North Dakota plays role in taxation of ecommerce

The U.S. Supreme Court has agreed to review a ruling it made nearly 30 years ago that, in effect, left most of the Internet a tax-free ecommerce landscape.

What’s interesting about this from a provincial point of view is that the original 1992 ruling was prompted by North Dakota’s tax department, then led by Heidi Heitkamp.

Indeed, it can be argued that North Dakota’s actions led to the tax-free state of online commerce today.

And, in the coming months, South Dakota may be responsible for the future of the tax-free state of online commerce.

In 1992, North Dakota wanted the Quill Corporation, which had no physical presence in the state and which was selling computer software and other products in North Dakota through catalogs, ads, flyers and phone calls, to collect state sales tax on those sales.

Quill argued, as an out-of-state company, it didn’t have to collect the taxes.

The issue worked its way through the legal system to the U.S. Supreme Court which, on May 26, 1992, ruled a business must have a physical presence in a state for that state to collect sales and use taxes.

Interestingly, the case didn’t specifically involve internet sales, focusing instead on the primary mail-order business aspects of Quill at that time.

However, later, used the ruling to justify not charging sales tax on its growing online sales to every state which, effectively, gave the online retailer a competitive advantage over “brick and mortar” retailers in the states.

Business and governmental pressure eventually led Amazon in 2012 to start collecting sales taxes for a handful of states.

Today, the issue is again before the Supreme Court through a South Dakota challenge. That state-enacted laws requiring out-of-state retailers to collect and remit sales taxes based “not on their physical presence in the state but on their economic connection to the state.” (

Three out-of-state retailers — Wayfair, and Newegg — are named in the Supreme Court petition.

This has opened the door for the court to reconsider its 1992 ruling in light of how online commerce has developed in the past three decades. At issue is billions of dollars in tax revenue the states feel they are entitled to and believe they have lost out on since 1992.

Heitkamp, who went from North Dakota Tax Commissioner to U.S. Senator in the intervening years, backs the reconsideration of the Quill ruling.

In a “friend of the court” brief submitted in November to the Supreme Court, she and a handful of other lawmakers argued the Quill ruling “tipped the scales in favor of online retailers and against brick-and-mortar retailers around the country.” (

You can follow the high court’s actions on the petition at There, you can sign up to be notified via email of any updates to the case as it progresses.

You also can read more about the North Dakota and South Dakota cases at the following links:

Quill Corp. Vs. N.D.

S.D. Vs. Wayfair

Keith Darnay is the Tribune’s online manager and has worked in the online world for more than two decades. His site is at

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