id. The Canadian

Revenue Agency has determined that a U.S. company managing

applications and data from outside Canada “does not cause the

[U.S. company] to have a server at its disposal and, hence, a

permanent establishment.” Id.

ITO, I.T.A. No. 1336 at ¶ 28.

was hosted, neither Google nor Yahoo had a permanent establishment in India.

Based on the foregoing, the United States and the

international community do not recognize the accessibility of a website as creating a fixed place of business

(i.e., a presence) within the jurisdiction of the United

States. While the nexus requirements of states may

differ from the rules established by the United States

and the international community for national tax

purposes, the states’ assertion of global jurisdiction in

contradiction of these rules is a bridge too far.14 Far

from being an outlier, the fixed place of business (i.e.,

a presence) rule standard is the international norm.

Therefore, it follows that the accessibility of a website

should not create a fixed place of business (i.e., a

presence) within the jurisdiction of a subordinate

sovereign. A departure from this standard would set a

precedent that would have far reaching implications

for international tax policy and the conduct of the

foreign economic relations of the United States. Those

decisions are necessarily reserved to the Federal

Government, specifically to the Executive and to the

Congress.

For an analysis of the complexity of issues surrounding the

taxation of global electronic commerce, see Office of Tax Policy,

supra, at n.10.

II. ASSERTION OF STATE TAX JURISDICTION BY REASON OF THE “ACCESSIBILITY” OF A WEBSITE WOULD UPSET THE

FEDERAL SYSTEM OF GOVERNANCE

A. The Virtual Capabilities Of The Internet And Its Related Technologies Are

In Their Infancy

In August of 1968, when the Defense Advanced

Research Projects Agency (“DARPA”)15 issued a

request for quotes for what was to become the

Advanced Research Projects Administration Network

(“ARPANET”), very few people understood this project’s profound implications. In part, ARPANET was

designed to connect government, academic, and private research networks to share scarce “high-powered”

computer resources. See Barry M. Leiner et al., Brief

History of the Internet, Internet Society (1997), https://

www.internetsociety.org/internet/history-internet/brie

f-history-internet/. ARPANET was designed not to

have any direct connections so that if any one connecting network failed, data would continue to flow to its

destination over the remaining networks. ARPANET

organized information into “packets”16 and used a common language called Transmission Control Protocol –

Originally known as the Advanced Research Projects Agency

(“ARPA”).

A packet is a small unit of data (IP = 128 bits) with a header

section and a data section. The header has information about the

packet including the sender’s address and the recipient’s address.

A picture sent over the Internet will consist of thousands of

packets or more. Those packets will likely not all travel the same

path through the various networks to their final destination. See

Layout Showing the Major ISPs, Internet Mapping Project: Map

Gallery, http://www.cheswick.com/ches/map/gallery/isp-ss.gif (a

graphic of the major Internet ISP back in 1999) for a small sample

of the network of networks comprising part of the Internet.

Internet Protocol (“TCP/IP”). This language and

distributed network of networks enabled today’s

Internet.

Accordingly, the Internet has no separate physical

instantiation. The programming language “spoken”

on the Internet is the glue that makes this virtual

network an incredible resource for government, academic, corporate, and individual users. It was purposely built to avoid the then-vulnerable switched

telephone network, which physically connected users

(e.g., operators plugging a cord into a console to

connect a user to another user locally or long distance).

Thus, Internet sales have far less of a physical

presence than a company in Delaware mailing a catalog to a person in North Dakota and that person

ordering a product over the phone. This is because the

Internet was purposefully built not to physically

connect users.

The Internet is still in its infancy. It was only as

recently as 1985 when the 1200-baud modem for

Internet connectivity became widely available. This

1200 bits-per-second device enabled email and simple

text bulletin boards services. Today, Internet Service

Providers are connecting homes at one billion bits

per second. Smartphones and high-speed wireless

data services make it possible for a Washingtonian in

London to use an application17 (app) on her iPhone and

Packets have a large number of pathways to their final destination and algorithms determine each packet’s path.

By 2017, nearly 6.5 million different mobile applications for

smartphones were available for download. See Dyfed Loesche,

The Biggest App Stores, Statista: The Statistics Portal (Jan.

9, 2018), https://www.statista.com/chart/12455/number-of-appsavailable-in-leading-app-stores/. Many of these apps include the

ability to purchase goods.

a hotel wireless network to watch a promotional video,

order chocolate from a Parisian company delivered

from Brussels to her cousin in North Dakota, and pay

in pounds with her U.S. Bank of America credit card.

As networks get more capacious and faster, as devices

increase in power and ability, and with machine

learning/artificial intelligence just beginning to

provide useful assistance to Internet users, there is

likely a myriad of future business models based on

Internet connectivity that few can imagine today.

B. The Assertion Of State Jurisdiction On

The Bases Of Virtual Technologies Will

Eliminate Boundaries On State Sovereignty And Create 50 Subordinate

Federal Governments

As noted above, there is no such identifiable

physical “thing” called the Internet. It is a staggering

concept to base state jurisdiction on Internet Protocol

packets that travel through many different private

networks between two users. This is particularly true

when there is simply no precedent in history for such

an overreach of state authority. The physical network

of the U.S. Postal Service creates a far more concrete

physical link between buyer and seller (as did the old

switched network phone system) than the Internet.

Precedent establishing the right of 50 states to regulate commerce with sellers in foreign and U.S. states

doing business through a worldwide, distributed

system (the Internet) will open a Pandora’s Box of

unimaginable consequences impacting both interstate

and foreign commerce.

While most of the attention is focused on large

catalog Internet sellers, the impact may be felt most

directly on innovative start-up companies that cannot

afford to interpret and apply the varying rules of some

50 states’ regulatory regimes when creating new

applications, crafting their business plans, and seeking capital.18 The Internet has been an important

engine of domestic and international economic growth.

Saddling it with the regulatory burdens of 50 states

may very well stall that growth and negatively impact

our economy. The Internet economy’s contribution to

U.S. GDP is significant. In 2014, it doubled in seven

years to nearly a trillion dollars creating three million

jobs. See New Report Calculates the Size of the Internet

Economy, The Internet Association (Dec. 10, 2015),

https://internetasso ciation.org/121015econreport/; see

also James Manyika & Charles Roxburgh, The great

transformer: The impact of the Internet on economic

growth and prosperity (Oct. 2011), https://www.mckin

sey.com/industries/high-tech/our-insights/the-great-tr

ansformer.19 Creating a jurisdictional nexus between

This does not account for local taxing jurisdictions. Loudoun

County, Virginia, for example, charges a one percent gross

receipts tax on all entities doing business in the city. While 50

states’ regulation of Internet business will be chilling enough for

innovative startups, to launch a new Internet business becomes

impossible if tens of thousands of local taxing entities are deemed

to have jurisdiction for both taxation and administration of local

use by such an expansion. For a more complete analysis of the

daunting complexities and issues that locally administered use

taxes impose in “home rule” states, see KPMG LLP, Locally

Administered Sales and Use Taxes, Institute for Professionals

in Taxation (2016), http://www.ipt.org/IPT/SponsoredResearch.

aspx.

The spread of Internet connectivity to other smart devices

(the “Internet of Things” (“IoT”)) is predicted to have an even

greater positive impact on the U.S. economy. In 2015, two

scholars wrote:

The cost savings and productivity gains generated

through “smart” device monitoring and adaptation are

projected to create $1.1 trillion to $2.5 trillion in value

Internet entrepreneurs and 50 state governments will

have a drastic negative impact on the growing

Internet economy. Nor does the federal political

system envision such a result. Those entrepreneurs

and other e-commerce participants are not

represented in the legislatures of all 50 states. The

potential assertion of national jurisdiction through a

rapidly expanding Internet, by the governments of all

50 states, is not a result contemplated by the federal

system of government.

III. IN THE ABSENCE OF FEDERAL

LEGISLATION GOVERNING TAXATION

OF REMOTE SALES, THE REQUESTED

ABROGATION OF QUILL THREATENS

THE VIABILITY OF THE DIRECT

MARKETING INDUSTRY

A. Remote Sales By Direct Marketers Is A

Historical Business Model That PreDates The Formation Of The Republic

The business practice of soliciting and effecting

sales in interstate commerce by remote or out-of-state

retailers20 is a practice that pre-dates the Constitution

in the health care sector, $2.3 trillion to $11.6 trillion

in global manufacturing, and $500 billion to $7.57

billion in municipal energy and service provision over

the next decade. The total global impact of IoT technologies could generate anywhere from $2.7 trillion to

$14.4 trillion in value by 2025.

A. Thierer & A. O’Sullivan, Projecting the Growth and Economic

Impact of the Internet of Things, Mercatus Center: Technology

Policy (June 15, 2015), https://www.mercatus.org/publication/

projecting-growth-and-economic-impact-internet-things.

The term “mail-order” refers to the “buying of goods or

services by mail delivery.” A mail-order business typically publishes a catalog containing a list of the merchandise sold by the

itself and even the formation of the Republic.

Benjamin Franklin is believed to have been this country’s first cataloger. Mail-order business, New World

Encyclopedia, http://www.newworldencyclopedia.org/

entry/Mail-order_business. In 1744, Mr. Franklin

“formulated the basic mail-order concept” when he

published a catalog of books for sale. Id.; Kelly Phillips

Erb, Flipping Through History: Online Retailers Owe

Popularity and Tax Treatment to Mail Order Catalogs,

Forbes (Aug. 18, 2014, 10:10 PM), https://www.forbes.

com/sites/kellyphillipserb/2014/08/18/flipping-throughhistory-online-retailers-owe-popularity-and-tax-treatme

nt-to-mail-order-catalogs/#7b5b0f414ad9. His terms

were cash only and books were available by mail. Erb,

supra. He offered: “Those persons that live remote, by

sending the Orders and Money to said B. Franklin

may depend on the same justice as if present.” Id.;

Wendy Woloson, How Benjamin Franklin Invented the

Mail-Order Business, Bloomberg (Mar. 13, 2013, 1:47

PM), https://www.bloomberg.com/view/ articles/201303-13/how-benjamin-franklin-invented-the-mail-orderbusiness. Other early catalogs sold seeds to farmers.

Mail-order business, New World Encyclopedia, supra.

Some of the earliest mail-order enterprises or

brands are still familiar names today: Hammacher

Schlemmer (first catalog published 1848); the original

Montgomery Ward21 (first catalog published 1872);

Sears, Roebuck & Co. (first catalog published 1894);

Bloomingdale’s (first catalog published 1885); and

even Tiffany & Co. (Blue book catalog first published

business. “Companies who publish and operate mail-order catalogs are referred to as catalogers in the industry.” Mail-order

business, New World Encyclopedia, supra.

A subsidiary of Colony Brands acquired the “Montgomery

Ward” brand (intellectual property) in 2008.

1845). See Erb, supra; Mail-order business, New World

Encyclopedia, supra.

Mail-order businesses helped spur economic growth

in America. Jim Gibbs, Five Pivotal Moments in Catalog History, The Dingley Press, http://dingley.com/fivepivotal-moments-in-catalog-history/ (last visited Apr.

1, 2018). Beginning in the late 1800s, mail-order

businesses made it possible for retailers to get a wide

variety of products from urban areas to rural America

at competitive prices. Emilie Le Beau Lucchesi, The

Lost Charm of Mail-Order Catalogs in America,

CountryLiving (Oct. 25, 2016), https://www.country

living.com/shopping/news/a40276/mail-order-catalogs/.

Following both World Wars, consumerism rose and so

did the use and distribution of catalogs. Divya Pahwa,

The History of the Catalog, Medium (Aug. 15, 2014),

https://medium.com/@pahwadivya/the-history-of-thecatalog-b5334841e941. The 1980s saw a boom in the

retail catalog business. Id. Even today, with the

advent of e-commerce, catalogs play an integral role in

influencing American consumerism. See id.

B. The Imposition Of State Regulatory

And Tax Obligations Occasioned By

The Abrogation Of Quill Would Unduly

Burden Catalog, Direct Mail, And Other

Traditional Forms Of Solicitation, As

Well As The Consumers That Purchase

Through These Sale Methods

Ordering by mail did not disappear with the arrival

of the Internet. For example, approximately 10 percent of Colony Brands’ subsidaries’ sales are still

received via the mail, and some competitors have

much higher percentages of orders received by mail.

Some consumers send checks or cash (that certain

marketers require to be sent with the order) along

with his or her order form, instead of including credit

card information. There are many reasons why a

consumer may choose to purchase via the mail,

including lack of Internet access, privacy concerns,

discomfort with the Internet, and other reasons.

Abrogation of Quill would place undue and unnecessary burdens and expenses upon remote sellers with

no presence in the state in connection with the forced

collection of a use tax that is owed by a state’s own

residents simply because that state does not want to

take the time or effort to collect it from its residents.22

This is so because the burden on a remote seller

of calculating and being responsible for the proper

collection of the myriad of sales and use taxes that may

apply to a particular purchase made by a consumer

in a particular state under the direct-mail business

model is so great. Sales tax complexity has only

increased since Quill was decided. Today, there are

more than 12,000 taxing jurisdictions across the

country, compared to the mere 6,000 that troubled

the Court at the time of Quill. Compare Jaimy Ford,

Tracking Sales Tax Rates Across Thousands of Jurisdictions, Avalara (June 25, 2015), https://www1.

avalara.com/trustfile/en/blog/tracking-sales-tax-ratesacross-thousands-of-jurisdictions.html, with Quill, 504

U.S. at 313 n.6. Collection of state and local taxes on

Several states have enacted notice and/or reporting laws that

require remote sellers to notify their customers of obligations to

pay use tax and/or to report summaries of the transactions annually to the customers and in some cases to the state department

of revenue. The Tenth Circuit upheld this practice in Direct

Marketing Ass’n v. Brohl, 814 F.3d 1129 (10th Cir. 2016) (holding

that a state’s notice and reporting requirements did not violate

dormant Commerce Clause), on remand from 135 S. Ct. 1124

(2015). Adding further burdens on remote sellers by abrogating

Quill is neither necessary nor justified.

the sale of goods sold via direct-mail catalogs or order

advertisements is not merely burdensome. It is, in

most cases, not feasible for the remote seller to be

responsible for collecting and remitting the correct

sales/use taxes. The proper tax to be paid on a single

good depends on answers to a number of questions:

What is the appropriate taxing district? Is the good

taxable in that district? Are there any tax holidays? If

taxable, what tax rate applies? Each of these questions

evades easy resolution by a remote seller who must

communicate with the out-of-state buyer about

such taxes if the remote seller must collect and remit

them, especially for orders mailed with payments.

Identification of the appropriate taxing district is not

clear-cut because taxing districts do not easily

correlate to a county, city, or zip code. Determination

of whether the good is taxable in that district is

complicated by varying definitions of taxable goods

categories and tax holidays. A decision as to what tax

rate applies may depend on the type of product being

purchased (i.e., food versus household goods) and how

the relevant taxing jurisdiction defines the good

(which can vary from district to district). This analysis

must be repeated for each product purchased via the

mail.

The process is complicated enough for tax accountants with sophisticated software tools.23 But for a

consumer who wants to fill out his mail-order form and

write a check, the process is impossible. Take the

example of a consumer purchasing a single good via a

catalog mail order. The consumer would have to find

his taxing district from a list of 12,000 districts, which,

Proposed software solutions for online orders still ignore

many other economic burdens and real-world complications that

would be borne by out-of-state sellers.

if printed at a reasonable font size, would constitute a

40-page insert in the catalog itself. This insert would

add considerable cost to the production and distribution of the catalog. The 40-page insert likely would not

include information about the dates of back-to-school

tax holidays or other special tax holidays, which could

alter the amount of the tax owed. The 40-page insert

would also not include rates for multiple tax categories, which means a catalog selling both food and

household goods would need to include twice the

information because many districts tax these items at

different rates. The 40-page insert would not help the

consumer determine to which category a good belongs

because different taxing districts can define the exact

same good in different ways. (A baseball hat may be

clothing in one district, sports memorabilia in another,

or a sun protection device in a third.)

Furthermore, if a consumer miscalculates the tax

owed when sending payment with his or her order, the

burden falls upon the cataloger to make it right.

Overpayment of the tax obligates the cataloger to

issue a refund,24 complete with additional processing

and postage costs not chargeable back to the consumer. Underpayment of the tax requires the cataloger

to either cancel the order, delay fulfillment of the order

until the additional tax payment is received, or

take on the financial burden of paying the additional

tax itself. There is no justification for placing these

collection burdens on remote sellers who have no

The potential for overpayment of state and local taxes is not

unique to the catalog industry or mail-in orders. See Webster v.

LLR, Inc., 2:17-cv-00225-DSC (W.D. Pa. filed Feb. 17, 2017) (class

action lawsuit alleging consumer overpayments of sales taxes

calculated based on location of consultant rather than location of

consumer).

ability to influence the laws of states where they have

no physical presence, instead of continuing to require

the state’s own residents to pay the proper use tax to

their own state.

C. States Have No Authority To Impose

On Internet Sales Regulatory And Tax

Obligations Not Borne By More Traditional Means Of Direct Marketing

In its amicus brief in support of South Dakota, the

United States suggests that one way to re-invent Quill

in the age of e-commerce is to limit Quill “to its precise

holding, involving traditional mail-order retailers

whose only connection to a State is by mail or common

carrier.” U.S. Br. at 8. While amicus agrees that Quill

should continue to apply to traditional mail-order

retailers without a physical presence, having a website

should not deprive any remote seller without a physical presence from the same protections absent Congress

passing appropriate legislation setting precise rules.25

The United States’ proposal to apply Quill only to

traditional remote sellers (direct-mail marketers and

catalogers), but not Internet vendors, has already been

rejected by Congress. In 1998, Congress passed the

Internet Tax Freedom Act (“ITFA”) to prevent commerce over the Internet from being subjected to burdensome taxation. See Pub. L. No. 105–277, § 1100,

112 Stat. 2681-719 (1998) (made permanent in Pub. L.

No. 114–125, § 922(a), 130 Stat. 281 (2016) (codified at

There are many details to be addressed in any future

Congressional legislation in order to establish simple, clear, and

fair rules for imposing such burdens on interstate commerce

before requiring a remote seller without a physical presence to

collect and remit sales taxes, including finding a solution for

dealing with mailed-in orders with checks or cash as payments.

47 U.S.C. § 151 note)). Of particular importance here,

ITFA forbids “[m]ultiple or discriminatory taxes on

electronic commerce.” ITFA, § 1101(a). Colony Brands

agrees with other amici that the existence of ITFA,

and its prohibition on discriminatory taxes on ecommerce, would, among other things, preclude this

Court from adopting the United States’ proposal. Certainly, a tax collection obligation that would apply to a

chocolate bunny rabbit purchased over the Internet,

but not the same chocolate bunny rabbit purchased

out of a mail-order catalog is per se discriminatory and

in violation of Federal law as embodied in ITFA.

Absent new legislation by Congress, this Court should

not retreat from Quill.

CONCLUSION

For these reasons, amicus Colony Brands respectfully urges this Court to affirm the decision of the

South Dakota Supreme Court.

Respectfully submitted,

JEFFREY R. SURLAS

Vice President &

General Counsel

COLONY BRANDS, INC.

1112 7th Avenue

Monroe, WI 53566

(608) 328-8400

Jeff.Surlas@sccompanies.com

JAMES M. BURGER

SEAN CROWLEY

THOMPSON COBURN LLP

1909 K Street, N.W.

Washington, D.C. 20006

(202) 585-6900

jburger@thompsoncoburn.com

April 4, 2018

WARREN L. DEAN, JR.

Counsel of Record

KATHLEEN E. KRAFT

THOMPSON COBURN LLP

1909 K Street, N.W.

Washington, D.C. 20006

(202) 585-6900

wdean@thompsoncoburn.com

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.