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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2018

## Text

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0787%3A13. Public record. Not legal advice.