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NetChoice Files Amicus Brief in South Dakota v. Wayfair,, and Newegg

Deems South Dakota Sales Tax Law Unconstitutional, and Highlights Trump Administration Desire to Stifle Online Commerce and Make Mail Order Great Again

Washington, D.C., April 4, 2018 – A South Dakota law is unconstitutional and breaks with settled law – the Internet Tax Freedom Act (ITFA), per an Amicus brief filed today by NetChoice, former Congressman Chris Cox (R-Ca) and former Virginia Governor James Gilmore, in the case of South Dakota v. Wayfair,, and Newegg.

A central question in the case is whether the U.S. Supreme Court should maintain its current holding that states can only impose sales tax on businesses with a physical presence within their borders. This physical presence rule was most recently affirmed in the 1992 case of Quill vs. North Dakota.  In 2016 South Dakota enacted a law that defies the Quill physical presence standard.

In their brief, Cox, Gilmore, and NetChoice explained: “Congress has repeatedly expressed itself through statute on the tax issues in this case. Exercising its constitutional authority over interstate commerce, Congress enacted ITFA in 1998, after the Supreme Court’s Quill decision. On eight subsequent occasions, Congress revisited this law and reaffirmed its policy.”

“South Dakota is attempting an unconstitutional online sales-tax land grab. The Quill decision and the ITFA have protected online small businesses from the demands of 46 state tax auditors covering 12,000 jurisdictions and led to a vibrant era of ecommerce that fosters economic growth across the country,” said Steve DelBianco, president of NetChoice.

DelBianco added, “The Trump administration now says that Quill should only protect mail-order businesses. While some may want to make mail order great again, Congress has made it illegal to discriminate against internet sales. We’d prefer to have laws that foster a brighter future instead of forcing us to return to the past.”

Below are key quotes from the amicus brief of former Congressman Chris Cox, Former Virginia Governor Jim Gilmore, and NetChoice:


Prevent new burdens on small businesses and discrimination against online sellers:

South Dakota has enacted a law that it acknowledges violates this Court’s precedents. Its transparent purpose was to provoke litigation that, it hopes, will be rewarded by the Court’s reversal of its prior rulings. [p.2]

Regarding the Internet Tax Freedom Act (ITFA), first enacted by Congress in 1998 — after the Quill ruling:

South Dakota’s law violates the ITFA by imposing burdens on internet transactions that retailers using other channels are not required to bear. [p.3]

A small business that maintains a website cannot choose whether to purposely avail itself of one or another jurisdiction. [p.10-11]

The law specifically prohibits assigning the tax collection burden to a different person in internet and non-internet transactions. [p.13]

The discriminatory effect of South Dakota’s law is explained on pages 13-14:

When, for example, a resident of South Dakota buys furniture from a retailer in Montana—picking up the goods herself, and bringing them home—South Dakota law requires her to pay use tax. But South Dakota does not impose a use tax collection burden on the out-of-state seller.

Unless, that is, the out-of-state seller is an Internet vendor.

In that case, the rule is different. If the furniture purchase is accomplished via the Internet (or via the telephone, or the mail), South Dakota’s new law does require the Montana seller to collect and pay, even though Montana has no sales tax.

This differential treatment is what the ITFA prohibits.

The result of overturning Quill would be to force small Internet sellers to comply with the conflicting rules of thousands of differentiated taxing sub-jurisdictions. The non-Internet merchant would have no such burden. This is precisely the result ITFA sought to avoid as a matter of national policy. [p.4]


The Trump Administration wants to preserve physical presence protection only for mail orders:

The Trump administration’s suggestion “that the Court can simply limit Quill to catalog sellers and discriminate for Commerce Clause purposes between catalog sellers and internet commerce also would violate the ITFA.” [p.3]

The Solicitor General proposes that the Court limit Quill’s nexus requirement to mail-order catalogs. This would permit South Dakota to impost unique tax-collection obligation on remote internet sellers that don’t apply to other remote sellers. The ITFA flatly prohibits this. [p.20]

The Solicitor General’s proposal runs afoul of the ITFA in yet another way. His idea that remote Internet sellers are “virtually” present in every State where a consumer can access its website violates the express prohibition against using as a factor for determining nexus the “sole ability [of persons within a State] to access a site on a remote seller’s out-of-State computer server.” [p.21]


There are significant due process problems with the South Dakota law:

An out-of-state seller may establish contact with an individual South Dakota purchaser online, but that does not show any relationship with the State itself. [p.23]

South Dakota’s law imposes tax collection obligations on out-of-state sellers without regard to whether they intentionally created a substantial relationship with that State. [p.24]

Not only would the increased burden on these sellers cause “practical problems” that Due Process protections are meant to curb, but by imposing steep costs and driving some companies out of the market, it would, ironically, reduce the States’ potential for increasing their tax revenues. [p.27]


Congress alone has the constitutional role to determine state taxation of interstate commerce:

As Justice Ginsburg has recently observed, “there is nothing nuanced” about what courts do by deciding a case one way or the other, while Congress “can write a statute that takes account of various interests.” [p.6]

The Internet Tax Freedom Act (ITFA) “is intended to provide “certainty” that the rules of Quill’s physical-presence test “will continue to apply to electronic commerce just as they apply to mail-order commerce, unless and until a future Congress decides to alter the current nexus requirements.” [p.13]

On page 9, former Congressman Cox further explains congressional intent for enactment of the ITFA:

Congress and the White House, in 1998 and 2016 and all points in between, believed otherwise. The specter of multiple States and municipalities all simultaneously taxing and regulating commerce on the Internet was seen as the far greater concern

The fact that large in-state sellers would be challenged by small enterprises via the Internet was seen as a boon to competition and consumers alike.

Those small businesses – in South Dakota and elsewhere – can only compete if they are not overwhelmed with a nationwide tax compliance burden simply by virtue of selling via the internet. [p.33]



About NetChoice

NetChoice is a trade association of eCommerce and online businesses that share the goal of promoting convenience, choice, and commerce on the net.