David Post at Volokh Conspiracy has written an explanation and defense of the Supreme Court’s holding, in 1992’s Quill v. North Dakota, “that a State may not require out-of-state sellers of goods or services to collect that State’s sales/use tax, unless the out-of-state seller has some ‘physical presence’ in the State – a retail outlet, warehouse, office, or the like” This term’s case of South Dakota v. Wayfair invites the Court to retreat from that holding. The Quill rule is often criticized for privileging online commerce unfairly over brick-and-mortar, but the contrary rule, says Post, would tend to do the reverse by sinking small online retailers under impossible regulatory burdens. A foretaste of those burdens:
South Dakota’s law, however, does not merely require her [an Idaho woman with a web storefront selling crafted iPhone cases] to collect South Dakota’s sales tax; it subjects her to the full range of South Dakota’s tax and regulatory jurisdiction, including the panoply of South Dakota’s licensing, recordkeeping, and registration requirements, and would, among other things, make her subject to periodic audit by the South Dakota Department of Revenue – which, in many States, requires an in-person appearance before the Revenue Board.
And of course if the Court discards the Quill rule and upholds South Dakota’s law, we can expect other jurisdictions to follow suit.
There are more than 6,000 taxing jurisdictions. Post argues that congressional action is needed, rather than a free-for-all of local taxing power.