Taxing & the Internet: Is It Time to “Reevaluate” National Bellas Hess, Inc. v. Department of Revenue of Illinois?
Gregory Waterworth*
Marylanders pay taxes on purchases from Amazon.com, but do not pay taxes when shopping at Overstock.com. This arbitrary phenomenon stems from one source, National Bellas Hess, Inc. v. Department of Revenue of Illinois. 386 U.S. 753 (1967). Years ago—before the Internet, smart phones, or the ability to have an online order delivered within an hour—the Supreme Court drew a line in the sand.
Bellas Hess determined when a state can require a retailer to collect and remit taxes. Id. Bellas Hess, a clothing retailer based in Missouri, challenged an Illinois law that required out-of-state companies, such as Bellas Hess, to collect and remit taxes for in-state consumers. Id. Illinois argued that because the retailer advertised in the state and delivered orders via common carriers and mail, it had enough of a presence in the state to justify taxing. Id. at 754. The Court disagreed. Id. at 759–60. To the Court, Bellas Hess was an issue of interstate commerce and the ever popular dormant Commerce Clause. Id. The Court reasoned that allowing Illinois to require out-of-state sellers to collect taxes would be the equivalent of inviting every other locality nationwide to do the same. Id. Further, the Court warned that to do so would “entangle [Bellas Hess’s] interstate business in a virtual welter of complicated obligations to local jurisdictions with no legitimate claim to impose a fair share of the cost of the local government.” Id. at 759. Thus, the Court created a bright-line rule: no taxing, unless physical presence. Id. at 760. So why do Marylander’s pay taxes on purchases from Amazon.com, as opposed to Overstock.com? The answer is an Amazon.com warehouse on 2010 Broening Highway in Baltimore.Continue reading “Taxing & the Internet: Is It Time to “Reevaluate” National Bellas Hess, Inc. v. Department of Revenue of Illinois?”