For generations states have been barred by the dormant commerce clause from requiring retailers to collect sales taxes unless they have a “physical presence” in the taxing state, thanks to two Supreme Court decisions. National Bellas Hess, Inc. v. Dept of Revenue, 386 U.S. 753 (1967) so held based on both the due process and dormant commerce clauses. Quill Corp v. North Dakota, 504 U.S. 298 (1992) followed. The court unanimously agreed that due process was no obstacle to imposing a sales tax collection obligation on retailers, but a five-person plurality reaffirmed Bellas’ interstate commerce burden holding, agreeing that compelling foreign retailers to collect sales taxes placed an unconstitutional burden on interstate commerce. Now, South Dakota has directly confronted that rule and asked the Supreme Court to overrule Quill. South Dakota v. Wayfair, Inc. (No. 17-494).

The moral and practical consequences of Bellas and Quill are obvious. Local and state governments, particularly those which have no income tax and rely almost solely on sales and use tax revenues, are extraordinarily harmed. As South Dakota has documented in its presentations to the Supreme Court, in 2012 state and local governments were owed an estimated $23 billion in taxes uncollected because of Quill, and $33.9 billion losses in 2018, and $211 billion from 2018-2022, are projected. To make up the shortfall, most states raise sales-tax rates, driving more consumers to avoid them by purchasing online. The states can ill afford losing these monies, which Justice Kennedy, concurring in Direct Mktg. Ass’n v. Brohl, 135 S. Ct. 1124 (2015), noted could be used for “education systems, healthcare services, and infrastructure.” Secondly, Quill unconscionably subsidizes internet retailers to the detriment of local mom-and-pop stores, who have enough difficulty as it is competing with them, but must also collect sales taxes from which the former are exempted.