Knowledge Center

Tuesday, March 24, 2015

HMB's Jordan Goodman in Law360 Comments on Justice Kennedy's Opinion Calling for Re-evaluation of Quill 

"Retailers Say High Court Use Tax Action Is Last Resort"

By Ama Sarfo
Law360, March 23, 2015

The brick-and-mortar retail industry is grateful that Justice Anthony Kennedy wants the U.S. Supreme Court to revisit two long-standing rulings that bar states from collecting use taxes from Internet sellers and other remote vendors, but the lobby says the best outcome will come from Congress.

Earlier this month, the high court addressed a tiny part of the battle when it ruled that taxpayers can challenge state use tax notice and reporting requirements in federal court. And in a lone concurrence, Justice Kennedy used the ruling as an opportunity to heavily criticize the Supreme Court's use tax doctrine, which he says is depressing state revenues...

Justice Kennedy...pointed out that when the high court decided a key use tax case, Quill Corp. v. North Dakota, the Internet was in its infancy, and mail-order sales in the U.S. were $180 billion, a paltry amount compared to the $3.16 trillion in U.S. e-commerce sales that occurred in 2008.

Now, states can't collect much-needed revenue from online and remote-seller transactions because of the Supreme Court's rulings in Quill and an earlier case, National Bellas Hess Inc. v. Department of Revenue of Illinois, Justice Kennedy said.

And he argues that the technological sea change obligates the court to revisit Quill and Bellas Hess.

Justice Kennedy's call [to action] may not be a literal one, says Jordan Goodman, head of Horwood Marcus & Berk Chtd.'s state and local tax practice.

"I don't think Justice Kennedy really wants another Quill-type case to come before the Supreme Court ... I think this was a motivational ploy by Kennedy to have Congress act," Goodman said. "Coaches do this a lot when a star isn't performing up to standards - by threatening that another player could take their place as easily."

...Justice Kennedy's concurrence is further undermined by the fact that the high court has declined other opportunities to hear other remote seller litigation cases.

"Justice Kennedy is saying the justices have the ability to legislate from the Supreme Court, but I don't think the court wants to do that. They had an opportunity when the Overstock and Amazon [click-through nexus] cases went up from the New York courts," Goodman added. "Although the cases focused on an agency theory, the Supreme Court could have addressed physical presence in those cases, and they chose not to."

The full article is available on Law360's website.

 Copyright 2015 Portfolio Media, Inc.

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