Document Prepared by and Received from Brann & Isaacson, Lead Counsel for Wayfair, Inc.

Prepared by Brann & Isaacson

Statement of Interest of Potential Amici Curiae in Support of the Respondents in South Dakota v. Wayfair Inc., et al. (U.S. S.Ct. No. 17-494)

On January 12, 2018, the United States Supreme Court granted the State of South Dakota’s petition for a writ of certiorari seeking review of the decision of the South Dakota Supreme Court in State of South Dakota v. Wayfair Inc,. et al., 2017 S.D. 56 (Sept. 13, 2017).  In State v. Wayfair, the state supreme court affirmed a lower court ruling in favor of retailers Wayfair, Newegg, and, that struck down South Dakota’s “economic presence” sales tax nexus law as unconstitutional based on the physical presence, “substantial nexus” standard for state sales/use taxes established by the Supreme Court in National Bellas Hess, Inc. v. Dep’t of Revenue, 386 U.S. 753 (1967), and reaffirmed by the Court in Quill Corp. v. North Dakota, 504 U.S. 298 (1992).  The Question Presented by the State’s petition is:

“Should the Court abrogate Quill’s sales-tax-only, physical-presence requirement?”   

The South Dakota statute requires retailers that have no physical presence in the state to collect and remit South Dakota sales and use tax if they have in-state sales of more than $100,000 or at least 200 transactions for delivery into the state in the current or prior calendar year.  The tax collection obligations imposed on remote sellers under the South Dakota law are plainly at odds with the physical presence standard reaffirmed in Quill.  The State’s express objective is to persuade the U.S. Supreme Court to overrule Quill’s long-standing limitations on state taxing authority over interstate commerce.

There are several reasons why organizations and businesses representing a variety of interests, and not merely remote sellers of tangible goods, should oppose the State’s effort to overturn Quill:

  • South Dakota seeks to sweep aside Commerce Clause limitations on state taxing power: South Dakota’s effort to abrogate Quill would: (a) permit the imposition of unfettered tax obligations on interstate businesses by the more than 12,000 state and local taxing jurisdictions in the U.S.; (b) allow a state or locality to dictate its own jurisdiction based solely on a minimum level of in-state sales or transactions; and (c) expose not only retailers of tangible goods (catalogers, Internet sellers, television and telemarketing vendors), but also service providers and sellers of digital products – i.e., any business selling at retail – to new and burdensome state tax obligations.
  • The State has argued for elimination of the dormant Commerce Clause doctrine altogether: State authority to regulate interstate commerce more generally is limited by the fundamental principles of the dormant Commerce Clause.  In its petition for cert, the State asserted that the “dormant Commerce Clause as a whole is incoherent and ‘unworkable,’” signaling its intent to seek a seismic alteration in constitutional doctrine, eliminating two centuries of dormant Commerce Clause jurisprudence that sets restrictions on state authority to regulate interstate commerce.
  • Businesses that have followed existing precedent could be exposed to massive, retroactive tax liability: When precedent is overruled, the change in the law typically applies retroactively. Thousands of businesses that have relied upon the Bellas Hess/Quill line of precedent to protect them from burdensome sales and use tax obligations would become liable for uncollected taxes, plus interest and penalties, for past periods.  Although South Dakota in its statute has decided to forego such back taxes, very few other states or localities have.  The potential liability for billions of dollars of back taxes could bankrupt businesses and severely harm an entire industry.
  • Smaller businesses / start-ups will suffer and innovation through the Internet will be stifled: The Internet is increasingly dominated by large sellers that already collect sales tax and can afford the compliance costs of nationwide tax collection.  Small businesses looking to launch or grow an online business do not have the same resources to cope with the requirements of thousands of different taxing jurisdictions.  
  • Overturning Quill would eliminate any incentive for states to simplify state tax systems: No one disputes that the U.S. sales tax system is wildly complex.  It requires updating and simplification for the Internet era.  Absent Quill, states will have no incentive to reform it.  Congress, which is actively considering multiple pieces of legislation regarding state taxation of remote sellers, is the body with the institutional expertise and national perspective required to balance the competing interests.
  • A decision abrogating Quill would undermine important principles of stare decisis: The physical presence standard governing when a state may impose a sales/use tax collection obligation has been the law for more than 50 years and has never been undermined by any Supreme Court decision, while prompting the reliance of thousands of businesses.  If principles of stare decisis may be discarded in these circumstances, then the value of precedent in nearly any context may be open to attack.
  • The procedure adopted by South Dakota is akin to constitutional nullification: The State adopted a statute it knew to be unconstitutional, with the express intention of overturning established precedent with which it disagrees.  Validating South Dakota’s approach would approve a strategy of open defiance of precedent by states dissatisfied with the federal constitutional limitations on their authority.
  • There will be numerous amici supporting the State: At the petition for certiorari stage, fifteen different amicus curiae briefs were filed on behalf of the State, representing dozens of other states, numerous state and local government organizations, several national and local trade associations, tax policy groups, and academics.  Even more amici are likely to file briefs in support of the State at the merits stage.  Businesses and organizations concerned about the possible abrogation of the Quill doctrine should not stay on the sidelines, but should ensure that their concerns are heard by the Court.

The Respondents would welcome briefs of amici curiae in support of their position.  The expected due date for briefs in support of the Respondents is April 4, 2018.  Please contact George Isaacson ( or Matthew Schaefer ( to discuss.

John Schultz