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Quill Corp. v. North Dakota - 504 U.S. 298, 112 S. Ct. 1904 (1992)


The parts of the analysis on use tax imposition on out-of-state vendors which require fair apportionment and non-discrimination, prohibit taxes that pass an unfair share of the tax burden onto interstate commerce. The first and fourth prongs, which require a substantial nexus and a relationship between the tax and state-provided services, limit the reach of state taxing authority so as to ensure that state taxation does not unduly burden interstate commerce. Thus, the "substantial nexus" requirement is not, like due process' "minimum contacts" requirement, a proxy for notice, but rather a means for limiting state burdens on interstate commerce. Accordingly, a corporation may have the "minimum contacts" with a taxing state as required by the Due Process Clause, and yet lack the "substantial nexus" with that state as required by the Commerce Clause


The State of North Dakota brought suit to collect use taxes from petitioner Quill, mail-order house incorporated in Delaware, with offices and warehouses in three other states, but with no outlets or representatives in North Dakota, pursuant to N.D. Cent. Code § 57-40.2-01(6). The trial court ruled in petitioner's favor, but the state supreme court reversed, refusing to follow precedent National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U.S. 753, 87 S.Ct. 1389 (1967). Petitioner appealed the order of the Supreme Court of North Dakota, which held that petitioner was required to collect and pay use taxes on goods purchased for use within the state pursuant to N.D. Cent. Code § 57-40.2-01(6), notwithstanding petitioner's alleged protected out-of-state, "substantial-nexus" status.


 Did Due Process Clause bar enforcement of the State's use tax against petitioner Quill?




The Order requiring petitioner to pay use taxes was reversed and the case remanded; while petitioner had met the requisite minimum contacts required by the Due Process Clause, it lacked the "substantial nexus" required by the Commerce Clause for the imposition of use taxes as apportioned by respondent. The United States Supreme Court concluded that petitioner purposefully directed sufficient activities at respondent's residents to satisfy due process minimum contacts, but nevertheless fell within the safe harbor provisions of the Commerce Clause "substantial nexus" requirement proffered by Bellas Hess. The court held that stare decisis and the differences between the controlling principles of the Due Process and Commerce Clauses mandated that the Bellas Hess rule remain good law. Accordingly, the judgment of the court was reversed, and the case remanded for further proceedings consistent with the court's opinion.

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