WSJ Discusses Virtues of Quill Physical Presence Rule

December 27, 2007

Today’s Wall Street Journal has an editorial piece discussing the Quill physical presence rule. That’s the constitutional bar which prevents states from forcing out-of-state businesses to collect each state’s sales tax on purchases. Overturning Quill would mean that retailers would have to collect taxes based on where the seller lives (not where the business is), an obligation that would next extend to brick-and-mortar businesses. The editorial recognizes this:

[S]mall merchants could potentially have to keep track of 86,000 different tax rates, depending on what they sell and to whom. But what about nine-digit zip codes? Could governments create different rates within each one? Yes indeed.

Believe it or not, it gets worse. The board of state and local tax collectors that administers the “streamlined” plan recently amended the agreement. Now the plan would allow some states to choose whether to tax online purchases at the seller’s address or the buyer’s, depending on whether they’re in the same state. The end result will be different tax rates for in-state and out-of-state vendors—a clear Constitutional violation.

As I explained in Why the Quill Physical Presence Rule Shouldn’t Go The Way of Personal Jurisdiction and in a recent commentary, overturning Quill will create uncertainty and discrimination:

While some constitutional principles surely must be revisited to apply them to new circumstances, the idea that parochial state interests cannot burden interstate commerce remains a timeless principle regardless how sophisticated technology may be.

The effort to kill Quill is nothing more than states attempting to boost their tax revenues at the expense of the national economy.


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