Amicus Curiae Brief — South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018) (No. 17-494)

No. 17-494

In The

Supreme Court of the United States

SOUTH DAKOTA,

Petitioner,

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

AND NEWEGG, INC.,

Respondents.

On Petition For Writ Of Certiorari

To The Supreme Court Of South Dakota

BRIEF OF AMICI CURIAE REPRESENTATIVE

ROBERT W. GOODLATTE, CHAIR OF THE

HOUSE COMMITTEE ON THE JUDICIARY,

SENATOR RON WYDEN, REPRESENTATIVE

F. JAMES SENSENBRENNER, JR.,

REPRESENTATIVE ANNA G. ESHOO,

SENATOR MICHAEL S. LEE, AND

REPRESENTATIVE STEVEN J. CHABOT

IN OPPOSITION TO THE PETITION

Of Counsel

DANIEL M. FLORES

DANIEL HUFF

Committee on the Judiciary

U.S. House of Representatives

2138 Rayburn House

Office Building

Washington, DC 20515

Daniel. Flores@mail.house.gov

Daniel. Huff@mail. house.gov

CHARLES A. TROST

Counsel of Record

CHRISTOPHER A. WILSON

SARAH F. BOTHMA

WALLER LANSDEN

Dortcu & Davis, LLP

511 Union Street, Suite 2700

Nashville, Tennessee 37219

(615) 244-6380

charles.trost@wallerlaw.com

chris.wilson@wallerlaw.com

sarah. bothma@wallerlaw.com

Counsel for Amici Curiae

December 7, 2017

COCKLE LEGAL BRIEFS (800) 225-6964

WWW COCKLELEGALBRIEFS.COM

TABLE OF CONTENTS

Page

py FL Phy) 6 yy |. rrr ii

INTEREST OF THE AMICI CURIAE................... 1

SUMMARY OF ARGUMENT .....................::0:000008 2

REASONS FOR DENYING THE WRIT................ 5

ET 25

ii

TABLE OF AUTHORITIES

Page

FEDERAL CASES

Bonaparte v. Tax Court, 104 U.S. 592 (1881) ............... 7

General Motors Corp. v. Tracy, Tax Comm’r of

ON Bt een 23, 24

H.P. Hood and Sons v. Du Mond, 336 U.S. 525

Coie ikcsceiiscissssstnveindidsaunatinniadbonateninennisiniaaenisatensddnnantohiane 7

Miller Bro. v. Maryland, 347 U.S. 340 (1954)............. 10

National Bellas Hess v. Illinois, 386 U.S. 753

EIDE t cencctesdimnseincnssntccehactiineatenaasiisinnanmnegitenienineins 3,9, 10, 24

Patsy v. Board of Regents of Florida, 457 U.S. 496

Cit nciicicieneciatinicdeaasstadebastantaitanddsuoieantdieldeldddmdamecietmndeanet 24

Quill Corp. v. North Dakota, 504 U.S. 298

Gia ielschinnhocchcceaednenssenciiniceddnisdiblidintadéiunsdadwlaladatansiiel passim

STATE CASES

Marshall v. Sherman, 42 N.E. 419 (N.Y. 1895)............ 7

LEGISLATIVE MATERIALS

Marketplace Fairness Act (MFA), S. 976, 115th

Se eS aS een 16

No Regulation Without Representation Act

(NRWR), H.R. 2887, 115th Cong. (2017)................ 16

Online Sales Simplification Act (OSSA), draft,

114th Cong. (2016), available at http://www.mtce.

gov/getattachment/2016-08-25-Online-Sales-

Simplification-Act-of-2016-(OSSA).pdf.aspx.......... 16

iii

TABLE OF AUTHORITIES — Continued

Remote Transactions Parity Act (RTPA), H.R.

2193, 114th Cong. (2016) .........cc.cccceseseeseseeseeees

Trade Facilitation and Trade Enforcement Act

of 2015, Pub. L. No. 114-125, § 922, 130 Stat.

BE GD tristetnsnrstinninentennanitinemmancinimicinipaininbenneneeets

OTHER AUTHORITIES

Arthur Zaczkiewicz, Amazon, Wal-Mart Lead

Top 25 E-commerce Retail List, WWD (Mar. 7,

2016); http://-wwd.com/business-news/financial/

amazon-walmart-top-ecommerce-retailers-

ITD sicectnseciinentsdvéssiiseniescidisnnniesiaiiiiiimcisuninnisiies

Brief of National Retail Federation as Amicus

Curiae in Support of Petitioner at 23, South

Dakota v. Wayfair, et al., No. 17-494 (Nov. 2,

FUP scnctthincsicepicmmarmninanintéanscnipnapeestisiecdastomneninvmees

Brief of States of Nebraska, lowa, et al. as Amici

Curiae in Opposition to Appellant’s Motion for

a Stay of the District Court’s Preliminary In-

junction Order and 54(b) Judgment Pending

Appeal at 4-6, Rocky Mount Farmers Union, et

al. v. Goldstene, et al., 730 F.3d 1070 (2012)

GRU SPIED puiceneiscnecsvinsssonsscnetiesininienevcisebeianen

Brief for the State of Utah as Amicus Curiae in

Support of Appellants at 4-5, Missouri ex rel.

Koster v. Harris, 847 F.3d 646 (2015) No. 14-

ETON scncdsnstnssinteeresnesmsevinisiniasseabvetasetneeapeemnertteins

iv

TABLE OF AUTHORITIES — Continued

Chris Isidore, Amazon to start collecting state

sales taxes everywhere, CNN.com (Mar. 29, 2017);

http://money.cnn.com/2017/03/29/technology/

amazon-sales-tax/index.html....................c.000000

Joseph Story, COMMENTARIES ON THE CONFLICT

OF LAWS: FOREIGN AND DoMEsTic § 20 (Boston,

Pe, GUI AP GODS. SP ccicensscncscssenienabesensceteces

Michael S. Greve, Government By Indictment:

Attorneys General and Their False Federalism

6 (The American Enterprise Institute, Work-

ing Paper No. 110, May 24, 2005), available at

https://www.aei.org/wp-content/uploads/20 1 1/

10/20050525-Greve-newAug09. pdf ...................

Press Release, NetChoice, Businesses United

Behind Goodlatte Sales Tax Plan (Sept. 1,

2016); https://netchoice.org/library/businesses-

unite-behind-goodlatte-sales-tax-plan/ .............

Press Release, U.S. Senator John Thune; Thune,

Wyden Introduce Bill to Protect Innovative

Digital Goods and Services from Multiple and

Discriminatory Taxes (Mar. 24, 2015); https://

www.thune.senate.gov/public/index.cfm/20 15/3/

thune-wyden-introduce-bill-to-protect-innovative-

digital-goods-and-services-from-multiple-and-

ES

Statement of Chairman Robert W. Goodlatte (Dec. 4,

2017); https://goodlatte.house.gov/news/document

Page

single.aspx?DocumentID=1052...................... passim

1

INTEREST OF THE AMICI CURIAE'

Amicus Curiae, United States Congressman Rob-

ert W. Goodlatte, is the Chairman of the United States

House of Representatives Committee on the Judiciary,

which has jurisdiction over legislation that would ad-

dress the interstate commerce and state tax nexus is-

sue presented in this case. He also is the sponsor of

bipartisan draft compromise legislation to address the

issues presented in this case.

Amicus Curiae, United States Senator Ron Wy-

den, is the former Chairman and current Ranking

Member of the United States Senate Committee on

Finance which has jurisdiction over legislation that

would address the interstate commerce and state tax

nexus issues presented in this case.

Amicus Curiae, United States Congresswoman

Anna G. Eshoo, is a senior Member of Congress repre-

senting the State of California. She is the sponsor,

along with Chairman Goodlatte, of bipartisan draft

compromise legislation to address the issues presented

in this case.

' This Brief is filed pursuant to a blanket consent filed by all

parties. No person other than the Amici and their counsel has au-

thored this Brief in whole or in part, or made a monetary contri-

bution toward its preparation or submission. Counsel in the

Birmingham, Alabama office of Waller Lansden Dortch & Davis

represents Newegg, Inc. in a separate matter pending in Alabama

Tax Court. However, Newegg, Inc. has not contributed financially

to the preparation of this Brief. On November 27, 2017, counsel

provided counsel of record for all parties the notice required by

Rule 37.2.a.

2

Amicus Curiae, United States Congressman F.

James Sensenbrenner, is a former Chairman and cur-

rent senior member of the House Committee on the Ju-

diciary. He has played an active role in helping the

Committee on the Judiciary resolve the issues pre-

sented in this case and also is the sponsor of relevant

legislation.

Amicus Curiae, United States Senator Michael S.

Lee, has played an active role in helping to resolve the

issues presented in this case.

Amicus Curiae, United States Congressman Ste-

ven J. Chabot, is the Chairman of the House Commit-

tee on Small Business and a senior Member of the

House Committee on the Judiciary. He has played an

active role in addressing the issues presented in this

case in light of the interests of small businesses.

@

SUMMARY OF ARGUMENT

The Court should deny Certiorari. The Constitu-

tion assigned to Congress the domain and power to

regulate and control commerce among the States, and

the House of Representatives’ committee with jurisdic-

tion over this issue has been working diligently and

assiduously to find legislative means by which remote

vendors may be required to collect use taxes from res-

idents of States in which the vendors have no physical

nexus, but which avoids violating the fundamental

principle against States regulating activity that occurs

3

beyond their borders. Amici refer to this principle as

that of “No Regulation Without Representation.”

Petitioner seeks to have the Court take this au-

thority from Congress and impose a judicial mandate

that for the first time ever would require a vendor

residing in another State to collect use tax from its

customers in a State in which it has no substantial

physical presence. Were the Court to do so, it would

have to breach its rule of stare decisis, overrule its prior

decisions in Quill Corp. v. North Dakota® and National

Bellas Hess v. Illinois,’ as well as a long, consistent line

of authorities upon which the decisions in those cases

rest, and, ultimately, sanction States taxing and regu-

lating the conduct outside of their borders of persons

with no physical presence in the State by seeking to

tax or regulate that conduct. In short, Petitioner in this

case asks the Court to authorize “regulation without

representation,” contrary to Constitutional tradition.

The fact that Congress thus far has not enacted a

federal solution to the problem of the collection of State

use taxes on sales by remote vendors should not be

seen by the Court as a reason to give up on Congress.

Rather, the Court should recognize that a lasting solu-

tion will require compromise, and respect and accom-

modate the ongoing, diligent efforts of Congress to find

a fair solution consistent with Constitutional norms.

The Court also should recognize, as it did in Quill, that

the only tool with which it might address this problem

* §04 U.S. 298 (1992).

* 386 U.S. 753, 760 (1967).

4

is a binary one, while Congress has not only the power

to legislate, but the greater variety of tools needed to

reach a compromise that takes into account the consti-

tutional and practical nuances behind an acceptable

compromise.

South Dakota, in another context, has taken a

position diametrically opposed to its position in this

matter, and, in doing so, has elsewhere affirmed its be-

lief that there should be “No Regulation Without Rep-

resentation.” In that instance, South Dakota strongly

opposed California’s efforts to regulate activity in South

Dakota in the context of California’s Low Carbon Fuel

Standard, by asserting that California’s action was an

attempt to invade South Dakota's sovereignty.

Even as Congress has worked towards a solution,

the actual magnitude of the problem posed by use

tax collection for sales by remote vendors has signifi-

cantly lessened. Seventeen of the top eighteen online

retailers have already begun collecting sales tax on

both online and in-store sales. This development

means that the problem Congress is confronting is be-

coming progressively less difficult to solve through leg-

islation, and that the Court has even less reason now

to intervene, short-circuit Congress’ efforts, and over-

turn Quill.

While Congress is making progress based on the

principles set forth herein, a key obstacle to the par-

ties’ agreement on a final legislative compromise is the

pendency of this case. States that prefer Qui//’s limita-

tion on cross-border taxation to be eliminated have

5

diminished incentive to compromise with Congress

while they pursue Qui//’s reversal by this Court. As a

result, South Dakota’s Petition has hindered Congress’

ability to fulfill the duty the Court in Qui// recognized

to belong to Congress.

For these reasons as well as those others set forth

in Respondent’s Brief in Opposition to Granting the

Petition, this Court should deny the Petition and leave

it to the Congress to forge a lasting solution to the

problem of the collection of use taxes on sales by out-

of-state vendors who do not have a substantia! physi-

cal presence in the taxing state.

,

wr

REASONS FOR DENYING THE WRIT

Amicus, Representative Robert W. Goodlatte, is

the Chairman of the House of Representatives Com-

mittee on the Judiciary, the House committee with ju-

risdiction over proposed legislation which deals with

the issue sought to be presented in this case. He and

the other Amici agree with the reasons presented in

Respondents’ Brief in Opposition to the Petition re-

garding why the Court should not grant Certiorari in

this case. But they present this Brief to bring before

the Court their unique insight into the work that the

House Committee on the Judiciary and other con-

cerned members of Congress working with the Com-

mittee have undertaken to date, in a sustained effort

to carry out the Constitutional duty assigned to Con-

gress to regulate commerce among the States with

6

regard to the issues presented in this case. These on-

going efforts have been directed at finding a way in

which use taxes not currently being collected, due to a

State from a citizen who buys from a remote vendor

not physically present in the State, can begin effec-

tively to be collected by the State in which the remote

vendor resides. The linchpin of this effort has been to

accomplish that end while avoiding legislation that

would violate the principle of “No Regulation Without

Representation,” because doing so would allow the tax-

ing State to impose requirements of conduct upon the

remote vendor, who lacks physical presence and rights

to legislative representation in the taxing State.

Were the Court to reverse its decision in Qui// and

require a remote vendor to collect use taxes due on

sales to a consumer located in a State in which the ven-

dor does not reside and has no physical presence, its

decision would upset long-settled Constitutional au-

thority, be at odds with the fundamental principle of

“No Regulation Without Representation,” be in deroga-

tion of Congress’ predominant authority to regulate

interstate commerce — authority which embodies the

principle of “No Regulation” of interstate commerce

“Without Representation” in Congress — and hinder

on-going efforts by Congress to reach a compromise

solution that would allow collection of use taxes on

cross-border sales without violating this important

principle.

7

I. Constitutional Tradition and the Principle

of “No Regulation Without Representation.”

A. In General

It has been understood since the earliest days of

the Republic that States do not have the power to reg-

ulate beyond their borders. In his “Commentaries on

the Conflict of Laws,” Justice Story wrote in 1834 that

“no State... can, by its laws, directly affect, or bind...

persons not resident therein.”

Writing for a unanimous Court, Justice Waite ob-

served that “[njo State can legislate except with refer-

ence to its own jurisdiction.”

In 1895, the New York Court of Appeals stated, it

is “a principle of universal application, recognized in

all civilized states, that the statutes of [one] state have

...no force or effect in another.”

In 1945, the Court said “It was the vision of the

Founders” that: “every farmer and every craftsman

shall be encouraged to produce by the certainty that he

will have free access to every market in the Nation...

and no foreign state will by ... regulations exclude

them.”

This bedrock principle of “No Regulation Without

Representation” keeps governmental regulation in

* Joseph Story, COMMENTARIES ON THE CONFLICT OF LAwWs:

FOREIGN AND Domestic § 20 ( Boston, Hillard, Gray, & Co. 1834).

* Bonaparte v. Tax Court, 104 U.S. 592, 594 (1881).

®* Marshall v. Sherman, 42 N.E. 419, 423 (N.Y. 1895).

” H.P. Hood and Sons v. Du Mond, 336 U.S. 525, 539 (1949).

8

check by allowing citizens, through the franchise, to

ensure accountability between the regulator and those

who are regulated. It is also a sensible way to protect

States’ rights. States speak of sovereignty, but as a

prominent scholar has written, the “idea of a ‘states’

right’ to exercise extraterritorial authority is incoher-

ent. If equal states are to retain autonomy over their

own affairs, they must refrain from regulating each

other’s affairs.”

The importance of this principle, and the ingenu-

ity required to adhere to it while devising legislation

to facilitate the effective collection of use taxes on sales

by remote vendors, are at the heart of why Congress,

although it has diligently tried to date, has thus far not

been able to reach a consensus solution to the problem

of use tax collection on remote sales — what Petitioner

posits as “the Qui// issue.” The solution insisted on by

the Petitioner and other States — to allow a State to

impose on remote vendors with no physical presence in

the taxing State an obligation to collect use tax from

customers who are residents of the taxing State —

causes concern among Members of Congress who do

not wish to take congressional action further opening

the door to allowing States to tax and regulate busi-

nesses beyond their borders. Many Members, from

both parties and many States from all parts of the

* Michael S. Greve, Government By Indictment: Attorneys

General and Their False Federalism 6 (The American Enterprise

Institute, Working Paper No. 110, May 24, 2005), available at

https://www.aei.org/wp-content/uploads/20 1 1/10/20050525-Greve-

newAug09. pdf.

9

country, are simply unwilling to abandon this principle

for the sake of finding an expedient solution to the

problem of use tax collection on remote sales.

However, States have not yet been sufficiently

willing to compromise their position in order to accom-

modate this principle, and even bristle at any sugges-

tion that they should have to compromise. They

instead see this Court’s holding in Quill as “constitu-

tional error” and “an affront to their sovereignty,” and

resist being “forced,” as they say, to negotiate a legisla-

tive solution with Congress’ help in lieu of fully exer-

cising the sovereign authority they say the

Constitution already grants them.

That Petitioner would have the Court accept its

interpretation of the Constitution as inherently correct

seems rather an odd position, given that until 1950 the

accepted rule was that States could not tax interstate

commerce at all. Even though that rule has been some-

what relaxed in some instances, in no case has the

power to impose a duty to collect sales and use taxes

ever been extended to include vendors with no physical

presence in the taxing State. In enunciating this rule

in Quill,’ the Court was merely upholding its prior

ruling in Bellas Hess, which itself was yet one more

iteration of the rule taken from a long line of earlier

cases.

In Bellas Hess the Court said:

The very purpose of the Commerce Clause

was to ensure a national economy free from

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

10

such unjustifiable local entanglements. Under

the Constitution, this is a domain where

Congress alone has the power of regula-

tion and control. (Emphasis added).'°

And, further in its decision in Bellas Hess the

Court pointed out that:

|I)n order to uphold the power of Illinois to im-

pose use tax burdens on National in this case,

we would have to repudiate totally the sharp

distinction which these and other decisions

have drawn between mail order sellers with

retail outlets, solicitors, or property within a

State and those who do no more than com-

municate with customers in the State by mail

or common carrier as part of a general inter-

state business. But this basic distinction,

which until now has been generally recog-

nized by the state taxing authorities, is a valid

one, and we decline to obliterate it."

This Court has never held that a State may impose

the duty of use tax collection and payment upon a

seller whose only connections with customers in the

state are by common carrier or the United States

Mail.”

The primary constraint on State regulatory and

taxing power, other than the Commerce Clause, is the

democratic franchise within each State — the ballot

box. When a state overtaxes or overregulates, its

’ Bellas Hess, 386 U.S. at 760.

" Jd. at 759.

'" See Miller Bro. v. Maryland, 347 U.S. 340 (1954).

11

citizens are empowered by the franchise to resist in op-

position to those in government who persist in doing

so. But this check on governmental overreach is un-

done when the burdens and consequences of the over-

reach are shifted away from voting citizens and onto

non-residents. When the burden of state regulation

falls on interests outside of the State, it is unlikely to

be alleviated by the operation of the political con-

straints normally exerted when the interests of resi-

dents within the State are affected. Not surprisingly,

as the needs and appetite for revenue have increased,

States have become increasingly aggressive in export-

ing tax compliance burdens onto residents of other

States, and the risks of overreaching have also in-

creased. This concern is not limited to administrative

actions, but applies as well to state court proceedings

that often follow. There is a reason why federal courts

have been given diversity jurisdiction, but this addi-

tional safeguard for non-residents is not available in

the state tax arena, due to the Tax Injunction Act.

B. Petitioner and Other States, in Other

Contexts, Have Strongly Advocated for

Respect for the Principle of “No Regula-

tion Without Representation.”

Ironically, outside of the sales tax context, South

Dakota has shown that it keenly perceives the dangers

of permitting States to violate the principle of “No Reg-

ulation Without Representation” and attempt to regu-

late beyond their borders. South Dakota and other

states, for example, joined in an Amicus Brief filed in a

12

suit challenging California’s Low Carbon Fuel Stand-

ard (“LCFS”), which seeks to regulate the out-of-state

production of ethanol sold in California, in order to re-

duce carbon emissions. In its Brief, South Dakota

acknowledged California’s sovereignty within its own

borders, but saw California’s attempt to regulate etha-

nol as impinging South Dakota’s sovereignty.

As sovereign states, Amici recognize Califor-

nia’s ability to regulate conduct that occurs

wholly within its borders.... But here, the

LCFS reaches out, across the Rockies and into

the Plains, to regulate Amici States’ ethanol

industry, corn farming, and a host of activities

that are far removed from California. . . . It is

none of California’s business how farmers [in

other states] choose to grow their corn. The

United States is a common market.'*

What is “sauce for the goose, is sauce for the gan-

der,” and the principle South Dakota asserts in the

context of LCFS — “No Regulation Without Represen-

tation” — applies with equal if not greater force in the

context of cross-border state taxation and tax collec-

tion requirements.

Similarly, in 2015, the State of Utah filed an Ami-

cus Brief challenging a California law that applied Cal-

ifornia cage-size requirements to laying hens outside

“ Brief of States of Nebraska, lowa, et al., at 4-6, as Amici

Curiae in Opposition to Appellant’s Motion for a Stay of the Dis-

trict Court’s Preliminary Injunction Order and 54(b) judgment

pending appeal, Rocky Mount Farmers Union, et al. v. Goldstene,

et al., 730 F.3d 1070 (2012) (No. 12-15131).

13

the latter state. The Brief explained that Utah’s inter-

ests in the case included:

Federalism concerns regarding policy that

each State should not expect that their inter-

nal policies are dictated by another State

where citizens of different States have no

democratic representation. Indeed, California

regulators have already inspected egg produc-

ers for compliance outside of California."

These examples, including one from the very State for-

mally seeking to have this Court reverse Quill, neatly

illustrate why South Dakota and other States should

insist that Congress respect the “No Regulation With-

out Representation” principle as it strives to help re-

solve the sales tax issue, and why this Court should

refrain from granting South Dakota’s Petition for a

Writ of Certiorari in the instant case.

Il. Solutions Are Available to the States That

They Could Adopt at Their Own Instance

Without Disturbing or Offending the Princi-

ple of “No Regulation Without Representa-

tion.” Meanwhile, the Problem Sought to be

Addressed is Diminishing.

Importantly, the States also have available to them

less offensive means to achieve collection of use taxes

on remote sales on their own — while respecting the

“ Brief for the State of Utah as Amicus Curiae in Support of

Appellants at 5, Missouri ex rel. Koster v. Harris, 847 F.3d 646

(2015) (No. 14-17111).

14

principle of “No Regulation Without Representation,”

and without disturbing Quill — either individually or

through collective action. Use tax States could, for ex-

ample, more vigorously enforce their use tax laws on

their own residents, within their own borders, such as

by legislatively enhancing their reporting-and-collection

regimes, then more actively pursuing collection and

auditing. States could also enter into an interstate

compact, through which each party State could regu-

late its own in-state sellers, require those sellers to

collect tax, and then forward taxes collected to the cus-

tomers’ states. Under such a compact, all regulated en-

tities would always have legislative recourse, through

the franchise, to hold accountable those who impose

burdens upon them. States similarly could enter into

an interstate compact through which each party State

could impose reporting, rather than collection, burdens

on sellers within their jurisdictions. In either of these

examples, the need to disturb Quill would be com-

pletely obviated and the principle of “No Regulation

Without Representation” would be respected.

The States have not chosen to devote their efforts

to the implementation on their own of such solutions.

Perhaps it is because they would prefer the Court or

the members of Congress to be held accountable to

their citizens, rather than themselves. But, whatever

the States’ reasons for not pursuing these other paths,

the availability of these paths strongly suggests that it

would be improvident for the Court to grant the Peti-

tion and unnecessarily revisit the Qui// issue.

15

Further, even as the States have refrained from

pursuing these solutions, the magnitude of the prob-

lem they confront has lessened. E-commerce today is

dominated by large retailers that have a physical pres-

ence in almost all of the States and, therefore, collect

use tax in almost all of the States.'° These retailers

include Amazon, with its warehouses, and major,

multi-channel “clicks-and-mortar” retailers such as

Wal-Mart, Target, Best Buy, and Lowes, who sell both

in traditional stores and online."’ Seventeen of the

top eighteen online retailers collect use tax on all of

their online sales.'’ This development means both that

Congress is confronting a problem that is becoming

progressively less difficult to solve through legislation,

and that the Court has less reason than ever to inter-

vene, short-circuit Congress’ efforts, and overturn

Quill.

’* See Brief of National Retail Federation as Amicus Curiae

in Support of Petitioner at 23, South Dakota v. Wayfair, et al.,

No. 17-494 (Nov. 2, 2017) (Amazon's current market share is over

40 percent, and will reach 50 percent by 2021); Chris Isidore, Am-

azon to start collecting state sales taxes everywhere, CNN.com

(Mar. 29, 2017); http://money.cnn.com/2017/03/29/technology/amazon-

sales-tax/index.html.

© See Arthur Zaczkiewicz, Amazon, Wal-Mart Lead Top 25 E-

commerce Retail List, WWD, Mar. 7, 2016; http://wwd.com/business-

news/financial/amazon-walmart-top-ecommerce-retailers- 103837 50/.

" 2

16

Ill. Since The States Refuse To Solve Their Use

Tax Collection Problem Themselves, the Only

Provident Decision for This Court To Take Is

To Deny the Petition and Leave It To Con-

gress to Pursue Its Fuller and More Appropri-

ate Means of Arriving at a Solution.

Congress, in contrast to the States, is living up to

its responsibility to use the means available to it to ad-

dress the remaining problem of use tax collection on

remote sales and its effects on interstate commerce.

Despite Petitioner’s suggestions to the contrary, Con-

gress has been far from derelict in its duties. The ina-

bility to reach a compromise solution to the problem at

hand has not been for lack of significant effort. Con-

gress has been working persistently for several terms

to find a solution that lies between the poles of exclu-

sive state action, such as adopting effective means of

collecting use taxes from use tax States’ own residents

or forging a workable interstate compact, and this

Court's overturning of Quill, as Petitioner urges. In the

process, Congress has considered several approaches'*

and has been making steady incremental progress over

at least the past three terms of Congress.

’* Among the proposals being considered are the Online

Sales Simplification Act (OSSA), draft, 114th Cong. (2016), avail-

able at http//www.mtc.gov/getattachment/20 16-08-25-Online-Sales-

Simplification-Act-of-2016(OSSA).pdf.aspx; Remote Transactions

Parity Act (RTPA), H.R. 2193, 114th Cong. (2016); Marketplace

Fairness Act (MFA), S. 976, 115th Cong. (2017); and No Regula-

tion Without Representation Act (NRWR), H.R. 2887, 115th Cong.

(2017).

17

Since Chairman Goodlatte assumed the Chair-

manship of the House Committee on the Judiciary in

2013, under his leadership, the Members and staff of

the Committee have devoted thousands of hours in an

effort to find a resolution of this issue satisfactory to

all interested parties, recognizing that all parties and

their constituents and customers have significant and

legitimate interests at stake.'”

In this process, the Committee has produced mul-

tiple iterations of a draft compromise bill.” Each suc-

cessive draft has brought the interested parties closer

together, and in the process has won the support of nu-

merous internet retailers and consumer groups that

previously had opposed any change in the status quo.’

Over 100 online retailers wrote to Congress in support

of the 2016 draft.** Meanwhile, even as Congress has

worked towards forging a compromise solution, the

magnitude of the problem has lessened, as seventeen

of the top eighteen online retailers collect use tax on

all of their online sales.*’ It is estimated that, if en-

acted, the most recent version of the proposed bill

would result in collection of between 80 to 100 percent

'’ See Statement of Chairman Robert W. Goodlatte, at 1-3

(Dec. 4, 2017); https://goodlatte.house.gov/news/documentsingle.

aspx?Document!D=1052.

» id.

*! See id.

*” Press Release, NetChoice, Businesses United Behind

Goodlatte Sales Tax Plan (Sept. 1, 2016); https://netchoice.org/

library/businesses-unite-behind-goodlatte-sales-tax-plan/.

“ Zaezkiewicz, supra, note 16.

18

of the sales/use tax revenue on cross-border sales not

currently being collected.**

The approach taken in the Committee's drafts has

been to respect the principle of “No Regulation Without

Representation” and simplify compliance burdens by

ensuring that, in collecting tax, remote sellers are re-

sponsible only to their home states and states within

which they have a physical presence or have voluntar-

ily registered as “dealers.”° Remote sellers without a

physical presence in the buyer’s State and who have

not voluntarily registered with the buyer’s State to

collect and remit the State’s tax, would collect tax and

remit it to the remote sellers’ home state taxing author-

ities, who would then be responsible for forwarding it

to the customer’s State using a proven clearing-

house method similar to that used in the fuel tax con-

text.**

Under each successive Committee draft, audits

to assure compliance with tax collection obligations

would be conducted by appropriate officials in the

State of the vendor's place of business, and the pro-

ceeds received would be remitted by the vendor's State

tax collecting authorities to the sales and use tax

** Statement of Chairman Robert W. Goodlatte, at 2 (Dec. 4,

2017); https//goodlatte.house.gov/news/documentsingle.aspx’?Document

ID=1052. https://protect-us.mimecast.con/s/7 GwWBJTD210YSk.

= See id. at 1-3.

2° See id.

19

collecting authorities in the States of residence of the

customers from whom the taxes were collected.*’

The Committee’s successive drafts have raised

successive issues, which were addressed as explained

by Chairman Goodlatte:

In 2015, we proposed a revised compromise,

under which sellers would follow their home

state rules on taxability (base), but would col-

lect at the rates applicable in their customers’

states, provided that the seller’s home state

incorporated those rates into its own tax laws.

This approach achieved critical price parity

for traditional retailers while keeping compli-

ance simple for online sellers. In fact, be-

cause compliance would be so simple, no State-

subsidized software would be necessary for

sellers to identify taxability, saving States an

estimated $2 billion annually as compared to

other approaches. As before, Internet sellers

would answer only to their home state taxing

authority, so there would be no cross-border

reach.**

This latest compromise proposal would level the

playing field between remote vendors and brick-and-

mortar vendors, and would also permit States to re-

cover use tax revenues they are not now collecting from

consumers residing in their State. At the same time,

the proposal would not grant those States cross-border

taxing and regulatory authority. Rather, it would allow

2" See id. at 1-2.

** Jd. at 2.

20

remote vendors to be responsible to and audited only

by their home-State authorities.** The proposal pro-

vides for remote sellers to apply tax rates applicable in

their customers’ states, but it makes that imposition

dependent upon the sellers’ states first adopting those

rates into their own law, for use in remote sellers’

sales.” This avoids the “No Regulation Without Repre-

sentation” problem with respect to tax rates.

In addition, the proposal would avoid the costly

administrative problem for sellers of having to comply

with as many as 13,000 taxing jurisdictions, each with

its own set of rules to follow — a requirement that is

particularly burdensome on small vendors who wish to

engage in the national market via the Internet, but

might not be able to afford the costs of compliance.*'

This approach is a solution that is far simpler than

previous alternatives, has the support of many small

businesses, and does not require a de minimis thresh-

old amount of sales.”

This novel approach has taken time to develop,

and required thought and effort to educate the inter-

ested parties as to the underlying principles and

framework of the solution. As with any new approach,

questions have been raised about how this framework

2? See id.

See id. at 1-2.

** See id. at 2n.5.

2 See id. at 2.

21

would operate.* The parties understandably still need

time to work together to resolve these questions.”*

Were either the Court to mandate or Congress to

allow States to regulate or tax beyond their borders,

that would be inconsistent with our Constitutional his-

tory, most particularly the Commerce Clause, and

would open up a “Pandora’s Box” of ills the Court can-

not fully predict, at least not based on the inadequate

and incomplete record in this case. Amici and the other

members of the House Committee on the Judiciary, if

not perhaps the whole membership of Congress, are

keenly aware of the need for Congressional action to

resolve the impasse. Their constituents have been vo-

cal about the need for a solution, and they have been

diligent in their attempts to find a fair and principled

solution.

In its decision in Quill, the Court recognized that

while it only has binary authority to rule on the case

before it, Congress uniquely has the tools necessary to

enable it to resolve the myriad of issues that create the

burden on interstate commerce through crafting com-

promises and drafting rules that simplify procedures

and minimize complexities and the expense of compli-

ance.

** The work by the House Committee on the Judiciary re-

flects Congress’ active engagement to find a solution on remote

sales tax collection. The discussion of that work and what it pro-

duced should not be interpreted as meaning that Senator Wyden

supports the Goodlatte measure.

* See id. at 2-3.

22

This aspect of our decision |the Commerce

Clause issue] is made easier by the fact that

the underlying issue is not only one that Con-

gress may be better qualified to resolve, but

also one that Congress has the ultimate power

to resolve. No matter how we evaluate the

burdens that use taxes impose on interstate

commerce, Congress remains free to disagree

with our conclusions.”

This is precisely what various members of Con-

gress, and specifically Amici and the other members of

the House Committee on the Judiciary have been do-

ing and should be permitted to continue to do until a

compromise legislative solution can be reached that

serves the needs of the States for revenue while pre-

serving the principle of “No Regulation Without Repre-

sentation.”

Additionally, the Senate Committee on Finance

has been actively engaged on these matters in recent

years. Ranking Member Wyden has been closely fol-

lowing Chairman Goodlatte’s efforts, recognizing that

the Senate will have to reconcile its views with those

of the House of Representatives. While there may be

stakeholders that are frustrated that the Congress has

not produced an enduring solution to the question of

remote sales tax collection, it is important to bear in

mind that it has legislated on matters related to inter-

state commerce and state and local tax collection, most

recently by making permanent the Internet Tax Free-

dom Act, which prevents states from, for example,

* Quill, 504 U.S. at 318.

23

imposing multiple and discriminatory taxes on elec-

tronic commerce.** Furthermore, a number of legislative

initiatives have been proposed to address particular

questions in the area. For example, Senators Ron Wy-

den and John Thune have advanced legislation to ad-

dress uncertainty around where digital goous and

services can be taxed, given that those goods may orig-

inate from a server in one state, and be consumed on a

mobile device in another state.*’ Senator Wyden takes

his oversight responsibility seriously and tasked the

Government Accountability Office to investigate mat-

ters related to collection of sales and use taxes on re-

mote sales. This more than year-long investigation

draws to a close this month and will present Congress

with potential options to resolve thorny questions that

have vexed lawmakers for many years. In short, the

House, the Senate and the entire Congress is consider-

ing matters that the Court would inject itself into,

should it grant Certiorari.

The reasoning of the Court in Qui// in this regard

is consistent with the Court’s reasoning in other cases

that presented the same issue in somewhat different

contexts. For instance, in General Motors Corp. v.

Tracy, the Court declared it “lack|s| the expertness and

the institutional resources necessary to predict the

* Trade Facilitation and Trade Enforcement Act of 2015,

Pub. L. No. 114-125, § 922, 130 Stat. 122, 281 (2015).

* See Press Release, U.S. Senator John Thune; Thune, Wy-

den Introduce Bill to Protect Innovative Digital Goods and Ser-

vices from Multiple and Discriminatory Taxes (Mar. 24, 2015);

https//www.thune.senate.gov/public/index.cfm/2015/3/thune-wyden-

introduce-bill-to-protect-innovative-digital-goods-and-services-from-

multiple-and-discriminatory-taxes.

24

effects of judicial intervention invalidating Ohio’s tax

scheme.” Should intervention by the National Gov-

ernment be necessary, Congress has both the “power

and institutional competence to decide upon and effec-

tuate any desirable changes in the scheme that has

evolved. Congress has the capacity to investigate and

analyze facts beyond anything the judiciary could

match, joined with the authority of the commerce

power... .”*® Similarly, in Patsy v. Board of Regents of

Florida, the Court stated that the “very difficulty of

these policy considerations, and Congress’ superior in-

stitutional competence to pursue this debate, suggest

that legislative not judicial solutions are preferable.”*

Ironically, a key obstacle to the parties being able

to reach a final compromise is the pendency of this

case. Petitioners and other opponents of the status quo

who advocate obliterating the bright line physical

presence standard enunciated in Bellas Hess 50 years

ago, and reconfirmed in Quill 25 years ago, appear to

believe they have little incentive to accept a proposed,

compromise Congressional solution when they think

they can wait and potentially get 100 percent of what

they want from the Court in this case — including, from

the States’ perspective, the opening of the Pandora’s

box of the ability to regulate beyond their borders.*'

*° General Motors Corp. v. Tracy, Tax Comm'r of Ohio, 519

U.S. 278, 304 (1996).

* Id. at 309.

* Patsy v. Board of Regents of Florida, 457 U.S. 496, 513 (1982).

* As observed by Chairman Goodlatte,

“lijn 2017, at the start of the 115th Congress, the Com-

mittee resumed its work, but, frankly, the pendency of

25

For the Court to deny granting any Writ of Certiorari

in a case presenting the issue of use tax collection on

sales by remote vendors will provide all of the relevant

parties with a greater incentive to remain creatively

and diligently at the Congressional negotiating table

in the effort to achieve a consensus legislative solution

~—an effort the Qui/l/ Court itself emphasized as the bet-

ter path for resolution of the relevant issues. Indeed,

affording more time for legislative action is all the

more appropriate since a central issue in the resolu-

tion of the problem at hand is the principle of “No Reg-

ulation Without Representation.” By contrast, for the

Court to grant a Writ improvidently now would lead to

a short-circuiting of the legislative process — an out-

come that would come at the expense of Congress, the

Court’s sister branch, and an outcome that the Court

should, out of comity, eschew.

&

-

CONCLUSION

The House Committee on the Judiciary has worked

assiduously with concerned members in both the House

and the Senate on resolving the issue before the Court

the litigation challenging Qui// has hindered negotia-

tions. In particular, States that oppose the limitations

of Quill believe that the U.S. Supreme Court will over-

turn that decision if they simply wait for action by the

Court and do not agree to a congressionally proposed

solution. This leaves them less open to compromise

with Congress.”

Statement of Chairman Robert W. Goodlatte (Dec. 4, 2017); https://

goodlatte.house.gov/news/documentsingle.aspx? Document! D= 1052.

26

and has made significant progress towards completion

of an enactable Bill. That negotiations have been pro-

tracted is not due to neglect on the part of Congress,

but to the bona fide concerns its Members have with

extending the permissible cross-border reach of States.

While the Court has two options — uphold or reverse

the lower court, Congress uniquely has the tools re-

quired to achieve the dual goals of effectively enabling

the collection of use taxes on sales by remote vendors

and avoiding impermissible regulation by the States

outside of their borders. The best way the Court can

contribute to resolving this issue is to deny the Petition

and leave it to the affected parties to make the compro-

mises necessary to forge a lasting solution to the prob-

lem.

Respectfully submitted,

Of Counsel CHARLES A. TROST

, Counsel of Record

eng a. PLOGNS CHRISTOPHER A. WILSON

ANIEL HUFF S FB aan

Committee on the Judiciary , >

WALLER LANSDEN

U.S. House of Representatives

Dortcu & Davis, LLP

2138 Rayburn House : :

Offi ny 511 Union Street, Suite 2700

€ Nashville, Tennessee

Washington, DC 20515 , 57219

Daniel Fl} @ T on (615) 244-6380

; charles.trost@wallerlaw.com

Daniel. Huff@mail. house.gov ee

chris.wilson@wallerlaw.com

sarah.bothma@walleriaw.com

Counsel for Amici Curiae

December 7, 2017