Knowledge Center

Thursday, July 10, 2014

HMB's David Hughes Quoted in Law360 Story

"In 'Amazon Tax' Case, Justices May Dodge E-Retailer Riddle"

Excerpt from Law360, Friday, July 2, 2014

The U.S. Supreme Court will likely clarify when state tax collection methods can be challenged in federal court when it hears an appeal related to Colorado's "Amazon tax" law, but the more divisive question of when a state can force out-of-state Internet retailers to collect sales tax will probably go unanswered, experts said Wednesday.

Under current law, an attempt to collect sales tax from an out-of-state vendor without Congress' blessing would violate the U.S. Constitution's Commerce Clause, the U.S. Supreme Court ruled in 1992 in Quill Corp. v. North Dakota.

As a result, online retailers only collect sales taxes in states where they have a physical nexus - some kind of brick-and-mortar operation, such as a warehouse, storefront or office building. States and local businesses say that this system gives online retailers an advantage because customers can avoid paying sales taxes.

"I don't believe the Supreme Court took this case to expand Quill," [Edward Zelinsky, a professor at the Benjamin N. Cardozo School of Law] said. "Every time the court gets a petition to rethink Quill, the court says no. I'm convinced that with this court what you see is what you get. They saw a bunch of circuit courts coming to different decisions on the scope of the Tax Injunction Act and that is the classic case when the Supreme Court gets involved."

David Hughes, a partner at Horwood Marcus & Berk Chtd., agreed with Zelinsky's assessment and said it's highly unlikely the court will touch its previous holding in Quill. Although Hughes cautioned that the [Direct Marketing Association] would have to be careful in how it argues the case, he said there is an argument to be made that the TIA does not bar its action.

"Don't get your hopes up for an exciting decision as far as sales tax collection," Hughes said.

"I don't see the Supreme Court getting to the merits," he said. "The reason the Supreme Court took the case was to provide an opinion on the scope of the Tax Injunction Act."

To read more, please visit the Law360 website.

Copyright 2014 Law360. Reprinted with permission.

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