Justices Weigh Congressional Inaction on Internet Sales Tax
Supreme Court muses about “obsolete” ruling

The Supreme Court almost yearned Tuesday for Congress to resolve a major internet sales tax issue, if only to relieve the justices from having to make a call in a case with potential widespread effects on the nation’s online commerce.
“Is there anything we can do to give Congress a signal it should act more affirmatively in this area?” Justice Sonia Sotomayor asked near the end of an hour of oral arguments.
South Dakota has asked the Supreme Court to overturn its 1992 ruling that bars states from collecting sales tax from out-of-state vendors, which they argue is outdated because of the growth of online retailers, and costs states billions in sales and use taxes each year.
The justices had invited Congress to take action 26 years ago in the case called Quill Corp v. North Dakota. But Congress has not been able to do so despite numerous legislative efforts.
On Tuesday, enough justices appeared ready to keep the Quill decision because of concerns about the unknown consequences of overturning it, and a sense that Congress is better able to weigh issues of interstate commerce and craft a solution. The justices will decide before the term ends in June.
Justices Samuel A. Alito Jr. and Elena Kagan asked questions that raised concerns about the “binary” nature of the Supreme Court’s options in the case: either continue to wait for Congress to act, or upend a long-standing decision that has shaped e-commerce and let states tax out-of-state online sales however they want.
“But Congress is capable of crafting compromises and trying to figure out how to balance the wide range of interests involved here,” Kagan said. “And then Congress, if it decides it wants to craft a compromise, can craft a compromise in ways that we cannot.”
Obsolete Ruling?
Justice Stephen G. Breyer cited briefs from members of Congress that say lawmakers were about to act, but then the Supreme Court agreed to decide this case. Lawmakers who worked on legislation on the issue watched the arguments from the gallery, including Sens. Michael B. Enzi, R-Wyo., Heidi Heitkamp, D-N.D., and Lamar Alexander, R-Tenn., as well as Rep. Robert W. Goodlatte, R-Va.
“Now that’s their view of it,” Breyer said. “And between whether they know or whether I know, I guess they have a better view. They’re members of Congress and they point to many statutes.”
Sotomayor and Breyer raised numerous concerns about what would happen if Quill were overturned, such as how much sales tax revenue states could collect and whether they could do so retroactively.
Breyer raised “empirical questions” that cannot be answered in the case, such as whether such sales tax collection would create barriers to entry for small businesses.
“Now that’s something the antitrust division could testify about, but they’re not going to testify here,” Breyer said. “And so that’s the kind of problem that worries me.”
Chief Justice John G. Roberts Jr. asked why the court shouldn’t just leave the issue alone, suggesting that sales tax collection is a diminishing problem for states because online retailers now increasingly have a physical presence in states. The Quill decision allowed states to collect sales tax if an online company had such a presence.
“Sure, e-commerce is expanding, and companies like Amazon account for a large part of that,” Roberts said. “But they’re already collecting in all 50 states.”
Justices Anthony M. Kennedy and Ruth Bader Ginsburg were the most critical of the Quill decision. Kennedy said some wanted Congress to act to correct a ruling that had been “proven incorrect.”
“If time has, and changing conditions, have rendered it obsolete, why should the court which created the doctrine say: Well, we’ll let Congress fix up what turns out to be our obsolete ruling,” Ginsburg said.
Ginsburg suggested Congress could act if the Supreme Court overturned the Quill decision. To back up her point, she referred to how the justices dismissed as moot Tuesday a closely watched privacy case about whether email service providers must comply with warrants even if data is stored outside the United States. The case was rendered moot because of related provisions included in the fiscal 2018 omnibus spending package signed into law in March.
“We saw today, from the announcement today, that Congress can sometimes act with rapidity,” Ginsburg said.
Kagan said the 25-plus years that Congress has chosen not to act on the internet sales tax issue “gives us reason to pause.”
“This is not the kind of issue where you say: Well, probably didn’t get on Congress’s radar screen or maybe Congress was too busy doing other things,” Kagan said. “This is a very prominent issue which Congress has been aware of for a very long time and has chosen not to do something about that.”
The case is South Dakota v. Wayfair, Inc., Docket No. 17-494.