TEI Files Amicus Brief With U.S. Supreme Court in the South Dakota v. Wayfair Economic Nexus Case.

• Position: Tax Executives Institute

On April 4, 2018, TEl filed an amicus brief with the U.S. Supreme Court in South Dakota v. Wayfair, No. 17-494. In Wayfair, Petitioner South Dakota asked the Court to modify the "physical presence" rule established in National Bellas Hess, Inc. v. Department of Revenue of the State of Illinois, 386 U.S. 753 (1967), and upheld in Quill Corporation v. North Dakota, 504 U.S. 28 (1992). TEl's brief did not take a position on whether the physical presence rule should be upheld, modified, or overturned. Rather, TEI filed the brief to bring the Court's attention to the injustice and subsequent litigation that would ensue if the ruling requested by South Dakota were to be applied retroactively. TEl's brief was prepared under the aegis of TEl's State and Local Tax Committee, whose chair is Marji Gordon-Brown. Pilar Mata, tax counsel for TEI, coordinated the preparation of the brief and was its principal author.

SOUTH DAKOTA,

Petitioner,

v.

WAYFAIR, INC., OVERSTOCK.COM, INC., AND NEWEGG, INC.,

Respondents.

IN THE

Supreme Court of the United States

On Writ of Certiorari to the Supreme Court of South Dakota

BRIEF OF TAX EXECUTIVES INSTITUTE, INC.

AS AMICUS CURIAE IN SUPPORT OF RESPONDENTS

A. PILAR MATA

Counsel of Record

W. PATRICK EVANS

ELI J. DICKER

TAX EXECUTIVES INSTITUTE, INC.

1200 G Street, N.W., Suite 300

Washington, D.C. 20005-3814

(202) 464-8346

pmata@tei.org

Counsel for Amicus Curiae

April 4, 2018

TABLE OF CONTENTS

TABLE OF AUTHORITIES INTRODUCTION STATEMENT OF INTEREST SUMMARY OF THE ARGUMENT THE ARGUMENT

1. RETROACTIVITY IS AN IMPORTANT ISSUE IN THIS CASE

   A. Eight States Enacted Economic Presence Laws Without Safeguards Against Retroactivity

   B. Twenty States Have Existing Laws that Would Permit the Retroactive Application of a Decision Abandoning Quills Physical Presence Rule

   C. States Could Enact Retroactive Tax Legislation to Adopt the Courts Standard

2. ALLOWING STATES TO RETROACTIVELY APPLY A DECISION MODIFYING QUILL WOULD RAISE DUE PROCESS CONCERNS AND

   SUBVERT PRINCIPLES OF SOUND JUDICIAL AND TAX POLICY

   C. Modifying Quill and Allowing States to Apply the Decision Retroactively Would Undermine the Intended Operation of Sales and Use Taxes

   D. Modifying Quill and Allowing States to Apply the Decision Retroactively Would Raise Significant Due Process Concerns

   E. Principles of Sound Judicial and Tax Policy Require This Court to Address the Retroactivity Issues Described Above If This Court Modifies Quill

   CONCLUSION

   TABLE OF AUTHORITIES

   CASES

   Carey v. Piphus, 435 U.S. 247 (1978)

   Dot Foods, Inc. v. State of Washington, Dep't of Revenue, 372 P.3d 747 (Wash. 2016) Estate of Hambleton, 335 P.3d 398 (Wash. 2014)

   Gen. Motors Corp. v. Dep't of Treasury, 803 N.W2d 698 (Mich. Ct. App. 2010)

   Harper v. Virginia Dep't of Taxation, 509 U.S. 86(1993)

   Int'l Bus. Machs. Corp. v. Dep't of Treasury, 878 N.W.2d 891 (Mich. App. 2016)

   Int'l Shoe Co. v. State of Washington, 326 U.S. 310(1945)

   James B. Beam Distilling Co. v. Georgia, 501 U.S. 529(1991)

   McKesson Corp. v. Div. of Alcoholic Beverages & Tobacco, Dep't of Bus. Regulation of Florida, 496 U.S. 18(1990)

   M'Culloch v. Maryland, 17 U.S. 316 (1819)

   Nat'l Bellas Hess, Inc. v. Dep't of Revenue of the State of Illinois, 386 U.S. 753 (1967)

   Quill Corp. v. North Dakota, 504 U.S. 28 (1992)

   Trinova Corp. v. Michigan Dep't of Treasury, 498 U.S. 358 (1991)

   LEGISLATIVE MATERIALS

   Ala. Code [section] 40-2A-7(b)(2)

   Cal. Rev. & Tax. Code [section] 6203(c)

   Cal. Rev. & Tax. Code [section] 6487(a)

   Colo. Rev. Stat. [section] 39-26-102(3)(b)

   Colo. Rev. Stat. [section]39-26-125

   Conn. Gen. Stat. [section] 12-407(a)(15)(A)(v)

   Conn. Gen. Stat. [section] 12-415(f)

   Fla.Stat. [section]95.091(3)(a)(5)

   Fla.Stat. [section]212.0596(2)(1)

   Ga. Code Ann. [section] 48-2-49(c)

   Ga. Code Ann. [section] 48-8-2(8)(I)(i)(III)

   Idaho Code [section]63-3611

   Idaho Code [section] 63-3633

   Ind. Code[section]6-2.5-2-l(c)

   Ind. Code [section]6-8.1-5-2(f)

   I.R.C. [section] 501(c)(6)

   Kan. Stat. Ann [section] 79-3609(b)

   Kan. Stat. Ann. [section] 79-3702(h)(l)(F)

   La. Rev. Stat. Ann. [section] 47:305(E)

   La. Rev. Stat. Ann. [section] 47:1580

   Me. Rev. Stat. Ann. tit. 36, [section] 141.2.C

   Me. Rev. Stat. Ann. tit. 36, [section] 1951-B(7)

   Mass. Gen. Laws ch. 62C, [section] 26(d)

   Miss. Code Ann. [section] 27-65-42

   Nev. Rev. Stat. [section] 372.724

   Nev. Rev. Stat. [section] 360.355(2)

   N.J. Stat. Ann. [section] 54:32B-2(i)(l)(C)

   N.J. Stat. Ann. [section] 54:49-6(b)

   N.M. Stat. Ann. [section] 7-l-18(C)

   N.M. Stat. Ann. [section] 7-9-10(A)

   N.Y. Tax Law [section] 1101(b)(8)(E)

   N.Y.Tax Law [section] 1147(b)

   N.C. Gen. Stat. [section] 105-164.8(b)(5)

   N.C. Gen. Stat. [section] 105-241.1(e)

   N.D. Cent. Code [section] 57-39.2-15

   N.D. Cent. Code [section] 57-40.2-01(7)

   Ohio Rev. Code Ann. [section] 5703.58

   Ohio Rev. Code Ann. [section] 5741.01(I)(2)

   Okla. Stat. [section] 223.E

   72 Pa. Cons. Stat. [section] 7201(b)(3.3)

   72 Pa. Cons. Stat. [section] 7259

   44 R.I. Gen. Laws [section] 44-18-15(a)(6)

   44 R.I. Gen. Laws [section] 44-19-13

   S.C. Code Ann. [section] 12-36-1340(4)

   S.C Code Ann. [section] 12-54-85(c)

   S.D. Codified Laws [section] 10-45-2

   S.D. Codified Laws [section] 10-45-22

   S.D. Senate Bill 106, 2016 Leg. Assemb., 91st Sess. (S.D. 2016)

   Tenn. Code Ann. 2017 Pub. Acts, c. 452, [section] 2

   Tex. Tax Code Ann. [section] 151.107(a)(4)-(5)

   Tex. Tax Code Ann. [section] 151.307(a)

   U.S. Const., amend XIV.

   Va. Code Ann. [section] 58.1-612(F)

   Va. Code Ann. [section] 58.1-634

   2016 Vt. Laws No. [section] 41(5)

   Vt. Stat. Ann. tit. 32, [section] 9701

   Wis. Stat. [section]77.51 (13g)

   Wis. Stat. [section] 77.59(3)

   Wyo. Stat. Ann. [section] 39-15-107(a)(iv)

   Wyo. Stat. Ann. [section] 39-15-110(b)

   Wyo. Stat. Ann. [section] 39-15-501

   REGULATIONS

   Ala. Admin. Code r. 810-6-2-.90.03

   Colo. Code Regs. [section] 39-26-102.3(1)

   830 Mass. Regs. Code 64H.1.7

   Miss. Admin. Code [section] 35.IV.3.09(100), (101) and (103)

   Okla. Admin. Code 710:65-15-3(c)

   Tenn. Comp. R. & Regs. 1320-05-01-.129

   34 Tex. Admin. Code [section] 3.339(a)(2)(B)

   OTHER

   California 540 Form and Instructions: 2017 Personal Income Tax Booklet

   Hellerstein, Hellerstein & Swain, State Taxation (Thomson Reuters/Tax & Accounting, 3rd ed. 2001, with updates through Dec. 2017)

   Jenkins, State Taxation of Interstate Commerce, 27 Tenn. L. Rev. 239 (1960)

   New York State 2017 Instructions for Form IT-201 Full-Year Resident Income Tax Return

   U.S. Government Accountability Office, GAO-18-114, Saks Tax--States Could Gain Revenue from Expanded Authority, but Businesses Are Likely to Experience Compliance Costs (Nov. 2017)

   INTRODUCTION

   Amicus curiae Tax Executives Institute, Inc. (TEI) respectfully files this brief in support of the respondents in South Dakota v. Wayfair, Inc. et al. (Wayfair). (1)

   In Wayfair, Petitioner South Dakota asks this Court to modify the "physical presence" rule established in National Bellas Hess, Inc. v. Department of Revenue of the State of Illinois, 386 U.S. 753 (1967), and upheld in Quill Corporation v. North Dakota, 504 U.S. 28 (1992). TEI does not take a position on whether the physical presence rule should be upheld, modified, or overturned. Rather, TEI files this brief to bring this Courts attention to the injustice and subsequent litigation that would ensue if the ruling requested by South Dakota were to be applied retroactively.

   STATEMENT OF INTEREST

   TEI is a voluntary, nonprofit association of corporate and other business executives, managers, and administrators responsible for the tax affairs of their employers. TEI was organized in 1944 under the laws of the State of New York and is exempt from taxation under section 501(c)(6) of the Internal Revenue Code. TEI is dedicated to the development of sound tax policy, the uniform and equitable enforcement of tax laws, the minimization of administrative and compliance costs for governments and taxpayers, and the vindication of taxpayers' constitutional rights.

   TEI's members are employed by a broad cross-section of the business community. As in-house tax professionals, TEI's members must evaluate tax laws, advise their companies regarding the tax consequences of various transactions and business decisions, and make practical decisions regarding their tax compliance obligations, including determinations regarding which states they must register with for the collection and remittance of sales and use tax. TEI's members thus have a vital interest in ensuring they are provided with adequate notice of their registration, collection, and...