U.S. SUPREME COURT QUESTIONS QUILL'S SHELF LIFE

Don't you hate it when you go into your kitchen pantry for an ingredient or some type of food product, and learn that the product is past it's expiration date? What do you do? Do you take a chance and risk it? Do you use it or throw it out? Do you open it up and smell it to see if it might be okay? Maybe it depends on the ingredient. Well, not unlike the products in your pantry, Justice Kennedy on the U.S. Supreme Court has placed a spotlight on a discussion that was probably inevitable - has Quill outlived its usefulness?

The Supreme Court of the United States decided on March 3, 2015 that the Direct Marketing Association's lawsuit to stop Colorado from imposing information reporting requirements on out-of-state sellers lacking nexus, was not barred by the Tax Injunction Act. Meaning, the lawsuit is not barred, and the case is remanded back to the Tenth Circuit for additional consideration.

DIRECT MARKETING ASSOCIATION v. BROHL, EXECUTIVE DIRECTOR, COLORADO DEPARTMENT OF REVENUE  

According to the decision, the Court reasoned that 'information gathering' is not equivalent to 'assessment, levy or collection.' Information gathering is an activity that occurs before assessment levy or collection. Thus, the notice requirements are not part of a state's assessment and collection procedures. Consequently, the Tax Injunction Act does not bar a lawsuit against a state's imposition of information reporting, as it would a lawsuit against a state's assessment, levy or collection activities.

Despite this apparent victory for the Direct Marketing Association and remote retailers, Justice Kennedy gave remarks in his concurring opinion that insinuates a challenge to current Commerce Clause jurisprudence could change the face of multistate taxation entirely.

In his opinion, he stated there is a "continuing injustice" on states caused by Commerce Clause jurisprudence requiring a business to have a physical presence in a state before being required to collect sales tax from customers (National Bellas Hess, Inc. v. Department of Revenue of Ill.,386 U. S. 753 (1967). Quill Corp. v. North Dakota, 504 U. S.298, 311 (1992)).

He comments that due to the depth at which our world is connected and business is conducted, "a business may be present in a State in a meaningful way without that presence being physical in the traditional sense of the term." As a result, Quill "should only be left in place only if a powerful showing can be made that its rationale is still correct."

What will happen next?

Will this provide extra traction to the passage of the Marketplace Fairness Act?

Will we see a court case challenging Quill?

Will other states attempt to impose information reporting requirements similar to Colorado?

Only time will tell.