Statement Opposed to Overturning Quill

Overturning Quill Corp v. North Dakota (1992) would upend decades of precedent safeguarding Congress’s constitutional prerogative to regulate interstate commerce. Abrogating the limits of constitutional preemption on matters of interstate commerce would suddenly subject online retailers to thousands of taxing jurisdictions. This will stunt economic growth and job creation.

As articulated by the Court, states are prohibited placing “undue burdens on interstate commerce.” Under Quill, states may not subject businesses lacking a “substantial nexus” or link to a state through a “physical presence” to that state’s sales and use tax collection requirements. Accordingly, states are barred from imposing tax reporting or collection duties on out-of-state businesses where such businesses’ only connection to the state involves the use of common carriers such as the mail service or the licensing of software to an in-state resident.

Jonathan Williams, ALEC chief economist and vice president of the Center for State Fiscal Reform warned elimination of these constitutional safeguards “would open the floodgates for revenue-hungry state governments to reach across their borders to tax and audit interstate commerce.” Joel Griffith, director of the Center for State Fiscal Reform at ALEC stated, “Throughout the ongoing transformation of the information era, the physical nexus requirements articulated by the Supreme Court have sheltered technological innovation, upstart businesses, and consumers from state and local governments overly eager to collect additional revenue.”

Our founding document—the Constitution— wisely delegated to Congress the authority to regulate interstate commerce. Technology and business practices have advanced immensely the past two centuries, largely because commerce could flow unfettered between the states. And Congress remains empowered to address concerns regarding the technicalities of these advances through legislation.

Short-circuiting the constitutional process will threaten economic growth as online retailers—many of which are small businesses—will likely become subject to onerous sales tax collection and remittance requirements, as well as audit risk from dozens of other states and thousands of municipalities. The substantial compliance costs (both time and financial) will hamper the very job creators that help light the way to prosperity. ALEC members strongly oppose efforts to redefine the Constitution in a way that would erode the nexus requirements requiring an actual physical presence for state taxation purposes.