# Amicus Curiae Brief — South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018) (No. 17-494) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0787%3A36 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2018 ## Text No, 17-494 In The Supreme Court of the Anited States ¢ SOUTH DAKOTA, Petitioner, Vv. WAYFAIR, INC., OVERSTOCK.COM, INC., and NEWEGG, INC., Respondents. e On Writ Of Certiorari To The Supreme Court Of South Dakota ° BRIEF OF PROFESSOR JOHN S. BAKER, JR. AS AMICUS CURIAE SUPPORTING NEITHER PARTY * JOUN S. BAKER, JR. Counsel of Record Professor of Law Emeritus, LINDSEY KEISERE LOUISIANA STATE UNIVERSITY 300 Massachusetts Ave. NW 5209 Sea Chase Dr. 5 Washington, D.C, 20001 Amelia Island, FL 32034 tOnly Admitted in Indiana Telephone; (225) 773-5027 John. Baker@law. lsu.edu Counsel for Amicus Curiae COCKLE LEGAL BRIEPS (400) 225.6964 WWW COCKLELEGALARIEPS COM i TABLE OF CONTENTS Page INTEREST OF AMICUS CURIAE. ................2.000++: 1 UPAR OO PARI U MRMBIT DE vececsccciccecescesscesccosocasi 1 FEE, Anidlcxciarindtictdachinicnasantiectiedumediatiatenanbide 4 I. Internet Sales Often Involve Foreign Com- merce and Many Fall Under the Import- MS GI va scccccscscveissscavescsccnussteeacunsisenes 4 Il. In Quill, the Court Did Not Need to Con- sider International Sales, but the South Da- kota Law Requires Such Consideration...... 5 Ill. Application of South Dakota’s Tax to Inter- national Sales Over the Internet Requires Analysis Under the Import-Export Clause.... 8 IV. South Dakota’s Law Also Presents Enforce- ment Problems in Relation to Foreign Sellers with No Presence in the United States....... 11 CF LUI sicinivvandesesseveayciuhuassnchiennusdtabspuddass inks 15 li TABLE OF AUTHORITIES Page CASES Almy v. California, 65 U.S. (24 How.) 169 (1860)......... 9 Bristol-Myers Squibb v. Superior Court of Cali- SPE, BEE ie aes OS COED scdscccnastanntisccsnctacicnesass 13 Brown v. Maryland, 25 U.S. 419 (12 Wheat.) EET Pdins sccscbsstedadeuisckadabbveinshiccaiianndestibinniensodegiesoe 8,11 Camps Newfound/Owatonna v. Town of Harri- OTE, Te as HI GP isidecicchdsnetcnsiptacctacasscssiistceicens 7 Dep't of Revenue v. Ass’n of Washington Steve- doring Companies, 435 U.S. 734 (1978)................ 3,9 Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124 (2015) ........ 7 Direct Mktg. Ass’n v. Brohl, 814 F. 3d 1129 (10th SG Jans SEND sdhcisochasiossb comcinprasiabeteantesictidaumasdnbinuscbuhacsendenedsess 7 Michelin Tire Co. v. Wages, 423 U.S. 276 (1976)..... passim Quill Corp. v. North Dakota, 504 U.S. 298 (1992)..... passim Thurlow v. Massachusetts, 46 U.S. 504 (5 How.) STE Wicrscivadiatatncupauhsceves ktntissdeceutesdianaboindapanaemaeiesianeadiA 10 Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869)........... 9 STATUTES AND OTHER AUTHORITIES PC Gs Oe i kd 15 ee een, ON eh oe sees brablanions 2,8 S.B. 106, 2016 Legis. Assemb. 91st Sess. (S.D. BUUITEN sanocisnisnceaedecasuansenschiadntamersbensiiaciandamasseioes’ 2,6,12 iil TABLE OF AUTHORITIES — Continued National Science Foundation, A Brief History of NSF and the Internet (Aug. 13, 2003) ...................... 4 William W. Crosskey, Politics and the Constitu- tion in the History of the United States 296-97 ST ccna Adidcdcauicaliledicatnianindgisustiaadbineasaisisicnens 11 1 INTEREST OF AMICUS CURIAE' Professor John S. Baker, Jr. is Professor of Law Emeritus at Louisiana State University Law School and a Visiting Professor at Georgetown University Law Center. He has taught Constitutional Law and litigated constitutional cases for many years. Professor Baker approaches his legal scholarship and litigation efforts with an Originalist understanding of the Con- stitution. e — SUMMARY OF ARGUMENT So far, the parties — in the Petition, the Response, and the Petitioner’s Brief — have failed to address the impact of South Dakota’s tax on transactions over the internet between buyers in the United States and for- eign sellers. Simply to argue how the internet has al- tered the way commerce is conducted in the United States since the decision in Quill Corp. v. North Da- kota, 504 U.S. 298 (1992), is too parochial. The inter- net’s World Wide Web has created an international marketplace. The language of the South Dakota statute applies to all purchases over the internet. The tax scheme ' Pursuant to Rule 37.6, amicus curiae certifies that no coun- sel for a party authored this brief in whole or in part and that no person or entity, other than amicus or his counsel, has made a monetary contribution to the preparation or submission of this brief. Counsel for both parties have provided blanket consent for amicus curiae brief filings. 2 covers “any seller selling tangible personal property, products transferred electronically, or services for de- livery into South Dakota. .. .”S.B. 106, § 1, 2016 Legis. Assemb. 91st Sess. (S.D. 2016). Nothing in the statute’s language would exclude internet purchases delivered into the state from another country. That South Da- kota’s tax would apply to foreign sellers means the tax should be analyzed under the Constitution’s Com- merce Clause and Import-Export Clause. Your Amicus respectfully suggests that briefs ad- dressing only the continued viability of the dormant- commerce-clause rationale in Quill Corp. are insufficient. This brief points to issues that your Amicus believes this Court would wish to consider. The words of the Import-Export Clause provide that “No State shall, without the Consent of the Con- gress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws... .” U.S. Const. art. I, § 10, el. 2. Unlike the extended analyses of the Due Process Clause and Dormant Commerce Clause in Quill, the wording of the Import-Export Clause — as applied to foreign commerce — would seem to involve only a de- termination as to whether a state tax is an impost or a duty on that commerce. This Court’s current reading of the Import-Export Clause came in Michelin Tire Co. v. Wages, 423 U.S. 276 (1976) (finding the ad valorem property taxes on im- ported goods permissible by reviewing the reasons prompting the inclusion of the Import-Export Clause 3 in the Constitution); see also Dep’t of Revenue v. Ass’n of Washington Stevedoring Companies, 435 U.S. 734, 761 (1978) (holding the Washington business and occu- pation taxes to not be included in the Import-Export Clause prohibition because the application violated none of the constitutional policies identified in Mich- elin). Michelin Tire adopted a threefold test as to whether a non-discriminatory state tax violates the Import-Export Clause. 423 U.S. at 285-86. The test looked to whether the tax (1) impedes the federal gov- ernment’s ability to “speak with one voice” in imple- menting the nation’s foreign relations, (2) results in diverting import revenues from the federal govern- ment to the states, or (3) causes interstate rivalry and friction among states when a state receives import taxes on goods destined for other states. Jd. South Dakota’s tax would seem to be an impost. That is, it is a tax on the privilege of foreign sellers shipping items or selling services directly into South Dakota and it applies only once the goods arrive in the state. The tax is linked to the time and place of impor- tation. South Dakota’s tax would need to be analyzed under the Michelin threefold test. Along with considering the constitutionality of the tax itself, this Court should also consider its enforce- ability. The South Dakota statute asserts the right to sue out-of-state sellers. To do so, of course, the state would have to invoke its long-arm statute. To reach out-of-state websites with no presence or contacts with 4 the state, the state would be extending the reach of its jurisdiction beyond what this Court has approved as consistent with the Due Process Clause. Before this Court issues a major ruling involving state taxes applicable to internet transactions, your Amicus respectfully urges the Court to have the bene- fit of full briefing on the Import-Export Clause, as well as on the foreign component of the Commerce Clause. © - ARGUMENT I. Internet Sales Often Involve Foreign Com- merce and Many Fall Under the Import- Export Clause. The sale of goods over the internet was virtually non-existent when this Court decided Quill Corp. v. North Dakota, 504 U.S. 298, in 1992. The general pub- lic first gained access to the internet in 1991 with the introduction of the World Wide Web. See National Science Foundation, A Brief History of NSF and the In- ternet.* It was the creation of the Web and later devel- opments that made internet marketing possible. South Dakota has argued that the unprecedented disruption in the way goods are sold since this Court’s decision in Quill has rendered its dormant-commerce-clause ra- tionale completely outdated. South Dakota, however, has failed to follow through on its own argument by * Available at https:/Awww.nsf.gov/news/news_summ.jsp?cntn_ id= 103050 (last updated Aug. 13, 2003). 5 considering the foreign commerce dimension of inter- net sales. Internet sales are erasing the line between domes- tic and foreign commerce. Like others, | have person- ally ordered a product on the internet from a foreign company, which delivered it directly to me. I could have, but did not, order that particular foreign product through Amazon. Other Americans have undoubtedly ordered from a foreign website while assuming, and without checking whether, it is based in the United States. Some websites with a U.S. address state in their Terms and Conditions that its products may be shipped to the purchaser directly from other countries. These changes created by internet sales certainly challenge constitutional distinctions within the Com- merce Clause and between the Commerce Clause and the Import-Export Clause. Under Michelin Tire Co. v. Wages, 423 U.S. 276 (1976), it is possible that the Import-Export Clause would block some, but not all, of the international sales covered by the South Dakota law. Your Amicus respectfully suggests that any recon- sideration of Quill would not be well-informed without considering the Import-Export Clause and the foreign component of the Commerce Clause. Il. In Quill, the Court Did Not Need to Consider International Sales, but the South Dakota Law Requires Such Consideration. In Quill Corp. v. North Dakota, 504 U.S. 298 (1992), this Court did not need to consider international sales 6 for at least two reasons. First, internet sales had not yet been born. Moreover, Qui//’s holding that a state could not tax an out-of-state seller with no location within the taxing state also necessarily protected sellers operating from other countries. If this Court were to overturn Qui/ll’s dormant-commerce-clause holding, however, it would not follow that sellers oper- ating from other countries could constitutionally be compelled to comply with the South Dakota law. Neither South Dakota in its Petition for a Writ of Certiorari or in its brief on the merits, nor respondents in their Brief in Opposition to the Petition for a Writ of Certiorari have addressed international sales over the internet.” Yet, the South Dakota statute clearly applies to all goods and services purchased over the internet for delivery into the state: |A|ny seller selling tangible personal property, products transferred electronically, or ser- vices for delivery into South Dakota, who does not have a physical presence in the state, is subject to chapters 10-45 and 10-52, shall re- mit the sales tax and shall follow all applica- ble procedures and requirements of law as if the seller had a physical presence in the state. ... S.B. 106, § 1, 2016 Legis. Assemb. 91st Sess. (S.D. 2016). Nothing in this language would exclude from * Given that an amicus brief supporting neither party is due within seven days of the filing of the Petitioner's Brief, your Amicus did not have the benefit of Respondents’ Brief on the Merits. 7 the tax goods coming into the state from another coun- try. South Dakota seems to assume that the question to be decided is a simple and straightforward one of whether Quil/’s dormant-commerce-clause holding should be overturned. See Petitioner's Brief for Writ of Certiorari (“Pet. Cert. Brief”). Petitioner may be giving too much significance to past statements by Justices Kennedy, Gorsuch, and Thomas. Neither Justice Ken- nedy nor then-Judge Gorsuch addressed international internet sales when they expressed their readiness to overturn Quill and its dormant-commerce-clause ra- tionale. See Direct Mktg. Ass'n v. Brohl, 135 8. Ct. 1124, 1134-35 (2015) (Kennedy, J., concurring); Direct Mktg. Ass'n v. Brohl, 814 F.3d 1129, 1147-51 (10th Cir. 2016) (Gorsuch, J., concurring). Petitioner is correct that Jus- tice Thomas has advocated for ending the use of the “virtually unworkable” Dormant Commerce Clause, Pet. Cert. Brief at 24, but he has also expressed the view that the Import-Export Clause is the correct anal- ysis. See Camps Newfound/Owatonna v. Town of Har- rison, 520 U.S. 564, 620 (1997) (Thomas, J., dissenting) (arguing that the terms “imports” and “exports” in the Import-Export Clause encompassed not only trade with foreign countries, but also trade with other States). Petitioner has failed to consider the interna- tional dimension of its tax. That the South Dakota law would apply to for- eign sellers with no presence in the United States necessarily means that the tax involves foreign com- merce. The tax, therefore, requires analysis under the 8 import-Export Clause. Deciding only whether Qui//'s dormant-commerce-clause rationale should remain good law will not adequately address the constitu- tional questions involved. Ill. Application of South Dakota’s Tax to Inter- national Sales Over the Internet Requires Analysis Under the Import-Export Clause. The words of the Import-Export Clause provide that “No State shall, without the Consent of the Con- gress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws... .” U.S. Const. art. 1, § 10, el. 2. Unlike the extended analyses of the Due Process Clause and Dormant Commerce Clause in Quill Corp. uv. North Dakota, 504 U.S. 298 (1992), the wording of the Import-Export Clause — at least as applied to for- eign commerce — would seem to involve only a deter- mination as to whether a state tax is an impost or a duty on that commerce. This Court's relatively few cases on the Import- Export Clause have undergone sharp changes in in- terpretation. In Brown v. Maryland, Chief Justice Marshall gave a dictionary or lexicographical inter- pretation of the Import-Export Clause’s unqualified language and wrote that the Court believed “the prin- ciples laid down in this case, to apply equally to im- portations from a sister State.” 25 U.S. (12 Wheat.) 419, 449 (1827) (invalidating state tax on importers of 9 goods produced abroad). Chief Justice Taney followed Marshall's reading that the clause applies as between states in Almy v. California, 65 U.S. (24 How.) 169 (1860) (finding a state tax on bills of lading unconsti- tutional). Woodruff v. Parham, 75 U.S. (8 Wall.) 123 (1869), however, rejected Marshall's reading that the clause applied as between states, concluding that in “the ordinary use of these terms,” impost and import only applied to items brought in from a foreign country. This Court’s current understanding of the Import- Export Clause came in Michelin Tire Co. v. Wages, 423 U.S. 276 (1976) (finding the ad valorem property taxes on imported goods permissible by reviewing the rea- sons prompting the inclusion of the Import-Export Clause in the Constitution); see also Dep't of Revenue v. Ass'n of Washington Stevedoring Companies, 435 U.S. 734, 761 (1978) (holding the Washington business and occupation taxes to not be included in the Import- Export Clause prohibition because the application vio- lated none of the constitutional policies identified in Michelin). While changing the analytical approach, the Court in Michelin Tire did so based on its understanding of the purpose of the Import-Export Clause: One of the major defects of the Articles of Con- federation, and a compelling reason for the calling of the Constitutional Convention of 1787, was the fact that the Articles essentially left the individual States free to burden com- merce both among themselves and with for- eign countries very much as they pleased. 10 Before 1787 it was commonplace for seaboard States with port facilities to derive revenue to defray the costs of state and local govern- ments by imposing taxes on imported goods destined for customers in other States. At the same time, there was no secure source of rev- enue for the central government. Michelin, 423 U.S. at 283. Michelin Tire adopted a threefold test as to whether a non-discriminatory state tax violates the Import-Export Clause. 423 U.S. at 285-86. The test looked to whether the tax (1) impedes the federal gov- ernment’s ability to “speak with one voice” in imple- menting the nation’s foreign relations, (2) results in diverting import revenues from the federal govern- ment to the states, or (3) causes interstate rivalry and friction among states when a state receives import taxes on goods destined for other states. /d. Michelin Tire distinguished the non-discrimina- tory state property tax, at issue and upheld there, from “a tax on the thing imported, while it remains a part of foreign commerce, and is not introduced into the gen- eral mass of property in the State.” 423 U.S. at 301 (quoting Thurlow v. Massachusetts, 46 U.S. (5 How.) 504 (1847)). A tax on goods and services provided di- rectly from abroad to a purchaser in South Dakota would seem to fall within Michelin Tire’s interpreta- tion of the Import-Export Clause’s prohibition on im- posts and duties. The Petitioner should be asked to explain how the South Dakota tax is not an impost. Imposts and duties 1] are taxes on the commercial privilege of bringing goods into a country. Michelin Tire, 423 U.S. at 287. Specifi- cally, imposts are charges imposed at the time and place of importation. /d. at 291 (citing William W. Crosskey, Politics and the Constitution in the History of the United States 296-97 (1953)). South Dakota's tax applies only to sellers who ship more than $100,000 worth of product into the state or make 200 or more shipments into the state. Pet. Cert. Brief at 6. The Petitioner may think that South Dakota has acted reasonably because the tax applies only once sellers meet certain requirements. However, Petitioner would have to explain how those minimums change the nature of the tax. See Brown v. Maryland, 25 U.S. (12 Wheat.) 419 (1827) (finding that whether the tax is imposed at the time of sale or the time of importation is irrelevant because it is still a tax on the same privi- lege at either time). If the South Dakota tax is an un- constitutional impost under Michelin, then it must fail. IV. South Dakota’s Law Also Presents Enforce- ment Problems in Relation to Foreign Sellers with No Presence in the United States. The South Dakota law provides for enforcement against those who do not comply voluntarily. The law allows for a state-court declaratory judgment process against any out-of-state seller believed to owe state taxes: Notwithstanding any other provision of law, and whether or not the state initiates an audit 12 or other tax collection procedure, the state may bring a declaratory judgment action un- der chapter 21-24 in any circuit court against any person the state believes meets the criteria of section 1 of this Act to establish that the ob- ligation to remit sales tax is applicable and valid under state and federal law. The circuit court shall act on this declaratory judgment action as expeditiously as possible and this ac- tion shall proceed with priority over any other action presenting the same question in any other venue. S.B. 106, § 2, 2016 Legis. Assemb. 91st Sess. (S.D. 2016) (emphasis added). But how will South Dakota assert personal juris- diction over out-of-state and out-of-country websites with no presence in the state other than its electronic “presence”? South Dakota’s long-arm statute asserts the broadest possible personal jurisdiction over out-of- state defendants, ending with a catch-all provision al- lowing plaintiffs to assert personal jurisdiction over “The commission of any act, the basis of which is not inconsistent with the Constitution of this state or with the Constitution of the United States.” S.D. Copirigp LAWS § 15-7-2. Consideration of South Dakota’s tax law should include the constitutional viability of the state’s pro- cess for enforcing the tax. Given this Court’s Due Pro- cess limits on long-arm statutes, South Dakota cannot assert specific personal jurisdiction over most out-of- state websites, much less those operating from abroad, 13 without going far beyond what this Court has recog- nized as consistent with Due Process. As this Court re- inforced last term in Bristol-Myers Squibb v. Superior Court of California, specific jurisdiction requires the lawsuit to arise out of or directly relate to the defend- ant’s contacts with the state. 137 S. Ct. 1773, 1780 (2017). Furthermore, the Court explained that: The primary concern in assessing personal ju- risdiction is the burden on the defendant. As- sessing this burden obviously requires a court to consider the practical problems resulting from litigating in the forum, but it also encom- passes the more abstract matter of submitting to the coercive power of a State that may have little legitimate interest in the claims in ques- tion. /d. (internal citations and quotations removed). Enforcement of the South Dakota tax involves ob- vious practical problems and concerns for the coercive power of the state. Out-of-state and out-of-country websites do not target any particular state. Websites — at least those in English — hope to sell to a worldwide audience. Websites are “present” only in the state(s) where they have employees, agents, or distribution centers. Otherwise, they are not present in any meaningful way. The vast majority are small operations, which are hoping to — and sometimes do — grow larger. If they do become a large operation, like Amazon, they find 14 advantages to becoming “present” in more states and, thereby, subject themselves to taxes in those states. Unless this Court is prepared to expand its Due Process analysis to allow for state long-arm statutes to reach websites with no presence in or meaningful! con- nection to the state, it would be confusing and counter. . productive to have states asserting a right that, as a practical matter, is unenforceable against out-of-state web sellers. Moreover, this Court should consider whether es- tablishing a right (even if unenforceable) for South Da- kota to assert personal jurisdiction over a website located outside the United States would be a danger- ous precedent. Such a holding would be a precedent available to China and other countries to likewise as- sert personal jurisdiction over every U.S. website that sells products to citizens in their countries. Having any and every government in the world able to assert jurisdiction over virtually every website would be wel- come to those countries seeking control over the inter- net. If this Court were both to uphold the South Da- kota law and to allow a further expansion of state long- arm jurisdiction, the tax could be enforced within the American judicial system against websites based in the United States. Nevertheiess, enforcement against websites in other countries would be unachievable without a treaty. That reality, of course, reinforces the Framers’ purpose of protecting, through the Import- Export Clause, the federal government’s powers over 15 foreign commerce. See also U.S. Const. art. I, § 8, cl. 3 (giving power to regulate commerce with foreign coun- tries to the federal government). e vv CONCLUSION For all of the foregoing reasons, the Court should require in this case, or in some future case, briefing on the Import-Export Clause as applied to foreign com- merce. Respectfully submitted, JOHN S. BAKER, JR. Counsel of Record Professor of Law Emeritus, LINDSEY KEISER= LOUISIANA STATE UNIVERSITY 300 Massachusetts Ave. NW 5209 Sea Chase Dr. 5 Washington, D.C. 20001 Amelia Island, FL 32034 Only Admitted in Indiana Telephone: (225) 773-5027 John.Baker@law.|su.edu Counsel for Amicus Curiae --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0787%3A36. Public record. Not legal advice.