Understanding Quill: An Important Case for eCommerce Businesses
Ecommerce Tax Education

Understanding Quill: An Important Case for eCommerce Businesses

The Overview:
In 1992, the Supreme Court determined an office supply company, Quill, did not have to pay North Dakota sales tax because its sale of floppy disks didn’t constitute a physical presence in the state.
The Take Away:
This ruling has been the controlling law used to hold up current sales tax rules for eCommerce businesses around the United States, but states aren’t happy about it.
Final Note:
This ruling is not the end-all-be-all for sales tax compliance. It is likely the Supreme Court will revisit this ruling, which could lead to some significant changes for businesses down the road.

Understanding Quill: An Important Case for eCommerce Businesses


Think back to how people used to shop nearly 25 years ago. If you needed something, chances are, you drove to a nearby store or ordered from direct mail catalogs. The days of one-click shopping had yet to arrive.

Back in 1992, e-Commerce was still in its infancy. That year, Johnny Carson was ending his late-night TV reign, Ross Perot was running for president and most people were just beginning to experiment with e-mail.

It was also the year the U.S. Supreme Court handed down a decision in Quill Corps. v. North Dakota—a case that has governed how retailers collect online sales tax ever since.

In this blog post, we’ll break down the details of this frequently cited case, explain its significance for e-retailers, and shed some light on the latest laws brewing in Washington that are expected to spell the end of Quill’s importance.

One Decisive Case: Quill Corps vs. North Dakota

As an online retailer, chances are, you’ve heard the name Quill mentioned when discussing what your company owes for sales tax. Quill, an office supply company, sued the state of North Dakota in 1992 over its sales tax liability. North Dakota argued that under its laws, any mail order company that sent more than three advertisements in a year established physical presence—or nexus—in the state. This meant Quill, with its frequent mail campaigns, would have to charge and collect state sales tax. Quill, however, argued that this law was invalid under the Commerce Clause.

The heated case went all the way to the Supreme Court, which refrained from following the North Dakota Supreme Court’s ruling that social and cultural advancements, particularly those that made it easier for residents of one state to purchase goods from other states, also made it easier to establish nexus. The Supreme Court instead held that its past rulings limiting when nexus could be found were based on Constitutional principles of protecting businesses from onerous cross-border restrictions and double taxation, and so were still relevant. Though mail orders had drastically increased—which the advent of Internet sales only promised to explode–having an actual, physical presence in a state was still required before sales taxes would be due.

This was good news for companies looking to increase sales by harnessing the emerging power of the Internet. No sales tax kept prices lower, which when combined with the convenience of online shopping, appealed to shoppers.

Quill’s Far-Reaching Effects

The case’s pivotal ruling just happened to coincide with the eCommerce boom. Never before had it been so easy to find products and purchase them. Now, Cyber Monday is the one of the most popular days for sales in the United States.

Customers are thrilled with the low prices found online and the perks of home delivery. When traditional bricks-and-mortar shops began to lose customers, they argued that not having to charge sales tax gave e-Commerce an unfair advantage. (Hello, Small Business Saturday!)

But it has been the states, which the National Conference of State Legislatures estimates now experience lost revenue at $23 billion annually, who have been arguing the hardest for a new review of the Quill ruling.

Enter the Marketplace Fairness Act

Over the past two decades, online sellers have clung to the Quill ruling as the reason for not having to charge and collect sales and use tax. But the times, as they say, are a-changing.

For starters, a growing number of states are extending sales taxes to online retailers with in-state sales affiliates. And after many years of fighting the good fight, industry leader Amazon has begun collecting sales tax in 24 states.

And in 2015, Congress introduced a revised Marketplace Fairness Act, which would give states the option to require out-of-state businesses, such as those selling online or through catalogs, to collect sales and use taxes already owed under state law the same way local businesses do.

It’s also important to note that the Supreme Court may be revisiting the Quill issue in the future. The Supreme Court, though, noted in Quill that this is more of a political issue, better suited for legislation rather than a judicial ruling–and so could defer to Congressional action.  But if the Court did revisit Quill, it could have huge implications, since the ruling has been the controlling law up until this point. Many think it’s likely to change, though, as state laws are increasingly confusing. It’s likely to change through one of the following routes:

  • Congress passes federal legislation
  • States find a way to circumvent Quill, which we’ve already seen some states do.
  • The Supreme Court revisits the decision through a new case, which will likely initiate from the lack of cohesion among states.

The silver lining, though, is that technology, which birthed e-Commerce in the first place, has made collecting sales tax in 9,600 different taxing jurisdictions easy to manage. Software programs, like Taxify, automatically stay up-to-date with changing local tax codes.

So while the days of tax-free online sales may be ending, e-retailers now have a convenient way of staying compliant. And, as these situations continue to change, you can bet we’ll keep you updated on the information you need to know. Subscribe to our bi-weekly newsletter so you never miss a thing!

Have some more questions? Let us know! We’re happy to help, and we love talking taxes.

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