# Amicus Curiae Brief — Quill Corp. v. North Dakota

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0176%3A26

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1992
- **Citation:** 504 U.S. 298

## Text

Bupreme Court, U.S,
FILED
oy) we 26 wae
No. 91-194 DAROE OF THE CLERK
In The

Supreme Court of the United States

October Term, 1991
+

QUILL CORPORATION,

Petitioner,

STATE OF NORTH DAKOTA,
BY AND THROUGH ITS TAX COMMISSIONER,
HEIDI HEITKAMP,

Respondent.

s

On Writ Of Certiorari To The Supreme Court Of
The State Of North Dakota
-

BRIEF AMICUS CURIAE OF THE MULTISTATE TAX
COMMISSION IN SUPPORT OF RESPONDENT
°

James F. Fiuc*

MartTIN LOBEL

Lee E. Hetrricu

Lois M. McKeNNA

Lospet, Novins, LAMONT
& FLuc

1275 K Street, N.W.

Suite 770

Washington, D. C. 20005

(202) 371-6626

Counsel for Amicus Curiae,
Multistate Tax Commission

*Counsel of Record

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964
OR CALL COLLECT (402) 342-2831

Yo, fal

QUESTION PRESENTED

Whether a state may require an out-of-state retailer
whose direct sales into the state are facilitated and bene

fitted by the state, to collect its use tax?

il

TABLE OF CONTENTS

Page

TABLE OF AUTIOORITERS . ...svsccccnccstuneneeee iv

INTEREST OF THE AMICUS CURIAE............. 1
INTRODUCTION AND SUMMARY OF ARGUMENT:

“THAT WAS THEN AND THIS IS NOW”......... 2

ARGUMENT ......cccc0ceeenns 650 seen nnn 7

I. THE PRACTICAL EFFECT OF A PHYSICAL
PRESENCE RULE WOULD BE TO ENSHRINE
INEQUITABLE DISTINCTIONS AND
ENCOURAGE AVOIDANCE OF TAX COLLEC-
TION RESPONSOBILITIOS. .....-0sccsccsscsses 7

Il. COLLECTING STATE USE TAXES IS NOT AN
IMPERMISSIBLE BURDEN ON COMMERCE; IT
IS A NORMAL BUSINESS FUNCTION WHICH
QUILL NOW PERFORMS FOR THREE STATES,
AND MANY OTHER CATALOGUE SELLERS
PERFORM FOR MANY MORE STATES........ 13

Ill. CONGRESS, RATHER THAN PREEMPTING
COURT OR STATE ACTION BY ITS INAC-
TION, HAS LEFT THE FIELD TO THE STATES
AND THES COURT .......ccescesseuueeee 21

A. This Court Has Made Clear That Congress
Will Not Be Deemed To Pre-empt The States
In The Absence Of Clear Legislative Pre-
emption Or Complete Occupation Of The
. See 22

B. Congress’ Conscious Exclusion Of Sales
Taxes From Its 1959 Legislation On Out-Of-
State Solicitation, Its Silence After Stat-
utorily Mandated Studies In 1964-65, And
Its Inaction Since 1985 On The Bellas Hess
Issue Show That Action Here Must Come
From The States And The Court.......... 23

ill

TABLE OF CONTENTS - Continued
Page

C. The States, Individually And Through Multis-
tate Action, Have A Mutual Interest With Tax-
payers In Implementing The Economic
Presence Test Reasonably And Efficiently.... 27

EE ooo 30

iv

TABLE OF AUTHORITIES

Page
Cases
—- Hess Corporation v. Director, Division
of laxation, New Jersey Dept. of the Tr
490 U.S. 66 (1989)... ee

Bloomingdale’s By Mail Ltd. v. Huddleston, No
89-3017-II (Ch. App. March 21, 1991), appeal filed
No. 01-S01-9016-CH-0047 (Tenn. April 19, 1991) .... 25

Book-of-the-Month Club, Inc. v. Porterfield, 268
N.E. 2d 272 (Ohio 1971)................. ree, 1

Boswell v. Paramount Television Sales, Inc., 282
So. 2d 892 (Ala. 1973).............. MALTA 11

Burger King v. Rudzewicz, 471 U.S. 462 (1989)..... 3, 8

California v. Grace Brethren Church, 457 U.S. 393
GROUPS 6:5500% cope na eee eee: 23

Cally Curtis Co. v. Groppo, 572 A.2d 302 (Conn.),
cert. denied, 111 S. Ct. 77 (1990)................... 11

Colonial Pipeline Co. v. Traig]
peer P raigle, 421 U.S. 100

AO 4650906545 enekeaague ete 13
Commonwealth Edison Co. v. Monta 45

eS” RRR BARA ates. mite 13
Complete Auto Transit v. Brady, 430 U.S. 274

SP Pree paper AEs Ty 4, 14, 22, 24, 27
Franchise Tax Board v. Alcan Aluminum Ltd., 110

MM. WOE GOI ono ede vc nvdeneececucnceesscsnscun 23

General Trading Co. v. lowa, 322 US. 335 (1944).... 14
Goldberg v. Sweet, 488 U.S. 252 (1989)..... 3, 4, 22, 27

Vv

TABLE OF AUTHORITIES - Continued

Pave
Good’s Furniture House, Inc. v. lowa State Board
of Tax Review, 382 N.W. 2d 145, (lowa) cert.
ee Sr ee, ee I cs 04 cds cpa aeksk els heoees 11
Heublein Inc. v. South Carolina Tax Comm’n, 409
as & 9 Be ire reer ree 23, 24
L.L. Bean, Inc. v. Department of Revenue, 516
pe. @€ FF Ge Se | eer reer re 11
Mobil Oil Corp. v. Vermont, 445 U.S. 425 (1980)...... 4
Moorman v. Bair, 437 U.S. 267 (1978) ............... 21
National Bellas Hess, Inc., v. Illinois, 386 U.S. 753
RE erry ores Serre Tere ee passim

National Geographic v. California Board of Equal-
ination, 450 U.S. SSi CIG77) ... 02 ccceccccccevenes 15

Nelson v. Montgomery Ward, 312 U.S. 373 (1941).... 14
Nelson v. Sears, Roebuck & Co., 312 U.S. 359

| eer err rrr Tyr reer rrr yr Te 11, 12, 14
North Dakota v. Quill Corp., 470 N.W.2d 203
SE WOE oe xtevnees PPP OOP ETC ETT TE CTO Te TLL i

‘Northwestern States Portland Cement Company v.
Minnesota, 358 U.S. 450 (1959)................. 14, 24

Proficient Food Co. v. New Mexico Taxation and
Revenue Department, 758 P.2d 806 (N.M. Ct.
App. 19GB)... cc ccccccccccodeceseresssessecscenens 11

Puerto Rico Department of Consumer Affairs v.
Isla Petroleum Corp., 485 U.S. 495 (1988)......... 22

Quill Corp. v. North Dakota, cert. granted, 60
U.S.L.W. 3257 (U.S. October 7, 1991) (No.
| Per rer er er rere Torrey yy 5, 13, 14, 15, 25

~ ai

vi

TABLE OF AUTHORITIES - Continued

ng EET PERO PEON ere Rr Oraetce D spe eae 23

SFA Folio Collection, Inc. v. Bannon, 585 A.2d 666
(Conn. 1991), cert. denied, 111 S. Ct. 2839 (1991) .... 12

SFA Folio Collection, Inc. v. Huddleston, No.
89-3015-III (Tenn. Ch. App. March 11, 1991)... .12, 25

Trinova Corp. v. Michigan Dept. of Treasury, 111

oe eer Spee rreee 4, 7, 21, 23, 27
United States Steel Corp. v. Multistate Tax
Comm'n, 434 U.S. 452 (1978) ........... 2, 24, 25, 28

Western Live Stock v. Bureau of Revenue, 303 US.
ER IRI a 8. i las eS ele 5 13

Wisconsin Dept. of Revenue v. William Wrigley Jr.
Company, 160 Wis. 2d 53 (Wis. Sup. Ct. 1991),
cert. granted 60 U.S.L.W. 3257 (U.S. October 7,
a, SER rr ee Pry eerie mri is unpre 24

PPRLIES TEAL DEUTER TUE Sede Te eMac eee a, at, ao

Statutes & REGULATIONS

Pub. L. No. 86-272, 15 U.S.C. § 381 et seq. ...19, 24, 27
Tax Injunction Act, 28 U.S.C. § 1341................. 23
Va. Cope ANN. § 46.2-1079 (1991)

MIscELLANEOUS
Att St. Tax Guipe 4701 et seq (Max. Mac. 1991)....1, 2

AMERICAN Business INFORMATION: Lists OF 9 MILLION
Businesses (January 1991).......................... 10

vii

TABLE OF AUTHORITIES - Continued

Page
Barrie Pace, Ltp.: Winter SALE 1991 ................. 16
BUSINESSLAND, Powerrut. Propucts Powerkrrul Sou-
RS PICA era kes Ph SNe arene ee 16, 17
105 Cons. Rac. 16,362 (1959)... 2. ccc ccc ecccees 19, 24
Davis, The National Nexus Program: An Innovative
Approach to Multistate Tax Compliance, 1 Statr
ee I I og ca cbcc tosses eesessie 29
Direct Marxetinc [Various Issues]............. 9, 10, 19
Eppoie Bauer: Att. Week Lone (1991) ................. 16
Egol, Personalized Production, Catatoc Act (Oct.
eer eee Cie ee i er 18, 19
GoverRNING (August 1989)...............06 00 eee a
Gasenreace Catatoc (1991-1992) .........0cceeccecess 16
Harry AND Davin: 1991 Houpay Book or Girts....... 16

M. Tamari, IN THE Marketplace: JewisH Business
eS te Oe a Ane a ee ae Og Sains 6

Interstate Sales Tax Collection Act of 1987 and the
Equity in Interstate Competition Act of 1987: Hear-
ing on H.R. 1242, H.R. 1981 and H.R. 3521 Before
the Subcommittee on Monopoly and Commercial
Law of the Committee on the Judiciary, 100th
Come, 26 Sean. (IGOR)... cece cece ser eeeccccees 26

J.C. Penney Catatocue, Fall and Winter 1991 ..8, 16, 17
Lorp & Taytor: SIGNATURE SAvINGS (1991)............. 16

Miller, Data Mills Delve Deep to Find Information
About U.S. Consumers, Wall St. J., March 14,
SE ME cp hii oe ocwed eR BAEK GESENEG Cds ee ewe Kes 10

viii

TABLE OF AUTHORITIES - Continued

Page
Morse and Zimmerman, Efforts to Collect Sales Tax
on Interstate Mail Order Sales, Recent State Legis-
lation (1990) (prepared for presentation to the
National Conference of State Legislatures) ........ 25
Multistate Tax Commission Review, Vol. 1991, No.
IG aavine bara ek edb NG woud aac bikes's x’ 28
NATIONAL ASSOCIATION OF SecuRITIES DEALERS, INC.,
AN INTRODUCTION TO THE NASD, (1990)............. 28

Opposition to Sales Tax Idea Arrives in the Mail,
Baltimore Sun April 2, 1989 ...........0.......... 26

Paciott 2000 User’s Manuat (1990)................... 20
ee , 20
Quint. Semi-ANNUAL Orrice Propucts CATALOGUE,

Nov. 1991-April 1992 ........ .2, 9, 10, 11, 15, 17, 19
Saks FirtH Avenue, Fouio: Resort 1991 ............... 12
Sears Catatocue (Spring/Summer 1991) ............. 16
St. Tax Guipe 9351 (CCH 1991).................... 1, 2
Time Macazine (Nov. 18, 1991) ..................2.-. 18
eee 20

No. 91-194
o

In The

Supreme Court of the United States

October Term, 1991
- r

QUILL CORPORATION,

Petitioner,

STATE OF NORTH DAKOTA,
BY AND THROUGH ITS TAX COMMISSIONER,
HEIDI HEITKAMP,

Respondent.

¢

On Writ Of Certiorari To The Supreme Court Of
The State Of North Dakota
7

BRIEF AMICUS CURIAE OF THE MULTISTATE TAX
COMMISSION IN SUPPORT OF RESPONDENT
°

INTEREST OF THE AMICUS CURIAE!

The Multistate Tax Commission (“MTC”) is the
administrative arm of the Multistate Tax Compact (the
“Compact”). Att St. Tax Guipe 9701 et seq (Max. Mac.
1991); St. Tax Guipe 9351 (CCH 1991). Nineteen States,
including the District of Columbia, have adopted the
Compact. In addition, fourteen states are associate mem-
bers. The Compact seeks to facilitate proper determina-
tions of state and local tax liability of multistate

1 Counsel for Petitioner and Respondent have consented
to the filing of this Amicus Curiae Brief. Their letters of consent
have been filed with the Clerk of the Court.

1

2

taxpayers, promote uniformity or compatibility of state
tax systems, facilitate taxpayer convenience and compli-
ance, and avoid duplicative state taxation. Article I, Com-
pact, Att St. Tax Guipe 9701 (Max. Mac. 1991), St. Tax
Guipe 4351 (CCH 1991). The Court recognized the val-
idity of the Compact in United States Steel Corp. v. Multis-
tate Tax Comm'n, 434 U.S. 452 (1978).

As described in further detail in Part III.C of this
Brief, the Commission, through its “uniformity” process,
its National Nexus Program, and ongoing discussions of
coordination and uniformity issues with direct marketers
and their trade association, has been directly involved in
the issue of collection of sales and use taxes by interstate
direct marketers. The Commission expects these activities
to continue and expand as additional state legislatures
adopt laws like the North Dakota law at issue here, in
response to the growth of the direct marketing industry
and its increasing share of retail sales in each state. By
eliminating artificial distinctions among competing, func-
tionally equivalent marketers, affirmance of the decision
below will help to accelerate the process of coordination
and cooperation among the states, and between states
and taxpayers, which the Commission seeks to foster.

INTRODUCTION AND SUMMARY OF ARGUMENT:
“THAT WAS THEN AND THIS IS NOW”

To a lay observer, the thought that a small out-of-
state retailer with one travelling salesman visiting North
Dakota would have to collect North Dakota taxes on all
its North Dakota sales, but that Quill Corporation - with
a thousand employees,? over three thousand customers in

2 Quit Semi-ANNUAL Orrice Propucrs Caratocur, Nov.
1991-April 1992, at 363 (hereinafter “Qui Caracocue”). Copies

(Continued on following page)

3

North Dakota, and 24 tons of catalogues and a million
dollars worth of products sent into the state in a year? -
would not have to collect any North Dakota tax from its
customers, might seem absurd.

To some direct-mail marketers, that anomaly is worth
attempting to cast in constitutional concrete. It gives
them a distinct competitive advantage over fellow direct
mailers with multistate physical presence, and over all
local marketers, who must collect state tax on their over-
the-counter sales. In support of their position, they
invoke a single case, National Bellas Hess, Inc., v. Illinois,
386 U.S. 753 (1967), repeating its words at every oppor-
tunity, in hopes that repetition will lend substance to
their proposition that in-state physical presence is a con-
stitutionally necessary condition for tax jurisdiction, even
though it is not necessary for most other types of jurisdic-
tion. See, e.g., Burger King v. Rudzewicz, 471 U.S. 462
(1989).

The legal response to their claim is not complicated:

1. Bellas Hess is the product of a different legal era
when “the Commerce Clause was thought to prohibit the
States from imposing any direct taxes on interstate com-
merce. [Citations omitted]. Consequently, the distinction
between intrastate activities and interstate commerce was
crucial to protecting the States’ taxing power.” Common-
wealth Edison Co. v. Montana, 453 U.S. 609, 614-15 (1981).
See Goldberg v. Sweet, 488 U.S. 252, 265 n.16 (1989).

(Continued from previous page)
of all catalogues cited have been lodged with the Clerk, and
selected excerpts are contained in the Appendices. See Bellas
Hess, 386 U.S. at 761, n. 2 (Fortas, J., dissenting).
3 North Dakota v. Quill Corp., 470 N.W.2d 203, 204, 218
(N.D. 1991); Appendix to the Petition for Writ of Certiorari at
A2, A34 (hereinafter “Pet. App.”).

i

4

2. In Complete Auto Transit v. Brady, 430 U.S. 274
(1977), the Court “renounced the formalistic approach” of
its earlier cases, and decided instead “to avoid formalism
and rely upon a ‘consistent and rational method of
inquiry [focusing on] the practical effect of a challenged
tax.” ” Trinova Corp. v. Michigan Dept. of Treasury, 111S. Ct.
818, 828 (1991) (quoting Mobil Oil Corp. v. Vermont, 445
U.S. 425, 436-7 (1980)) (brackets in original). Since 1977
there has been no constitutional bar to state taxation of
interstate commerce as long as it meets the four-prong
test of Complete Auto.

3. Subsequent cases have driven home the obsoles-
cence of Bellas Hess. Goldberg v. Sweet distinguished Bellas
Hess and applied the Complete Auto test to sales of inter-
state communications services into a state, finding the
test satisfied where the sales were billed or paid in the
state. Goldberg, 488 U.S. at 263. The Goldberg holding
applies a fortiori to the facts here: sales of tangible goods
into a state. In Trinova, the Court emphasized the “value
added” by sales into a state, and found jurisdiction to tax
such value not because of, but in spite of, a minuscule
physical presence of the seller in the state. Trinova, 111 S.
Ct. at 830, 833-834.

4. Here, as in Goldberg, 488 U.S. at 254, the change in
legal environment is complemented and fueled by a
change in the technological environment, symbolized by
the change in basic concept from “mail order” to “direct
marketing,” and facilitated by the universal availability
of toll-free “800” numbers, inexpensive computers, over-
night express service, computerized selective mailing
lists, and bank credit cards.

These legal points are treated in scholarly detail in
the briefs of North Dakota and its other amici, who collec-
tively demonstrate that the Complete Auto tests are met
here with flying colors. The Multistate Tax Commission

5

will not duplicate their arguments. Instead, the Commis-
sion, a hands-on body of state tax administrators which
deals with the practical realities of state tax policies and
procedures, will focus its attention on the plea for equita-
ble relief to which Petitioner and its allies, perhaps antici-
pating the strength of the legal arguments against them,
appear to retreat.

In éssence, Quill argues that it should not be subject
to North Dakota’s tax laws because it doesn’t get much
benefit from North Dakota. The fact is that Quill has so
many contacts with the state, and every other state it sells
into, that the Court could avoid confronting the obsoles-
cence of Bellas Hess, by finding enough of what Petitioner
calls “chimerical” presence,4 to meet the facial standards
of that case. Even apart from the catalogues and packag-
ing and waste from its products strewn all over its cus
tomers’ states, Quill has direct presence in each state, as
shown in Section | below. It maintains in-state agents to
set up equipment and service computers. It leaves its
computer software in the hands of its customers, and it
checks their credit through local banks. The fact that even
Quill can be found to meet this supposed “bright line”
test of physical presence, notwithstanding its efforts to
remain isolated by eschewing “800” numbers? and, until
recently, by refusing credit card sales from North Dakota,
demonstrates why the test is meaningless, and why the
Court should not rely on it to affirm the decision below. A
decision on this narrow basis would merely postpone the
inevitable and deprive the states and the direct marketing
industry of definitive guidance based on the practical

4 Brief for Petitioner at 46 n. 43, Quill Corp. v. North Dakota,
cert. granted, 60 U.S.L.W. 3257 (U.S. October 7, 1991) (No.
91-194) (hereinafter “Pet. Br.”). 7

5 Pet. Br. at 4.

1

6

realities of direct marketing in the United States in the
1990's, and the predictable expansion of the industry in
the years ahead. Quill’s most important presence in
North Dakota is its economic presence, not its computer

disks or its repair people, and the case should be decided
on that basis.®

Quill’s fallback equity argument is that compliance
with North Dakota’s use tax law would be too much of a
burden. This argument requires the Court to believe that
the direct marketers, who are at the frontier of comput-
erized demographic research and data manipulation,
using the most advanced database and telecommunica-
tions equipment and software to identify, contact, and sell
to tens of millions of carefully selected Americans, are
unable to keep track of 47 states’ sales tax rates.

It should reassure Quill and the Court to know that
the task of collecting multiple state taxes, which so
frightens the Quills of the world, is one to which large
numbers of its fellow direct marketers have accommo-
dated. Moreover, the states, through the Multistate Tax
Commission and individually, are just as anxious as the
direct marketers to simplify and coordinate their tax col-
lection activities. While these implementation issues are
not of constitutional magnitude, Quill and the Court may
also be comforted to know that this cooperative process

* The principle that sellers from afar who want to exploit
the local market must bear their share of local taxes is not a
new one. It was recognized in ancient Jewish law: “In the
Talmudic discussion, the ruling was quite clearly that foreign
and out-of-town merchants cannot be excluded, provided that
they pay the local taxes.” M. Tamari, IN THe MArkerplace: Jewrsi
Business Ernics 55 (1991). Tamari notes that “Non-payment of
taxes gives the competitor an advantage which cannot be
duplicated by the local merchants, no matter how efficient or
cost-conscious they are.” /d. at 61

7

has already begun between the states and marketers who
now collect state taxes in multiple states.

Quill’s ultimate defense is to assert that the principle
it reads into Bellas Hess is subject to revision only by
Congress. We show below that Congress, by both action
and inaction, has signaled the opposite conclusion: this
Court has the authority and responsibility to review and,
if appropriate, revise its own decisions, especially where
its prior statements are the source of serious conflicts.

Quill wants to have all the benefits of exploiting the
North Dakota market without bearing any of the bur-
dens. Exempting Quill from the well accepted business
responsibility of assisting in sales and use tax collection
would be unfair to the state and its taxpayers and unfair
to Quill’s competitors who do assist the state. Such an
exemption is neither required nor justified by the Consti-
tution, by this Court’s precedents, or by federal law
North Dakota’s legislature and Supreme Court acted rea-
sonably and lawfully in rejecting such an exemption and
their actions should not be disturbed.

ARGUMENT

I. THE PRACTICAL EFFECT OF A PHYSICAL PRES-
ENCE RULE WOULD BE TO ENSHRINE INEQUI-
TABLE DISTINCTIONS AND ENCOURAGE
AVOIDANCE OF TAX COLLECTION RESPON-
SIBILITIES

The general economic benefit from the “value added”
by Quill’s North Dakota sales, Trinova Corp., 111 5. Ct. at
830, and from its exploitation of the state’s “civilized
society”, Wisconsin v. J.C. Penney Co., 311 US. 435, 444
(1940), is more than sufficient to meet a constitutional
nexus test. But the list of Quill’s direct contacts with,
burdens on, and benefits from North Dakota dramatizes
why no reasoned distinction can be made between Quill

8

and either the local merchants or competing direct mar-
keters who happen to have sales agents or other physical
presence in the state. Quill’s “presence” includes:

~ the wear and tear on North Dakota’s roads
and the additional truck traffic and air pollution
attributable to the delivery of 24 tons of cata-
logues and a million dollars worth of (fre-
quently heavy) office supplies,

- the police and fire protection for the goods in
transit into and within the state,

- the disposal of the huge volume of catalogues
and many thousands of packages and wrap-
pings containing the delivered goods,”

- the availability of North Dakota courts and
collection agencies to collect overdue bills,

~ protection of Quill from unfair competition of
unscrupulous marketers of office products by
the consumer protection, law enforcement, and
licensing agencies of North Dakota,

- submission by Quill to North Dakota’s juris-
diction in respect to any applicable laws on
usury, fair credit practices, prohibited sales,
fraud, antitrust, warranties, limitations of lia-

bility, environmental protection, and food qual-
ity,®

? Pet. App. at A34.

* For examples of such limitations in other states, see J.C.
Penney Catatocue, Fall and Winter 1991, at 750 (enumerating
Ohio restrictions on credit, Wisconsin notice regarding credit
obligations incurred by spouses, Hawaii notice of state credit
sale law). See also Va. Cope ANN. § 46.2-1079 (1991) (prohibiting
use or sale of radar detectors). See also Burger King v.
Rudzewicz, 471 U.S. 462, 476 (1985) (“it is an inescapable fact of
modern commercial life that a substantial amount of business
is transacted solely by mail and wire communications across
state lines thus obviating the need for physical presence within
a State in which business is conducted”).

9

- the use of the state’s banks to obtain credit
references on customers,?

— the use of VISA and Mastercard accounts at
local banks to establish immediate credit,'°

- the provision of “ ‘inside delivery’ or ‘carry-in
with setup’ ” services at extra cost,"!

- for purchasers of computers, continuing tech-
nical support by telephone and “free on-site
service” for one year after purchase,'?

- the leasing of computer software to North
Dakotans, allowing them to access Quill’s com-
puter,!s

- the use of demographic information and
databases gathered in-state to generate solicita-
tion lists.'4

® Quill’s current order form asks new customers desiring
to be billed to provide “Bank Name, Bank Phone #, Bus.[iness]
Checking Account #, Person to Contact”. Quit Catarocur at
361.

10 Quit CaraLocue at 361. Although it appears from the
record that Quill for a time discriminated against North Dakota
customers by denying them the use of credit cards, its current
catalogue contains no such restriction.

11 Jd. at 365.
12 Jd. at 204.
13 Pet. App. at A29.

14 Direct marketers access lists segmented into a dizzying
array of lifestyle, life-event, demographic, geographic, and
previous purchasing characteristics. Direct Marketing maga-
zine each month carries an annotated listing of newly available
lists, numbering anywhere from 25-30 entries and encompass-
ing market segments ranging from “Texas Liberals (“file con-
tains 33,398 . . . Texas residents who have contributed to the
campaign of Gov. Ann Richards and other democratic candi-
dates”), New List Bank, 54 Direct Marketinc 1, May 1991 at 63,
to the “Portable Technology Database” (“last 12 months
buyers’ list contains 26,397 names at $100 [per thousand

(Continued on following page)

10

The fact is that most of this list would apply to every
direct marketer who substantially enters the North
Dakota market, whether or not it has a store, an agent, a
warehouse, or an office in the state. These are not factors
which show that Quill is unique in having the requisite
presence. Rather they show generically why “direct mar-
keters” are exactly what their self-selected name implies,
marketers who enter the local markets massively and
directly to do from a distance, with economies of scale
and modern telecommunications, precisely what local
marketers do in person: make sales to local citizens. A
rule which ignores this purposeful and pervasive eco-
nomic presence and focuses exclusively on physical pres-
ence no matter how slight or how separate from the
target of the tax, or which depends on a case by case
weighing of discrete contacts, will merely perpetuate a
tax dichotomy based on no functional difference.

Quill obviously cares about its customers, offering
them its own “Bill of Rights.”'5 But its customers have no

(Continued from previous page)

names]. These top corpurate officers are large volume buyers
of portable computers.”) New List Bank 53 Direct MarketiNc 12,
April 1991 at 56. The effort to add names of potential con-
sumers can start on the day of their birth. See Miller, Data Mills
Delve Deep to Find Information About U.S. Consumers, Wall St. &
March 14, 1991, at A-1. Raw name lists can then be enhanced
and sorted by zip code, income level, residence rates and socia!
position. See Advertisement, 54 Direcr Marxketinc 6, October
1991 p. 15. For those, like Quill, selling mainly to businesses,
lists are available by discrete business type (e.g. dishwashing
machine dealers), size of business (e.g. sales volume, number
of employees) or new business entries updated through tele-
phone directories, and can be sorted on a nationwide or indi-
vidual state basis. See AMERICAN Business INFORMATION: Lists oF 9
MILLION Businesses (January 1991).

'S Quit CataLocue at 363.

11

right to avoid payment of their state’s sales or use taxes,
when they order office furniture shipped from manufac-
turers in Michigan, Florida, California, New Jersey, Dela-
ware, or Tennessee'®, whether they order it from Quill by
phone, fax, or mail, or from another direct marketer who
sends a salesman to drop catalogues and take orders, or
from a local office supply store.'7 Quill’s exemption from
the use tax laws would not oniy place Quill at an unfair
competitive advantage over its in-state and out-of-state
rivals who collect the state’s tax, it would force these
competitors and their customers to generate the tax reve-
nues to pay for the state’s direct and indirect contribution
to Quill’s profit-making activity in the state.

Quill and its amici argue that a physical presence rule
is desirable, if not required, because it offers a purpor-
tedly “bright-line” test. Even putting aside the fact that
litigation all over the country demonstrates that the pre-
sent line is murky at best,'® what the “physical presence

16 Quit, CaTALoGueE at 291, 308-309.

17 See Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 366
(1941) (“ .. . respondent is in no position to found a constitu-
tional right on the practical opportunities for tax avoidance
which its method of doing business affords lowa residents”).

18 Compare Boswell v. Paramount Television Sales, Inc., 282
So. 2d 892, 893, 896-897 (Ala. 1973) (lease of films sufficient
nexus to out-of-state lessor) with Cally Curtis Co. v. Groppo, 572
A.2d 302, 303, 306 (Conn.), cert. denied, 111 S. Ct 77 (1990).
Compare L.L. Bean, Inc. v. Department of Revenue, 516 A.2d 820,
823, 825-826 (Pa. Commw. Ct. 1986) (state visits by customer
service representatives sufficient) with Proficient Food Co. v.
New Mexico Taxation and Revenue Department, 758 P.2d 806, 807,
808-809 (N.M. Ct. App. 1988). Compare Good's Furniture House,
Inc. v. lowa State Board of Tax Review, 382 N.W. 2d 145, 146-147,
150 (lowa) cert. denied, 479 U.S. 817 (1986) (noting local adver-
tising as a significant link) with Book-of-the-Month Club, Inc. v.
Porterfield, 268 N.E. 2d 272, 274 (Ohio 1971) (local advertising
insufficient to establish nexus).

ih

12

test does is invite “formalistic” gaming of the system to
avoid state tax responsibilities. For example, Saks & Com-
pany, the parent of the Saks Fifth Avenue retail stores
throughout the nation, conducts its mail order activities
through a corporate subsidiary with physical presence
only in New York and California. Its “Saks Fifth Avenue
Folio” mail-order catalogues are intimately connected
with its store operations.'® Nevertheless it continues to
resist collecting use tax anywhere outside those two
states. If the Court does not update Bellas Hess, Saks Fifth
Avenue may continue to find itself on different sides of
the line in different states.2? On the other hand, if this
Court affirms the North Dakota decision, Saks Fifth Ave-
nue Folio will collect any appropriate taxes from all its
customers, just as its stores do. The fact that Saks Fifth
Avenue might not continue to attract some customers
who wish to escape state tax is not an argument for
maintaining the status quo. See, e.g. Nelson v. Sears
Roebuck & Co., 312 U.S. 359, 366 (1941). It is, rather,
evidence of the unfair advantage some sellers currently
enjoy, and an argument for changing the status quo.
Surely any interpretation of the commerce or due process
clauses which encourages or assists tax avoidance, fosters

'? Each item lists the store department where it can be
purchased, except for certain items which are listed as not
available at stores or at all stores. Saks Fifth Avenue Folio
accepts Saks Fifth Avenue credit cards, uses Saks’ New York
City office for certain mail, and, as is clear solely from the
catalog cover, exploits the Saks name and good will. See Saks

ae Avenue, Fouio: Resort 1991 at 4, 50, Order Form following
p. 46.

20 Compare SFA Folio Collection, Inc. v. Bannon, 585 A.2d 666
(Conn. 1991), cert. denied, 111 S. Ct. 2839 (1991), with SFA Folio

Collection, Inc. v. Huddleston, No. 89-3015-II1 (T.
March 11, 1991). ae

13

unfair competition between sellers of the same goods to
the same customers, and erects barriers to expansion of
sellers’ physical facilities into other states should not be

endorsed by this Court.

Il. COLLECTING STATE USE TAXES IS NOT AN
IMPERMISSIBLE BURDEN ON COMMERCE; IT
IS A NORMAL BUSINESS FUNCTION WHICH
QUILL NOW PERFORMS FOR THREE STATES,
AND MANY OTHER CATALOGUE SELLERS PER-
FORM FOR MANY MORE STATES.

Petitioner and its numerous amici complain that the
“burden” they would have to bear if they are subject to
North Dakota’s use tax law would cause “economic
chaos,” Pet. Br. at 9, and drive mail order companies out
of business. Brief of Amicus Curiae Direct Marketing
Association at 16, Quill Corp. v. North Dakota, cert. granted,
60 U.S.L.W. 3257 (U.S. October 7, 1991) (No. 91-194) (here-
inafter “DMA Br.”). Their claim echoes this Court’s con-
cern 24 years ago that collection of taxes for multiple
states would draw mail order companies into a book-
keeping morass. Bellas Hess, 386 U.S. at 759-760. But net-
ther the commerce clause nor due process guarantees
immunize businesses from all “burdens” in the states
whose economies they are exploiting. On the contrary,
this Court has said that “ ‘[iJt was not the purpose of the
commerce clause to relieve those engaged in interstate
commerce from their just share of state tax burden even
though it increases the cost of doing business.’ ads

21 Commonwealth Edison Co. v. Montana, 453 U.S. 609,
623-624 (1981) (quoting Colonial Pipeline Co. v. Traigle, 42) U.S.
100, 108 (1975) quoting Western Live Stock v. Bureau of Revenue,
303 U.S. 250, 254 (1938)).

14

| Even if “burden” were a triggering mechanism which
invokes the commerce or due process clauses,22 or a factor in
a “weighing” process with “contacts”, Pet. Br. at 7, in today’s
business environment this case does not raise a serious
“burden” issue. For the fact is that the additional procedures
which the decision below requires of Quill and others who
are resisting their state tax co!lection responsibilities are ones
which many of their competitors and fellow multistate mar-
keters have long accepted.

The Court’s pre-Bellas Hess decisions in Nelson v.
Sears, Roebuck & Co., 312 U.S. 359 (1941) and Nelson v.
Montgomery Ward, 312 U.S. 373 (1941), established fifty
years ago the requirement of tax collection from cata-
logue customers by those with local retail outlets. In 1944,
Justice Frankfurter, who was quite concerned about the
administrative burdens on taxpayers,2> upheld lowa’s
requirement that out-of-state sellers without local offices,
warehouses, or general agents collect its use tax, and
said, “to make the distributor the tax collector for the
State is a familiar and sanctioned device.” General Trading
Co. v. lowa, 322 U.S. 335, 338 (1944).24 The decision fifteen

?? Cc °
ie This appears to be the argument of at least one of
‘etitioner S amici. See, e.g. Brief Amici Curiae of American
Council for the Blind et al. at 22, Quill Corp. v. North Dakota

te gaa 60 U.S.L.W. 3257 (U.S. October 7, 1991) (No.

23 See Northwestern States Portland Ceme
nt Co. v. Minnesota,
358 U.S. 450, 474 (1959) (Frankfurter, J., dissenting).

24 Justice Frankfurter thought that the existence of retail
Stores in-state in Sears and Montgomery Ward was “constitu-
tionally irrelevant”, General Trading, 322 U.S. at 338, and placed
no particular emphasis on the fact that General Trading used
travelling salesmen to solicit orders filled from out-of-state. In
this pre-Complete Auto case, the dissent said that the holding
was “that a state has the power to make a tax collector of one

— it has no power to tax.” Id. at 339 (Jackson, J. dissent-
ing >

15

years ago in National Geographic v. California Board of
Equalization, 430 U.S. 551 (1977), confirmed that local
presence of any type is a sufficient condition for tax
collection responsibility. Thus, many direct marketers are
fulfilling these tax collection responsibilities in multiple
states today, without “economic chaos” and without
being driven out of business. In fact, Quill itself is collect-
ing use taxes for the three states in which it has facilities.
Quit CataLocue at 361.

MTC’s review of over 150 recent catalogues (selected
randomly but unscientifically), discloses at least 33 which
require buyers in 15 or more states to remit use tax,
including 9 which call for remittance of tax for all 47
states (including D.C.) with use taxes. See Appendix A.
Another 30 of these catalogues collect taxes for 3 or more
states, as does Quill. Among those who collect for only
one or two states are such large, well-known marketers as
Saks Fifth Avenue Folio, and L. L. Bean. Id. Justice Frank-
furter’s “familiar and sanctioned device” is thus already
part of the normal business environment for many Inter-
state marketers, and there is no showing that those who
have so far avoided it are any less capable of fulfilling
this obligation than those who are meeting it now.

Some of Petitioner’s amici complain that they would
be forced to use costly catalogue space to inform cus-
tomers of their tax obligations.?°> Quill’s own order form,
typical of the middle ground used by many multistate
marketers, rebuts that argument. It merely has a small

25 See, e.g. DMA Br. at pp. 18-20; Brief of Amicus Curiae
Coalition for Small Direct Marketers at 19, Quill Corp. v. North
Dakota, cert. granted 60 U.S.L.W. 3257 (U.S. October 7, 1991),
(No. 91-194).

16

space in its computation form for “State Sales Tax”, and
in an effort to be helpful to its customers, lists the tax rate
in each of the three states where Quill has facilities. Quill
Catalogue, at 361. Some direct sellers assume that their
customers know the tax rates in their own states, and
merely instruct them to “add applicable state sales tax”.
See e.g., Lorp & Taytor: Sicnature Savincs, Order Form
following p. 34 (1991). Others list the states in which tax
is due, e.g. Greenreace Catatoc, Order Form following p.
8 (1991-1992) (listing 34 states), see App. B, or the states
which do not have sales taxes. E.g., Eonir Bauer: Att
Week Lona, Order Form following p. 24 (1991). Some give
additional information to assist the customer in calculat-
ing the tax. See, e.g., Barrie Pace, Lrp.: Winter Sate 1991,
Order Form following p. 24 (1991) (clothing exemptions);
Harry AND Davin: 1991 Howipay Book or Girts, Oxpek Form
FOLLOWING P. 18 (1991) (FOOD ExEMPTION); BusiINESSLAND, Pow-
exPUL Propucts Powerrut So_tuTions, Order Form following
p. 130 (1991) (instruciing exempt companies to include
their tax exempt certificate with their order). Sears does
not list any tax rates, but instructs customers to call its
“800” number to obtain calculation of shipping and han-
dling charges and taxes. Sears at 950B (Spring/Summer
1991). At the other extreme, J.C. Penney provides a com-
prehensive set of instructions: on its chart of shipping
information and return centers for each state, it also lists
the state sales tax rate, and other state-specific informa-
tion relevant to Penney merchandise (e.g. “omit tax on
footwear and clothing”). J.C. Penney, Faust. & Winter 1991
at 742, see App. C. The entire tax listing adds one column
to the six other columns on the chart.*6

26 Although not at issue in this case, Petitioner repeatedly
invokes its apprehension at the prospect of complying with

(Continued on following page)

_—

17

Of course, like Sears, most sellers have phone agents
who will compute the state tax and shivoping charges, or
check the customer’s computation, when the order is
taken or while the customer is filling out an order form.
Businessland, for example, offers to “confirm” the com-
putation for the customer. See BusinessiaNp, supra, Order
Form following p. 130. Just as Quill informs its customers
that “shipping charges, if applicable, will be added to
your total” by Quill (Qu: CataLocue at 361), Penney tells
its customers that overpayment of sales taxes will be
refunded, that late changes in taxes will be reflected in a
corrected invoice, and that on credit orders, “we'll figure
the tax and add it to your account.” J.C. Penney, supra at
741.

Each of these marketers has made its own market-
driven decision on how much space, detail, and help to
provide for this purpose. But the fact is that a marketer
who collects tax in all or most states can, if it wishes,
meet the need with no more order blank space than Quill

(Continued from previous page)

myriad local sales tax laws. As with state tax collections,
different direct marketers have chosen different ways to deal
with this issue. J.C. Penney, for example, notes to its customers
the states in which there are such taxes and leaves it to the
customer to apply them. See App. C. As noted below, if a
marketer wished, it could use modern computer printing tech-
nology to print local tax instructions on each catalogue cover
or order blank. In any event, this concern will be addressed in
the first instance by the marketers themselves, by state and
local tax authorities, and if disputes arise, by the state courts.
Only if some issue of constitutional moment arises will it reach
this Court. Certainly it should not be decided here in the first
instance, as a hypothetical matter and without a record

18

now provides. Moreover, the phone agents, who answer
questions about hundreds or thousands of catalogue
items and prices and shipping rules, have no difficulty
answering questions about a state’s tax rates. Whether
they look at Penney’s chart or type a zip code into their
computers, the information can be readily available.

Similarly, the claim that accounting for many states’
taxes would be beyond the bookkeeping capacity of a
direct marketer like Quill is frivolous. The large direct
marketers keep track of hundreds of thousands of cus-
tomers, orders, and items in stock on large computers.
They use the most sophisticated technologies to identify
the most desirable demographic targets for their wares,
and to decide how many and which catalogues to send
them.’” They buy, sell, sort, and refine huge mailing lists,
and compare them to individualized data bases with
detailed information on each prospective customer.28
Many already personalize the order forms in their cata-
logues with ink-jet printed names and addresses of the
recipient,2” and could undoubtedly add state-specific
information on sales taxes if they wished.%°

2? See Egol, Personalized Production, Catacoc. Act, October
1991 at 78. See also discussion n. 14, supra.

26 Id.

*% As the “P” column in App. A indicates, the vast major-
ity of the catalogues reviewed by MTC contained personalized
order forms.

*® It is now fairly common for mass magazines to contain
computer generated inserts containing the name of the sub-
scriber and localized information such as the location of the
nearest store of a national chain. See, e.g., Time, Nov. 18, 1991,
insert following p. 55, containing personalized message with
name of subscriber and location of nearest Radio Shack. “At

(Continued on following page)

19

In fact, Quill prides itself on its sophisticated com-
puter capacity. Its “integrated order fulfillment system,”
based on a 700 terminal “Unisys 110/1200 mainframe,”
provides its operators with “instant on-line access to
customer files and product information, . . . [and] credit
checking. . . . It determines which . . . warehouse will
handle the shipment and generates detailed picking
instructions for each order, complete with carton size and
weight.” It offers same-day shipment for orders received
by 4 p.m., and as soon as the personal computer at the
warehouse detects from the bar code on each package
that an order has been shipped, it signals the mainframe
to generate an invoice the same day.*! Clearly, for Quill,

going from 3 states to 47 will not be a significant prob-
lem.32

Even for the smaller direct marketer, computers capa-
ble of calculating and keeping track of tax receipts and
payments are readily available and inexpensive. At the
time of Bellas Hess, it was probably still true, as Senator
Keating said in discussing Pub. L. No. 86-272,33 that
“[s]mall firms simply cannot afford the electronic gadgets
now used by giant corporations for such purposes.” 105
Conc. Rec. 16,362 (Aug. 19, 1959). Now a fast, large

(Continued from previous page)

present, Fingerhut uses its merchandising / publishing system
to version [sic] its outer wraps based on the customer's geogra-
phy,” to accommodate each state’s “credit rules that have to be
expressed differently.” Egol, supra note 27.

*! Smith, The New Frontier, Dixect Markerinc, September
1991 at 37.

* It is interesting to note that part of Quill’s product line
includes tax forms. Quit Caratocur at 362.

33 See discussion Part III, Section B. infra.

20

Capacity personal computer which did not even exist in
1967 can be purchased by mail from Damark for $899.99,
monitor and basic software included.*4 Several well
reviewed business accounting programs can be pur-
chased for under $100, and more sophisticated programs
for under $300.35 Even if a marketer sets up its own sales
tax record-keeping system on a simple spreadsheet pro-
gram for its own state, the cost of adding additional
States after the first one is literally nil for hardware and
software. It takes only a few minutes’ time per state to
copy the initial spreadsheet and substitute each addi-
tional state’s tax rate.

Whether for large direct sellers with large computers
and large numbers of sales in each state, or smaller sellers
with small computers and small numbers of sales in most
States, this is hardly an issue of constitutional signifi-
cance. As more marketers collect for more states the task
can only get easier, for the software providers (after
designing programs to meet the needs of their own direct
mail sales) will compete to offer these programs at low
cost to all comers. Almost every direct marketer must
have some system for collecting and remitting sales and
use taxes for at least one state now. It is hardly a burden
at all, let alone a burden of constitutional proportions, to

4 Damark Advertisement, USA Today, Dec. 6, 1991 at 5b
(“In MN add 6.5% sales tax”).

© See, ¢.g., Peachtree Accounting Advertisement, PC Mac-
azine Dec. 31, 1991 at 254 (offering accounting package with
multiple taxation feature for $298); Software Add-Ons Adver-
tisement, PC Macazine Dec. 31, 1991 at 431 (listing several
accounting programs retailing for as little as $29). One such
program, Pacioli 2000, provides capability for creating up to
1000 different sales tax codes. Paciot: 2000 User’s MANUAL at
127 (1990).

21

require that, as they and their markets grow, their respon-
sibility for collecting state use taxes grow as well.

Ill. CONGRESS, RATHER THAN PREEMPTING
COURT OR STATE ACTION BY ITS INACTION,
HAS LEFT THE FIELD TO THE STATES AND
THIS COURT.

Petitioner argues that the states are precluded from
enacting legislation like North Dakota’s, and that the
Court is precluded from allowing them to do so, because
of what Petitioner seems to think is Congress’ exclusive
responsibility to define the scope of state tax powers.
Petitioner quotes approvingly a commentator’s statement
that “making state tax law . . . is best left to Congress”
Pet. Br. at 45 n. 40. Fortunately for the nation’s federal
system, that view is not reflected in the Constitution, the
acts of Congress or the opinions of this Court. Making
state tax law is best left to the states. The Tenth Amend.
ment says so. U.S. Const. amend. X. And this Court has
repeatedly said so. See, e.g., Trinova, 111 S. Ct. at 836:
Moorman v. Bair, 437 U.S. 267, 279-80 (1978): Wisconsin v
|.C. Penney, 311 U.S. 435, 445 (1940).

Bellas Hess was not a provision of the Constitution or
a Congressional enactment. It was the Court's best inter-
pretation of the Constitution’s requirements given the
surrounding constitutional and factual fiamework at the
time. Whether or not the present members of this Court
would have assessed the then prevailing facts and consti-
tutional environment the same way as their predecessors
did twenty-four years ago, the Court must decide the
present case in the light of today’s constitutional and
factual context. Particularly in the field of state taxation,

22

the Court has never ceded to Congress the Court's consti-
tutional responsibility to clarify and modernize prior case
law. On the contrary, in such cases as Complete Auto and
Goldberg, it has moved the law forward with the economic
realities of business and technology.

A. This Court Has Made Clear That Congress
Will Not Be Deemed To Pre-empt The States
In The Absence Of Clear Legislative Pre-emp-
tion Or Complete Occupation Of The Field.

Petitioner cites no congressional enactment through
which Congress in the exercise of its power over inter-
state commerce has directed the states or the Court to
refrain from action in this field. Instead it cites Congress’
failure to produce legislation on the subject of this case
over the past six years. Pet. Br. at 35 n. 26.

But the silence of Congress, at least in the absence of
a comprehensive legislative framework inherently occu-
pying the entire field, is not a barrier to state action or to
this Court’s action. In Puerto Rico Department of Consumer
Affairs v. Isla Petroleum Corp., 485 U.S. 495, 504 (1988), this
Court said “preemption, if it is intended, must be explic-
itly stated.” There cannot be “a preemptive grin without a
Statutory cat.” Id. The Court demands “clarity and mani-
festness”, id. at 500, before it will find that Congress
intended to supersede the powers of the states. Thus, in
the absence of some affirmative action by Congress, the
states are free to do whatever the Court finds is not
barred by some constitutional constraint.

23

B. Congress’ Conscious Exclusion Of Sales Taxes
From Its 1959 Legislation On Out-Of-State
Solicitation, Its Silence After Statutorily Man-
dated Studies In 1964-65, And Its Inaction
Since 1985 On The Bellas Hess Issue Show
That Action Here Must Come From The States
And The Court

In general, Congress and the courts have historically
recognized the importance to federalism of non-interfer-
ence by the federal government with state taxing author-
ity. See California v. Grace Brethren Church, 457 U.S. 393,
410-11 nn. 23, 24 (1982). As a matter of common law,
comity, and long-held statutory policy, federal courts
have refrained from interjecting themselves into the state
tax enforcement process. See e.g. Franchise Tax Board v.
Alcan Aluminum Limited, 110 S. Ct. 661 (1990); California v.
Grace Brethren Church, 457 U.S. 393 (1982); Rosewell v.
LaSalle National Bank, 450 U.S. 503 (1981). See also Tax
Injunction Act, 28 U.S.C. § 1341. Of course, once state
remedies have been exhausted, this Court has met its
responsibilities to apply the constraints of the Constitu-
tion, but always with due respect for the proper role of
the states in designing their own tax systems. Trinova, 118
S. Ct. at 836; J.C. Penney, 311 U.S. at 444.

Three times in the postwar years, Congress has exam-
ined the scope of state taxing power over interstate busi-
nesses. But rather than signifying a legislative decision to
occupy the field or to pre-empt either state or Court
authority, Congress’ action each time shows that Con-
gress itself has left the issue in this case to the states,
subject only to the limits this Court may impose.

The Court has previously considered Congress’ 1959
action on the state income tax implications of sales solic-
itations by out of state businesses. See Heublein Inc. v.

24

South Carolina Tax Comm'n, 409 U.S. 275 (1972); United
States Steel Corp. v. Multistate Tax Comm'n, 434 U.S. 452
(1978). See also Wisconsin Dept. of Revenue v. William
Wrigley Jr. Company, 160 Wis. 2d 53 (Wis. Sup. Ct. 1991),
cert. granted 60 U.S.L.W. 3257 (U.S. October 7, 1991) (No.
91-119). In that year, after this Court’s decision in North-
western States Portland Cement Company v. Minnesota, 358
U.S. 450 (1959), a precursor of Complete Auto Transit, 430
U.S. 274 (1977), many large interstate businesses, cor-
rectly anticipating that the Court was heading towards
eliminating its proscription of state taxes on interstate
transactions, went to Congress for anticipatory relief. The
result was Pub. L Wo. 86-272, 15 U.S.C. § 381 et seq.,
which prohibits imposition of state net income tax on
corporations based solely on solicitation of orders in the
state, where acceptance is outside the state. See Heublein,
409 U.S. at 280; United States Steel Corp., 434 U.S. at 455.

It is clear from the text and legislative history of the
Statute that Pub. L. No. 86-272 did not apply to sales taxes
because the framers of the statute intended that the states
continue to have full authority to levy sales taxes in
accordance with the Court's broadening view of state tax
powers Over interstate commerce.

For the next sixteen years, Congress was aware of
these issues but did nothing. As the Court later noted,
Congress in 1959

also authorized a study for the purpose of rec-

ommending legislation establishing uniform
standards to be observed by the States in taxing

%© See 105 Conc. Rec. 16,362 (1959) (colloquy between Sen-
ators Bush and Bennett).

25

income of interstate businesses. Although the
results of the study were published in 1964 and
1965, Congress has not enacted any legislation
dealing with the subject. [Court’s Footnote:
“There have been several unsuccessful
attempts.” [citing bills in 1965, 1966, 1971, 1973,
1975, including post-Bellas Hess bills that cov-
ered sales tax issues]].

United States Steel Corp. v. Multistate Tax Commission, 434
U.S. at 455-6.

As Petitioner points out, Congress again took up the
Bellas Hess issue beginning in 1985, and regularly thereaf-
ter. Pet. Br. at 35. But again there was no congressional
action, despite the proliferation of so-called “anti-Bellas”
state laws,?? enforcement of those laws, increasing volun-
tary compliance with those laws,** and state court deci-
sions construing them.*? It should be pointed out that the
same interests which now claim that the legislative
branch is the only appropriate authority to act on Bellas
Hess fought vigorously to prevent congressional action to
close the Bellas Hess loophole during this period. In a
massive lobbying campaign, they enlisted their catalogue

3” Brief of National Conference of State Legislatures et al.
on Petition for Writ of Certiorari at 7 n. 6, Quill Corporation v.
State of North Dakota, cert. granted 60 U.S.L.W. 3257 (U.S. Octo-
ber 7, 1991) (No. 91-194).

38 Morse and Zimmerman, Efforts to Collect Sales Tax on
Interstate Mail-Order Sales, Recent State Legislation, 12-13 and n.
35 (1990) (prepared for presentation to the National Conference
of State Legislatures).

39 North Dakota v. Quill Corp., 470 N.W.2d 203 (N.D. 1991);
Bloomingdales By Mail Ltd. v. Huddleston, No. 89-3017-I1 (Ch.
App. March 21, 1991); appeal filed No. 01-S01-9016-CH-0047
(Tenn. April 19, 1991); SFA Folio Collection Inc. v. Huddleston,
No. 89-3015-III (Tenn. Ch. App. March 11, 1991).

26

customers to provide grassroots Opposition to the pend-
ing legislation. In fact, contradicting their present posi-
tion that only Congress, and not the Court, can act to
update Bellas Hess, their expert witness testified before
the House Judiciary Committee in 1988 that Congress was
precluded from acting because this Court had based
Bellas Hess on the due process clause, over which Con-
gress had no legislative authority, rather than solely on

the commerce clause, over which Congress has “plenary
power” .4!

This history leaves no doubt that Congress has not
occupied the field of state taxation of interstate com-

merce, nor in any way preempted state or Court action in
the field of state sales taxes. On the contrary, each of
Congress’ three ventures into this area have left the legal

_ 4° See Federal Report, GOVERNING, at 24 (August 1989): The
Direct Marketing Association ” . . . held a summit meeting to
plot strategy, and 300 companies contributed to a $1.5 inlilien
war chest, according to Robert Levering, vice president for
government affairs of the Direct Marketing Association In
addition 30 to 40 companies printed letters Opposing the ) lan
at their Own expense and have begun inserting them in a
chandise shipments to millions of customers.” Opposition to

Sales Tax Idea Arrives in the Mail, Balti ,
at 1A, 14A. il, Baltimore Sun, April 2, 1989,

* Testimony of Lucas A. Powe, Jr, on behalf of Dire
Marketing Association and Magazine Publishers Maines
on H.R.1242 and H.R. 3521, Interstate Sales Tax Collection Act of
1987 and the Equity in Interstate Competition Act of 1987: Hearing
on H.R. 1242, H.R. 1981 and H.R. 3521 Before the Subcommittee on
Monopoly and Commercial Law of the Committee on the Judiciary
100th Cong., 2d Sess. at 72 - 75 (1988): “The Court said due
process, and Congress cannot change due process decisions
Congress can change commerce clause decisions.” Id. at 72.

NS ee eee

_——a

27

landscape either untouched, or with a specific congres-
sional statement that it did not intend to affect sales
taxes.

Of course, if the Court affirms the decision below,
and Congress wishes to address issues left open by the
Court, or anticipate and resolve potential implementation
issues, Congress can do so within the scope of its power
over interstate commerce, as it did in 1959. See, Pub. L.
No. 86-272. The possibility that Congress might some day
act to improve on or supersede the Court’s action, how-
ever, is no reason for the Court not to act at all, when
faced with a clear constitutional controversy, especially
one generated by its own prior ruling.

C. The States, Individually And Through Multis-
tate Action, Have A Mutual Interest With Tax-
payers In Implementing The Economic
Presence Test Reasonably And Efficiently.

In such post-Complete Auto cases as Trinova, Goldberg,
and Amerada Hess Corp. v. Director, Div. of Taxation, New
Jersey Dept. of Treasury, 196 U.S. 66, 72 (1989), this Court
has emphasized that it will not attempt to impose a
particular tax formula on the states, even if that may
result in minor inconsistencies and inconveniences to
taxpayers. As long as the states are reasonable and non-
discriminatory in their tax structures, the Court will
allow them to choose their own tax rates, rules, and
procedures.

Of course the states have a shared interest in making
their tax systems as compatiblé and convenient as possi-
ble, and they have done so frequently in the past.
Through such mechanisms as the. Multistate Tax

28

Compact,4? which became effective in 1967, the Multistate
Tax Commission, established by the signatories to the
Compact, and the Uniform Division of Income for Tax
Purposes Act, adopted as part of the Compact by its
signatories, many states have demonstrated their interest
in “promoting uniformity and compatibility in state tax
systems” and “facilitating taxpayer convenience and

compliance in the filing of tax returns and in other phases
of tax administration.” 43

The MTC has already focused on the need for unifor-
mity and consistency in the sales and use tax area.
Through its “uniformity” process, Proposals for multi-
State action to coordinate state sales and use tax laws and
enforcement are developed, circulated for taxpayer and
other public comment, and recommended by the full
Commission for adoption by the states. See Muttistate Tax

Commission Review, Vol 1991, No. 1 :
; ' , ' at 21-22
pe (March

in addition, twenty-six states have joined MTC’s
National Nexus Program, which began in December 1990.

P * Considered and upheld by the Court in United States
teel Corp. v. Multistate Tax Commission, 434 U.S. 452 (1978).

*° United States Steel Corp., 434 U.S. at 45 |
Multistate Tax Compact). 4 : 6 (paraphrasing

™ The States have undertaken similar cooperative efforts
to simplify compliance with state law in other fields. For
example, the North American Securities Administrators Asso-
ciation and the National Association of Securities Dealers have
jointly developed a Central Registration Depository which
receives and processes state registration applications and fees
for brokers and their representatives for all states. See NATIONAL

ASSOCIATION OF SECURITIES Deacers, INc., AN IN oii
NASD, 13 (1990). ye Ae EROMCTN TD Tee

29

This multifaceted project provides assistance to states in
securing taxpayer compliance and to taxpayers in com-
plying with state tax laws. A key element is a central
repository of information on the states’ tax filing require-
ments. This information is available for distribution to
any company that needs to determine the filing require-
ments in several states. Where taxpayers are concerned
about potential past liability, the Program enables them to
discuss their exposure and to fashion settlements anony-
mously, before they register.*

It is well known to the parties and many amici in this
case that for the past year MTC and other state organiza-
tions have also been involved in discussions with the
Direct Marketing Association and individual direct mar-
keters in an effort to coordinate and simplify the adminis-
tration of sales and use taxes, regardless of the outcome
of this case. This Court’s affirmance of the decision below
would undoubtedly give new impetus to this process,
which allows the industry as a whole to bring its con-
cerns and suggestions directly to the responsible tax offi-
cials of a large number of states.

At the same time, affirmance will give clear guidance
to the individual states as they update and conform their
own statutes to accommodate developments in this
Court, and thus make unnecessary what will otherwise
be the continuing state experimentation with new ways
to address the Bellas Hess problem. Although this Court
need only decide the specific case presented to it -
involving collection of one state’s use tax — its analysis of

45 Davis, The National Nexus Program: An Innovative
Approach to Multistate Tax Compliance, 1 Stare Tax Norrs, 450,
451 (Nov. 25, 1991).

30

North Dakota law, including the de minimis standard
adopted by regulation, will substantially inform the other
States’ process of implementing the decision.

The Court can and should decide this case on the
constitutional merits with assurance that it will be in the
interest of each state, and of the States as a group, to
identify and address sub-constitutional inconveniences
which the Petitioner speculates may result from affir-
mance of the decision below.

IV. CONCLUSION

For the reasons stated herein, the decision of the
Supreme Court of North Dakota should be affirmed.

Respectfully submitted,

James F. Fruc*

Martin Lose!

Lee E. Hevrricn

Lois M. McKenna

Lose, Novins, LAMONT
& Fiuc

1275 K Street, N.W.

Suite 770

Washington, D.C. 20005

(202) 371-6626

Counsel for Amicus Curiae
Multistate Tax Commission

“Counsel of Record

December 26, 199]

APPENDIX A

Al

Catalogues Ranked By Number of States
for which Use Tax Is Collected
(“P” indicates whether order forms are personalized]

# Jurisd. Company P.
47 All Week Long Eddie Bauer Y
47 Businessland N
47 Eddie Bauer Home Y
47 Honeybee Y
47 J.C. Penney N
47 Laura Ashley Y
47 Sears N
47 Spiegel Y
47 The Ultimate Outlet —- Spiegel Y
35 Victoria’s Secret Y
34 Greenpeace Catalog N
34 Talbots N
33 The Disney Catalog Y
29 Godiva Direct Y
27 Egghead Discount Software — \
27 Sharper Image Y
26 Coach Y
25 Barrie Pace, Ltd. ,
24 Williams-Sonoma ,
23 Nature Company Y
22 Brooks Brothers ,
22 Carroll Reed Y
22 Harry & David ’ |
17 FAO Schwartz ,
16 Bachrach, by Mail Y
16 Lord & Taylor N
16 Neiman Marcus by Mail Y
16 Pottery Barn Y
15 Chambers Y
15 Hold Everything Y

A2
A3

14 Castitnes's &
13 — aes y Showcase of Savings
12 Horchow : After the Stork
12 Rand-McNally Y Bits & Pieces
7 Bloomingdale’s By Mail Ltd. y sen —
: Care Package Catalog N rightscree

National Wildlife Y Exposures
4 Orvis y Grill Lover’s Catalog
4 Tiffany & Co. M Lillian Vernon
8 Crate & Barrel] y Museum of Fine Arts
8 Laurel Burch ‘ Saks Fifth Avenue Folio
6 Unicef y Smythe & Co. |
/ Nordstrom N The Ben Silver Collection
6 J. Crew The Jewish Book Guide
. Clifford & Wills — a 9 ala - SP nin
EveningPhone {| | | Jjt{_j J a eS iar ae Signature Required with all credit card purchases Authorization No
PLEASE PRINT INFORMATION SHIP TO: If different from name and address at left
Name Naine
Address oo Address
City State lip Ate City State dp .
ee ees 3.0 - siateieditninsteipiimmaiciiainadinn " a
INDICATEIFSHIPTOIS J RESIDENTIAL J COMMERCIAL
tem Number Color Description PageNumber Suze Size Category Adult/Youth/Infant Quantity Price bach fotal
7,4,0,5| BLK —_| (EXAMPLE) ENDANGERED RAINFOREST T-SHIRT BORE ADULT 31 $1350} —- $X, 00
(mF amanss a Re En ee . ; -“
.. Ball . initiated i ne a — - ’
aioli sjeditbalemiaiatitbiiedi rlsiae naan ma = = |
we s , Se z —— =
NN — = .
alleutioedl amnane — ee a oe : — “an = — -4
EE ES iinet inal SS ee ; 7 .
Free With Every Order Our Greenpeace bumper sticker lets the world know you care
SHIPPING AND HANDLING: *add All Sales Tax For Delivery To: Subtotal
Mf shipping to more than one address compute delivery charges for each address. Purchase Amount Per Shipping Address AL, AR, AZ, CA, CO, DC. FI. GA. 1A. It, IN, KS, KY, LA. MD. MI, MO, MS.
NC, ND, NE, NM, NV, NY, O14, OK, SC, TN, TX. UT. VA. WA. WIL & WV “Applicable Sales Tax
Continental U S. Fee Poster(ito3 Units} = dd gs SO Size Information Call Toll-Free to Charge Your Order i
———— ‘ : _ Foreign Orders. ---- —— Add $ 30.00 Adult sizes: Small (34-36). Medium (38-40). Creda Cards only $15.00 Minimum Shipping
$390.00... Lange (42-44), Extral (46. 48). Youth Sizes: -800- 456-4629
ssaoi ee Sieeee—___... $675 Check box for air. tatrs Seal (2-4, Snail 6-8). Medium (10-12, + en ay ne
$100.01 $2000... = gs o25 CurS@luelabel = Adds '§ 6.00 Large (14-16), Infant sizes: 12 mo. and 24 mo. ,
Over $2000. $s O Federal Express Standard. Add. § 9.00 When In Dowbt, Order One Size Larger. Please have your credit card handy and your order form filled in to read eons
Please Remember to the operator. toecign
1. Specify the style. size and color of each garment ordered. and whether Adult. Youth, or infant size 2. Order only sizes and cators lasted un the «at alog 3. Inctude delivery
Ce ee ee etndia Ciiadahn emvetn meee ta Green (or fill in information requested for creda card charge ) S. Print your All mail orders lor the Winter Holidays received in our office by December 2 TOTAL
name end address in the corner of the return envelope. 6. This fs the Greenpeace you will recetvc ia the mail join as in oar effortto and phone orders placed with our operators by December 5, will be shipped
Couserve resources - save it lor your orders through June 30, 1992 er recycie K te and friends. for arrtval by December 20, 1991. 2

-_—_———.

APPENDIX C

Cl

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0176%3A26. Public record. Not legal advice.