504 U.S. 298 (1992), 91-194, Quill Corp. v. North Dakota by and Through Heitkamp
|Docket Nº:||No. 91-194|
|Citation:||504 U.S. 298, 112 S.Ct. 1904, 119 L.Ed.2d 91, 60 U.S.L.W. 4423|
|Party Name:||Quill Corp. v. North Dakota by and Through Heitkamp|
|Case Date:||May 26, 1992|
|Court:||United States Supreme Court|
Argued Jan. 22, 1992
CERTIORARI TO THE SUPREME COURT OF NORTH DAKOTA
Respondent North Dakota filed an action in state court to require petitioner Quill Corporation -- an out-of-state mail-order house with neither outlets nor sales representatives in the State -- to collect and pay a use tax on goods purchased for use in the State. The trial court ruled in Quill's favor. It found the case indistinguishable from National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753, which, in holding that a similar Illinois statute violated the Fourteenth Amendment's Due Process Clause and created an unconstitutional burden on interstate commerce, concluded that a "seller whose only connection with customers in the State is by common carrier or the . . . mail" lacked the requisite minimum contacts with the State. Id. at 758. The State Supreme Court reversed, concluding, inter alia, that, pursuant to Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, and its progeny, the Commerce Clause no longer mandated the sort of physical presence nexus suggested in Bellas Hess; and that, with respect to the Due Process Clause, cases following Bellas Hess had not construed minimum contacts to require physical presence within a State as a prerequisite to the legitimate exercise of state power.
1. The Due Process Clause does not bar enforcement of the State's use tax against Quill. This Court's due process jurisprudence has evolved substantially since Bellas Hess, abandoning formalistic tests focused on a defendant's presence within a State in favor of a more flexible inquiry into whether a defendant's contacts with the forum made it reasonable, in the context of the federal system of government, to require it to defend the suit in that State. See, Shaffer v. Heitner, 433 U.S. 186, 212. Thus, to the extent that this Court's decisions have indicated that the clause requires a physical presence in a State, they are overruled. In this case, Quill has purposefully directed its activities at North Dakota residents, the magnitude of those contacts are more than sufficient for due process purposes, and the tax is related to the benefits Quill receives from access to the State. Pp. 305-308.
2. The State's enforcement of the use tax against Quill places an unconstitutional burden on interstate commerce. Pp. 309-319.
(a) Bellas Hess was not rendered obsolete by this Court's subsequent decision in Complete Auto, supra, which set forth the four-part test that continues to govern the validity of state taxes under the Commerce Clause. Although Complete Auto renounced an analytical approach that looked to a statute's formal language, rather than its practical effect, in determining a state tax statute's validity, the Bellas Hess decision did not rely on such formalism. Nor is Bellas Hess inconsistent with Complete Auto. It concerns the first part of the Complete Auto, test and stands for the proposition that a vendor whose only contacts with the taxing State are by mail or common carrier lacks the "substantial nexus" required by the Commerce Clause. Pp. 309-312.
(b) Contrary to the State's argument, a mail-order house may have the "minimum contacts" with a taxing State as required by the Due Process Clause, and yet lack the "substantial nexus" with the State required by the Commerce Clause. These requirements are not identical, and are animated by different constitutional concerns and policies. Due process concerns the fundamental fairness of governmental activity, and the touchstone of due process nexus analysis is often identified as "notice" or "fair warning." In contrast, the Commerce Clause and its nexus requirement are informed by structural concerns about the effects of state regulation on the national economy. P. 312-313.
(c) The evolution of this Court's Commerce Clause jurisprudence does not indicate repudiation of the Bellas Hess rule. While cases subsequent to Bellas Hess and [112 S.Ct. 1907] concerning other types of taxes have not adopted a bright-1ine, physical presence requirement similar to that in Bellas Hess, see, e.g., Standard Pressed Steel Co. v. Department of Revenue of Wash., 419 U.S. 560, their reasoning does not compel rejection of the Bellas Hess rule regarding sales and use taxes. To the contrary, the continuing value of a bright-1ine rule in this area and the doctrine and principles of stare decisis indicate that the rule remains good law. Pp. 314-318.
(d) The underlying issue here is one that Congress may be better qualified to resolve, and one that it has the ultimate power to resolve. P. 318-319.
470 N.W.2d 203 (N.D.1991), reversed and remanded.
STEVENS, J., delivered the opinion for a unanimous Court with respect to Parts I, II, and III, and the opinion of the Court with respect to Part IV, in which REHNQUIST, C.J., and BLACKMUN, O'CONNOR, and SOUTER, JJ., joined. SCALIA, J., filed an opinion concurring in part and concurring in the judgment, in which KENNEDY and THOMAS, JJ., joined, post, p. 319. WHITE, J., filed an opinion concurring in part and dissenting in part, post, p. 321.
STEVENS, J., lead opinion
JUSTICE STEVENS delivered the opinion of the Court.
This case, like National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753 (1967), involves a State's attempt to require an out-of-state mail-order house that has neither outlets nor sales representatives in the State to collect and pay a use tax on goods purchased for use within the State. In Bellas Hess, we held that a similar Illinois statute violated the Due Process Clause of the Fourteenth Amendment and created an unconstitutional burden on interstate commerce. In particular, we ruled that a "seller whose only connection with customers in the State is by common carrier or the United States mail" lacked the requisite minimum contacts with the State. Id. at 758.
In this case, the Supreme Court of North Dakota declined to follow Bellas Hess, because "the tremendous social, economic, commercial, and legal innovations" of the past quarter-century have rendered its holding "obsole[te]." 470 N.W.2d 203, 208 (1991). Having granted certiorari, 502 U.S. 808, we must either reverse the State Supreme Court
or overrule Bellas Hess. While we agree with much of the State Court's reasoning, we take the former course.
Quill is a Delaware corporation with offices and warehouses in Illinois,, California, and Georgia. None of its employees work or reside in North Dakota, and its ownership of tangible property in that State is either insignificant or nonexistent. Quill sells office equipment and supplies; it solicits business through catalogs and flyers, advertisements in national periodicals, and telephone calls. Its annual national sales exceed $200,000,000, of which almost $1,000,000 are made to about 3,000 customers in North Dakota. It is the sixth largest vendor of office supplies in the State. It delivers all of its merchandise to its North Dakota customers by mail or common carrier from out-of-state locations.
As a corollary to its sales tax, North Dakota imposes a use tax upon property purchased for storage, use or consumption within the State. North Dakota requires every "retailer maintaining a place of business in" the State to collect the tax from the consumer and remit it to the State. N.D.Cent.Code § 57-40.2-07 (Supp.1991). In 1987, North Dakota amended the statutory definition of the term "retailer" to include "every person who engages in regular or systematic
solicitation of a consumer market in th[e] state." § 57-40.2-01(6). State regulations in turn define "regular or systematic solicitation" to mean three or more advertisements within a 12-month period. N.D.Admin.Code § 81-04.1-01-03.1 (1988). Thus, since 1987, mail-order companies that engage in such solicitation have been subject to the tax even if they maintain no property or personnel in North Dakota.
Quill has taken the position that North Dakota does not have the power to compel it to collect a use tax from its North Dakota customers. Consequently, the State, through its Tax Commissioner, filed this action to require Quill to pay taxes (as well as interest and penalties) on all such sales made after July 1, 1987. The trial court ruled in Quill's favor, finding the case indistinguishable from Bellas Hess; specifically, it found that, because the State had not shown that it had spent tax revenues for the benefit of the mail-order business, there was no "nexus to allow the state to define retailer in the manner it chose." App. to Pet. for Cert. A41.
The North Dakota Supreme Court reversed, concluding that "wholesale changes" in both the economy and the law made it inappropriate to follow Bellas Hess today. 470 N.W.2d at 213. The principal economic change noted by the court was the remarkable growth of the mail-order business "from a relatively inconsequential market niche" in 1967 to a "goliath" with annual sales that reached "the staggering figure of $183.3 billion in 1989." Id. at 208, 209. Moreover, the court observed, advances in computer technology greatly eased the burden of compliance with a "`welter of complicated obligations'" imposed by state and local taxing authorities. Id. at 215 (quoting Bellas Hess, 386 U.S. at 759-760).
Equally important, in the court's view, were the changes in the "legal landscape." With respect to the Commerce Clause, the court emphasized that Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), rejected the line of cases holding that the direct taxation of interstate...
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