Constitutional Law—State Taxation of Interstate Commerce—Use Taxes on Mail-Order Business With No Physical Presence in the Taxing State. Quill Corp. v. North Dakota.

The Quill Corporation is a Delaware corporation that sells office supplies and equipment nationwide. 1 Its annual untaxed sales to North Dakota residents are estimated at slightly less than $1 million.2 In an effort to halt this loss of tax revenue, North Dakota sought to impose a use tax' on Quill's sales, all of which were made through mail-order solicitations.' Quill had no offices or sales representatives in North Dakota, and none of its employees lived or worked in North Dakota.5 If Quill could be considered to own any property in North Dakota, such ownership would be "insignificant or nonexistent."' Quill sells its products through direct-mail forums, such as catalogues, flyers, and advertisements in nationally distributed "card packs."7 It also advertises in national magazines and trade journals.8 All deliveries of merchandise are made through the mail or by common carrier from sites outside North Dakota.9 North Dakota imposed a use tax, at the same rate as its sales tax, on property purchased for "storage, use, or consumption" within the I. Quill Corp. v. North Dakota, 112 S. Ct. 1904, 1907 (1992).2. 112 S. Ct. at 1907-08. 3.A use tax is a tax imposed by the consumer's state on the use of an item that the consumer purchased through a retail outlet in another state and on which no sales or use tax has been paid.JOHN E. NOWAK & RONALD D. ROTUNDA, CONSTITUTIONAL LAW § 8.8, at 290 (4th ed.1991).Use taxes are often levied together with sales taxes in an effort to prevent consumers from buying out-of-state goods instead of local goods which have been made more expensive through imposition of local taxes.LAURENCE H. TRIBE, AMERICAN CONSTITUTIONAL LAW, § 6-16, at 447 (2d ed.1988).4. 112 S. Ct. at 1908. 5. Id. at 1907.Quill's offices are in Illinois, California, and Georgia.6. Id.Quill licensed a computer software program to some of its North Dakota customers that enabled them to check Quill's inventories and prices and to place orders directly via computer.Id. at 1907 n.l.The Court stated that Quill's interests in the software did not affect its due process analysis and that the interests did not provide the substantial nexus required by the Commerce Clause.Id. 7. North Dakota v. Quill Corp., 470 N.W.2d 203, 204 (N.D. 1991).Quill is the sixth largest seller of office supplies in North Dakota.Quill, 112 S. Ct. at 1908. 8. 470 N.W.2d at 204. 9. 112 S. Ct. at 1908.state.' 0 While the purchaser of the merchandise is responsible for paying the tax, the statute requires a "retailer maintaining a place of business" in North Dakota to collect the tax from the purchaser and remit the tax to the state."The state code was amended in 1987 to define "retailer maintaining a place of business" as including persons who regularly or systematically solicit consumers in the state through the use of direct mail; through printed, radio, or television advertising; or through telephone, computer, cable, or other communication system.' 2The North Dakota Administrative Code defines "regular or systematic solicitation" as "three or more separate transmittances" of any advertising during a twelve-month period.' 3 Quill refused to collect and remit the use tax required by North Dakota law.'The state Tax Commissioner sought a declaratory judgment that Quill was a "retailer" and a "retailer maintaining a place of business" in North Dakota and that Quill must collect and remit taxes on sales to purchasers in North Dakota.' 5 Quill responded that North Dakota's use tax was unconstitutional because it violated both the Due Process Clause and the Commerce Clause of the United States Constitution.' 6 The trial court found the statute unconstitutional as applied to Quill, basing its decision principally on a 1967 United States Supreme Court case which also concerned use taxes on mail-order sales,' 7 National Bellas Hess, Inc., v. Department of Revenue.' 8 The trial court concluded there was not a sufficient nexus between Quill and North Dakota to meet the Due Process and Commerce Clause requirements of Bellas Hess.' 9 The North Dakota Supreme Court reversed the trial court.20 The North Dakota Supreme Court reasoned that changes in the economy, in technology, and in Commerce Clause and Due Process Clause legal doctrine made [Vol.15:299