386 U.S. 753 (1967), 241, National Bellas Hess v. Department of Revenue

Docket Nº:No. 241
Citation:386 U.S. 753, 87 S.Ct. 1389, 18 L.Ed.2d 505
Party Name:National Bellas Hess v. Department of Revenue
Case Date:May 08, 1967
Court:United States Supreme Court

Page 753

386 U.S. 753 (1967)

87 S.Ct. 1389, 18 L.Ed.2d 505

National Bellas Hess


Department of Revenue

No. 241

United States Supreme Court

May 8, 1967

Argued February 23, 1967



Appellant is a mail order house with its principal place of business in Missouri. It owns no tangible property in Illinois, has no sales outlets, representatives, telephone listing, or solicitors in that State, and does not advertise there by radio, television, billboards, or newspapers. It mails catalogues twice a year to customers throughout the United States, including Illinois, supplemented by occasional "flyers." Orders for merchandise are mailed to appellant's Missouri plant, and goods are sent to customers by mail or common carrier. Appellee obtained a judgment from the Illinois Supreme Court requiring appellant to collect and pay to the State the use tax imposed by Illinois upon consumers who purchase appellant's goods for use within the State.

Held: The Commerce Clause prohibits a State from imposing the duty of use tax collection and payment upon a seller whose only connection with customers in the State is by common carrier or by mail. Pp. 756-760.

34 Ill.2d 164, 214 N.E.2d 755, reversed.

STEWART, J., lead opinion

MR. JUSTICE STEWART delivered the opinion the Court.

The appellant, National Bellas Hess, is a mail order house with its principal place of business in North Kansas

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City, Missouri. It is licensed to do business in only that State and in Delaware, [87 S.Ct. 1390] where it is incorporated. Although the company has neither outlets nor sales representatives in Illinois, the appellee, Department of Revenue, obtained a judgment from the Illinois Supreme Court that National is required to collect and pay to the State the use taxes imposed by Ill.Rev.Stat. c. 120, § 439.3 (1965).1 Since National's constitutional objections to the imposition of this liability present a substantial federal question, we noted probable jurisdiction of its appeal.2

The facts bearing upon National's relationship with Illinois are accurately set forth in the opinion of the State Supreme Court:

[National] does not maintain in Illinois any office, distribution house, sales house, warehouse or any other place of business; it does not have in Illinois any agent, salesman, canvasser, solicitor or other type of representative to sell or take orders, to deliver merchandise, to accept payments, or to service merchandise it sells; it does not own any tangible property, real or personal, in Illinois; it has no telephone listing in Illinois, and it has not advertised its merchandise for sale in newspapers, on billboards, or by radio or television in Illinois.3

All of the contacts which National does have with the State are via the United States mail or common carrier. Twice a year, catalogues are mailed to the company's active or recent customers throughout the Nation, including Illinois. This mailing is supplemented by advertising "flyers" which are occasionally mailed to past and potential customers. Orders for merchandise are mailed by the

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customers to National, and are accepted at its Missouri plant. The ordered goods are then sent to the customers either by mail or by common carrier.

This manner of doing business is sufficient under the Illinois statute to classify National as a "[r]etailer maintaining a place of business in this State," since that term includes any retailer:

Engaging in soliciting orders within this State from users by means of catalogues or other advertising, whether such orders are received or accepted within or without this State.

Ill.Rev.Stat. c. 120, § 439.2 (1965). Accordingly, the statute requires National to collect and pay to the appellee Department the tax imposed by Illinois upon consumers who purchase the company's goods for use within the State.4 When collecting this tax, National must give the Illinois purchaser "a receipt therefor in the manner and form prescribed by the [appellee]," if one is demanded.5 It must also

keep such records, receipts, invoices and other pertinent books, documents, memoranda and papers as the [appellee] shall require, in such form as the [appellee] shall require,

and must submit to such investigations, hearings, and examinations as are needed by the appellee to administer and enforce the use tax law.6 Failure to keep such records or to give required receipts is punishable by a fine of up to $5,000 and imprisonment of up to six months7 Finally, to allow service of process on an out-of-state company like National, the statute designates the Illinois Secretary of State as National's appointed agent, and jurisdiction in tax collection suits attaches

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when process is [87 S.Ct. 1391] served on him and the company is notified by registered mail.8

National argues that the liabilities which Illinois has thus imposed violate the Due Process Clause of the Fourteenth Amendment and create an unconstitutional burden upon interstate commerce. These two claims are closely related. For the test whether a particular state exaction is such as to invade the exclusive authority of Congress to regulate trade between the States, and the test for a State's compliance with the requirements of due process in this area are similar. See Central R. Co. v. Pennsylvania, 370 U.S. 607, 621-622 (concurring opinion of MR. JUSTICE BLACK). As to the former, the Court has held that

State taxation falling on interstate commerce . . . can only be justified as designed to make such commerce bear a fair share of the cost of the local government whose protection it enjoys.

Freeman v. Hewit, 329 U.S. 249, 253. See also Greyhound Lines v. Mealey, 334 U.S. 653, 663; Northwestern Cement Co. v. Minnesota, 358 U.S. 450, 462. And, in determining whether a state tax falls within the confines of the Due Process Clause, the Court has said that the "simple but controlling question is whether the state has given anything for which it can ask return." Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444. See also Standard Oil Co. v. Peck, 342 U.S. 382; Ott v. Mississippi Barge Line, 336 U.S. 169, 174. The same principles have been held applicable in determining the power of a State to impose the burdens of collecting use taxes upon interstate sales. Here too, the Constitution requires "some definite link, some minimum connection, between a state and the person, property or transaction it seeks to tax." Miller Bros. Co. v. Maryland, 347 U.S. 340, 31 345; Scripto,

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Inc. v. Carson, 362 U.S. 207, 210-211.9 See also American Oil Co. v. Neill, 380 U.S. 451, 458.

In applying these principles, the Court has upheld the power of a State to impose liability upon an out-of-state seller to collect a local use tax in a variety of circumstances. Where the sales were arranged by local agents in the taxing State, we have upheld such power. Felt & Tarrant Co. v. Gallagher, 306 U.S. 62; General Trading Co. v. Tax Comm'n, 322 U.S. 335. We have reached the same result where the mail order seller maintained local retail stores. Nelson v. Sears, Roebuck & Co., 312 U.S. 359; Nelson v. Montgomery Ward, 312 U.S. 373.10 In those situations, the out-of-state seller was plainly accorded the protection and services of the taxing State. The case in this Court which [87 S.Ct. 1392] represents the furthest constitutional reach to date of a State's power to deputize an out-of-state retailer as its collection agent for a use tax is Scripto, Inc. v. Carson, 362 U.S. 207. There, we held that Florida could constitutionally impose upon a Georgia seller the duty of collecting a state use tax upon the sale of goods shipped to customers in Florida. In that case, the seller had

10 wholesalers, jobbers, or "salesmen" conducting continuous local solicitation in Florida and forwarding the resulting orders

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from that State to...

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