On November 3 California Attorney General Xavier Becerra joined a bipartisan coalition of 36 attorneys general in filing an amicus brief to urge the U.S. Supreme Court to grant review and reconsider the Court’s outdated “physical presence” rule, which restricts states’ ability to collect certain taxes from out-of-state retailers. In 1967, the U.S. Supreme Court ruled in National Bellas Hess v. Department of Revenue that states were prohibited from requiring out-of-state retailers to collect sales and use taxes on goods purchased through the mail.  With the rise of online shopping, out-of-state retailers – including online retailers – have used the physical presence rule set forth in Bellas Hess, and later reaffirmed in the U.S. Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota, to avoid collecting sales and use taxes.

“Our small businesses and local retailers are the backbone of our economy,” said Attorney General Becerra. “But right now, out-of-state and online retailers can do business in California without collecting state taxes. This puts our local businesses at a disadvantage. Given our changing economy, we urge the U.S. Supreme Court to reconsider this issue.”

“The Court’s earlier view of sales and use tax nexus no longer makes sense in today’s economy,” said Nicolas Maduros, Director of the California Department of Tax and Fee Administration.  “It’s unfair to both in-state retailers and to all California taxpayers.”

South Dakota recently enacted a statute requiring online retailers to collect South Dakota sales taxes. On September 14, 2017, the South Dakota Supreme Court held South Dakota’s statute unconstitutional because only the U.S. Supreme Court can reconsider its own precedents. South Dakota filed a petition for writ of certiorari asking the U.S. Supreme Court to revisit the matter. Attorney General Becerra is supporting South Dakota’s effort.

Attorney General Becerra filed today’s brief along with the Attorneys General of Colorado, Alabama, Arkansas, Connecticut, Florida, Hawai’i, Illinois, Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont, Utah, Washington, Wisconsin, Wyoming, and the District of Columbia.

A copy of the brief is attached to the electronic version of this release at oag.ca.gov/news.

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