Banner year for state tax cases before the U.S. Supreme Court.

• Author: Goral, Mike

The U.S. Supreme Court has been unusually busy this year with state tax cases. The Court has already decided two cases and another seven state tax cases are pending. Issues to be considered in these cases include jurisdiction to tax, business/nonbusiness income classification, income tax base, discriminatory taxation and taxation of instruments of international commerce. Each of these cases will likely have a profound effect on future state and local tax assessments. Two cases (Barker v. Kansas and Quill Corporation v. North Dakota) have been recently decided. Most, if not all, of the others will be decided sometime before June 29, 1992 when the Court adjourns for the summer. Below is a brief discussion of the facts and issues presented in each case.

Jurisdiction to tax

Mail-order use tax collections: On May 26, 1992, the Court decided Quill Corporation v. North Dakota in favor of the The Court in Quill held that a state could not require an out-of-state mail-order seller to collect use taxes on sales made into the state if the seller has no physical presence in the state. In so holding, the Court refused to overrule National Bellas Hess, Inc., 386 US 753 (1967), in which it found that economic exploitation of the marketplace without physical presence is insufficient contact with a state in order to impose a duty to collect use taxes. The decision in Quill is based on the Commerce Clause rather than the Due Process Clause and hence Congress is free to legislate a Federal law that would require the out-of-state mail-order sellers to collect the tax.

PL 86-272: Oral arguments have been heard in Wisconsin Department of Revenue v. William Wrigley, Jr. Co. In Wrigley, the Court is reviewing a decision of the Wisconsin Supreme Court that adopted an extremely broad view of the activities encompassed in the term "solicitation" under PL 86-272. This Federal statute prohibits a state from imposing an income tax on an out-of-state seller of tangible personal property, if its only activities in the state are solicitation of orders and delivery from out-of-state. The statute does not define the term "solicitation"; since its enactment in 1959, there has been considerable debate over the proper scope of the term.

The oral arguments focused on the facts and circumstances of the case at hand, particularly customs of the chewing gum industry. Additionally, the Court considered whether de minimis activity within a state should be permissible without...