/* When is a mail order company required to collect sales tax

from out of state orders? The final word is the Quill vs. North

Dakota case of the U.S. Supreme Court, which follows in full text

with our comments. */

NOTE: Where it is feasible, a syllabus (headnote) will be

released, as is being done in connection with this case, at the

time the opinion is issued. The syllabus constitutes no part of

the opinion of the Court but has been prepared by the Reporter of

Decisions for the convenience of the reader. See United States

v. Detroit Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

QUILL CORP. v. NORTH DAKOTA, BY AND

THROUGH ITS TAX COMMISSIONER, HEITKAMP

certiorari to the supreme court of north dakota

No. 91194. Argued January 22, 1992 Decided May 26, 1992

Respondent North Dakota filed an action in state court to require

petitioner Quill Corporation "an out-of-state mail-order house

with neither outlets nor sales representatives in the State" to

collect and pay a use tax on goods purchased for use in the

State. The trial court ruled in Quill's favor. It found the

case indistinguishable from National Bellas Hess, Inc. v.

Department of Revenue of Ill., 386 U.S. 753, which, in holding

that a similar Illinois statute violated the Fourteenth

Amendment's Due Process Clause and created an unconstitutional

burden on interstate commerce, concluded that a "seller whose

only connection with customers in the State is by common carrier

or the . . . mail" lacked the requisite minimum contacts with

the State. Id., at 758. The State Supreme Court reversed,

concluding, inter alia, that, pursuant to Complete Auto Transit,

Inc. v. Brady, 430 U.S. 274, and its progeny, the Commerce

Clause no longer mandated the sort of physical-presence nexus

suggested in Bellas Hess; and that, with respect to the Due

Process Clause, cases following Bellas Hess had not construed

minimum contacts to require physical presence within a State as a

prerequisite to the legitimate exercise of state power.

Held:

1. The Due Process Clause does not bar enforcement of the State's

use tax against Quill. This Court's due process jurisprudence

has evolved substantially since Bellas Hess, abandoning

formalistic tests focused on a defendant's presence within a

State in favor of a more flexible inquiry into whether a

defendant's contacts with the forum made it reasonable, in the

context of the federal system of government, to require it to

defend the suit in that State. See, Shaffer v. Heitner, 433

U.S. 186, 212. Thus, to the extent that this Court's decisions

have indicated that the clause requires a physical presence in a

State, they are overruled. In this case, Quill has purposefully

directed its activities at North Dakota residents, the magnitude

of those contacts are more than sufficient for due process

purposes, and the tax is related to the benefits Quill receives

from access to the State.

2. The State's enforcement of the use tax against Quill places an

unconstitutional burden on interstate commerce. Pp.919. (a)

Bellas Hess was not rendered obsolete by this Court's subsequent

decision in Complete Auto, supra, which set forth the four-part

test that continues to govern the validity of state taxes under

the Commerce Clause. Although Complete Auto renounced an

analytical approach that looked to a statute's formal language

rather than its practical effect in determining a state tax

statute's validity, the Bellas Hess decision did not rely on such

formalism. Nor is Bellas Hess inconsistent with Complete Auto.

It concerns the first part of the Complete Auto test and stands

for the proposition that a vendor whose only contacts with the

taxing State are by mail or common carrier lacks the "substantial

nexus" required by the Commerce Clause.

(b) Contrary to the State's argument, a mail-order house may have

the "minimum contacts" with a taxing State as required by the Due

Process Clause, and yet lack the "substantial nexus" with the

State required by the Commerce Clause. These requirements are

not identical and are animated by different constitutional

concerns and policies. Due process concerns the fundamental

fairness of governmental activity, and the touchstone of due

process nexus analysis is often identified as "notice" or "fair

warning." In contrast, the Commerce Clause and its nexus

requirement are informed by structural concerns about the effects

of state regulation on the national economy.

(c) The evolution of this Court's Commerce Clause jurisprudence

does not indicate repudiation of the Bellas Hess rule. While

cases subsequent to Bellas Hess and concerning other types of

taxes have not adopted a bright-line, physical presence

requirement similar to that in Bellas Hess, see, e. g., Standard

Pressed Steel Co. v. Depart ment of Revenue of Wash., 419 U.S.

560, their reasoning does not compel rejection of the Bellas Hess

rule regarding sales and use taxes. To the contrary, the

continuing value of a bright-line rule in this area and the

doctrine and principles of stare decisis indicate that the rule

remains good law.

(d) The underlying issue here is one that Congress may be better

qualified to resolve and one that it has the ultimate power to

resolve.

470 N.W. 2d 203, reversed and remanded.

Stevens, J., delivered the opinion for a unanimous Court with

respect to Parts I, II, and III, and the opinion of the Court

with respect to Part IV, in which Rehnquist, C. J., and Blackmun,

O'Connor, and Souter, JJ., joined. Scalia, J., filed an opinion

concurring in part and concurring in the judgment, in which

Kennedy and Thomas, JJ., joined. White, J., filed an opinion

concurring in part and dissenting in part.

SUPREME COURT OF THE UNITED STATES No. 91-194

QUILL CORPORATION, PETITIONER v. NORTH DAKOTA by and through its

TAX COMMISSIONER, HEIDI HEITKAMP on writ of certiorari to the

supreme court of north dakota

[May 26, 1992]

Justice Stevens delivered the opinion of the Court. This case,

like National Bellas Hess, Inc. v. Department of Revenue of Ill.,

386 U. S. 753 (1967), involves a State's attempt to require an

out-of-state mail-order house that has neither outlets nor sales

representatives in the State to collect and pay a use tax on

goods purchased for use within the State. In Bellas Hess we held

that a similar Illinois statute violated the Due Process Clause

of the Fourteenth Amendment and created an unconstitutional

burden on interstate commerce. In particular, we ruled that a

"seller whose only connection with customers in the State is by

common carrier or the United States mail" lacked the requisite

minimum contacts with the State. Id., at 758.

In this case the Supreme Court of North Dakota declined to follow

Bellas Hess because "the tremendous social, economic, commercial,

and legal innovations" of the past quarter-century have rendered

its holding "obsole[te]." 470 N.W. 2d 203, 208 (1991). Having

granted certiorari, 502 U.S. ___, we must either reverse the

State Supreme Court or overrule Bellas Hess. While we agree with

much of the State Court's reasoning, we take the former course.

/* Fascinating point for the constitutional scholar. The Court

seems to say that they have to rule squarely on an issue. That

has never stopped the court before from marginalizing its changes

in the law. or using semantic tests which defy intellectual

rationale to avoid ruling. */

I

Quill is a Delaware corporation with offices and warehouses in

Illinois, California, and Georgia. None of its employees work or

reside in North Dakota and its ownership of tangible property in

that State is either insignificant or nonexistent. Quill sells

office equipment and supplies; it solicits business through

catalogs and flyers, advertisements in national periodicals, and

telephone calls. Its annual national sales exceed $200,000,000,

of which almost $1,000,000 are made to about 3,000 customers in

North Dakota. It is the sixth largest vendor of office supplies

in the State. It delivers all of its merchandise to its North

Dakota customers by mail or common carrier from out-of- state

locations.

/* An interesting bit of factual statement. Although it will not

be important given the ruling, the fact that less than 1/2% of

Quill's sales are in North Dakota makes North Dakota's claim to

tax Quill much less than that of a state where it might have a

high number of sales, like California. */

As a corollary to its sales tax, North Dakota imposes a use tax

upon property purchased for storage, use or consumption within

the State. North Dakota requires every "retailer maintaining a

place of business in" the State to collect the tax from the

consumer and remit it to the State. N.D. Cent. Code 5740.207

(Supp. 1991). In 1987 North Dakota amended the statutory

definition of the term "retailer" to include "every person who

engages in regular or systematic solicitation of a consumer

market in th[e] state." 5740.201(6). State regulations in turn

define "regular or systematic solicitation" to mean three or more

advertisements within a 12-month period. N. D. Admin. Code

8104.10103.1 (1988). Thus, since 1987, mail-order companies that

engage in such solicitation have been subject to the tax even if

they maintain no property or personnel in North Dakota.

/* This is one of the most expansive rules of any state. It is

however not going to win the day. One wonders since the Court has

taken so much time with the peculiar facts (a very small state

with a very broad definition of taxable companies) if it is

reservering the right to change at some time in the future, or,

if it is trying to guide the federal Congress. */

Quill has taken the position that North Dakota does not have the

power to compel it to collect a use tax from its North Dakota

customers. Consequently, the State, through its Tax

Commissioner, filed this action to require Quill to pay taxes (as

well as interest and penalties) on all such sales made after July

1, 1987. The trial court ruled in Quill's favor, finding the

case indistinguishable from Bellas Hess; specifically, it found

that because the State had not shown that it had spent tax

revenues for the benefit of the mail-order business, there was no

"nexus to allow the state to define retailer in the manner it

chose." App. to Pet. for Cert. A41.

The North Dakota Supreme Court reversed, concluding that

"wholesale changes" in both the economy and the law made it

inappropriate to follow Bellas Hess today. 470 N.W. 2d, at 213.

The principal economic change noted by the court was the

remarkable growth of the mail-order business "from a relatively

inconsequential market niche" in 1967 to a "goliath" with annual

sales that reached "the staggering figure of $183.3 billion in

1989." Id., at 208, 209. Moreover, the court observed, advances

in computer technology greatly eased the burden of compliance

with a "`welter of complicated obligations"' imposed by state and

local taxing authorities. Id., at 215 (quoting Bellas Hess, 386

U. S., at 759760).

Equally important, in the court's view, were the changes in the

"legal landscape." With respect to the Commerce Clause, the court

emphasized that Complete Auto Transit, Inc. v. Brady, 430 U. S.

274 (1977), rejected the line of cases holding that the direct

taxation of interstate commerce was impermissible and adopted

instead a "consistent and rational method of inquiry [that

focused on] the practical effect of [the] challenged tax." Mobil

Oil Corp. v. Commissioner of Taxes of Vt., 445 U. S. 425, 443

(1980). This and subsequent rulings, the court maintained,

indicated that the Commerce Clause no longer mandated the sort of

physical-presence nexus suggested in Bellas Hess.

Similarly, with respect to the Due Process Clause, the North

Dakota court observed that cases following Bellas Hess had not

construed "minimum contacts" to require physical presence within

a State as a prerequisite to the legitimate exercise of state

power. The State Court then concluded that "the Due Process

requirement of a `minimal connection' to establish nexus is

encompassed within the Complete Auto test" and that the relevant

inquiry under the latter test was whether "the state has provided

some protection, opportunities, or benefit for which it can

expect a return." 470 N. W. 2d, at 216.

Turning to the case at hand, the State Court emphasized that

North Dakota had created "an economic climate that fosters demand

for" Quill's products, maintained a legal infrastructure that

protected that market, and disposed of 24 tons of catalogs and

flyers mailed by Quill into the State every year. Id., at

218219. Based on these facts, the court concluded that Quill's

"economic presence" in North Dakota depended on services and

benefits provided by the State and therefore generated "a

constitutionally sufficient nexus to justify imposition of the

purely administrative duty of collecting and remitting the use

tax." Id., at 219.

II

As in a number of other cases involving the application of state

taxing statutes to out-of-state sellers, our holding in Bellas

Hess relied on both the Due Process Clause and the Commerce

Clause. Although the "two claims are closely related," Bellas

Hess, 386 U. S., at 756, the clauses pose distinct limits on the

taxing powers of the States. Accordingly, while a State may,

consistent with the Due Process Clause, have the authority to tax

a particular taxpayer, imposition of the tax may nonetheless

violate the Commerce Clause. See, e. g., Tyler Pipe Industries,

Inc. v. Washington State Dept. of Revenue, 483 U. S. 232 (1987).

The two constitutional requirements differ fundamentally, in

several ways. As discussed at greater length below, see infra,

at Part IV, the Due Process Clause and the Commerce Clause

reflect different constitutional concerns. Moreover, while

Congress has plenary power to regulate commerce among the States

and thus may authorize state actions that burden interstate

commerce, see International Shoe Co. v. Washington, 326 U. S.

310, 315 (1945), it does not similarly have the power to

authorize violations of the Due Process Clause.

Thus, although we have not always been precise in distinguishing

between the two, the Due Process Clause and the Commerce Clause

are analytically distinct.

"`Due process' and `commerce clause' conceptions are not always

sharply separable in dealing with these problems. . . . To some

extent they overlap. If there is a want of due process to

sustain the tax, by that fact alone any burden the tax imposes on

the commerce among the states becomes `undue.' But, though

overlapping, the two conceptions are not identical. There may be

more than sufficient factual connections, with economic and legal

effects, between the transaction and the taxing state to sustain

the tax as against due process objections. Yet it may fall

because of its burdening effect upon the commerce. And, although

the two notions cannot always be separated, clarity of

consideration and of decision would be promoted if the two issues

are approached, where they are pre- sented, at least tentatively

as if they were separate and distinct, not intermingled ones."

International Harvester Co. v. Department of Treasury, 322 U. S.

340, 353 (1944) (Rutledge, J., concurring in part and dissenting

in part). Heeding Justice Rutledge's counsel, we consider each

constitutional limit in turn.

III

The Due Process Clause "requires some definite link, some minimum

connection, between a state and the person, property or

transaction it seeks to tax," Miller Bros. Co. v. Maryland, 347

U. S. 340, 344345 (1954), and that the "income attributed to the

State for tax purposes must be rationally related to `values

connected with the taxing State."' Moorman Mfg. Co. v. Bair, 437

U. S. 267, 273 (1978) (citation omitted). Here, we are concerned

primarily with the first of these requirements. Prior to Bellas

Hess, we had held that that requirement was satisfied in a

variety of circumstances involving use taxes. For example, the

presence of sales personnel in the State, or the maintenance of

local retail stores in the State, justified the exercise of that

power because the seller's local activities were "plainly

accorded the protection and services of the taxing State." Bellas

Hess, 386 U. S., at 757. The furthest extension of that power

was recognized in Scripto, Inc. v. Carson, 362 U. S. 207 (1960),

in which the Court upheld a use tax despite the fact that all of

the seller's in-state solicitation was performed by independent

contractors. These cases all involved some sort of physical

presence within the State, and in Bellas Hess the Court suggested

that such presence was not only sufficient for jurisdiction under

the Due Process Clause, but also necessary. We expressly

declined to obliterate the "sharp distinction . . . between mail

order sellers with retail outlets, solicitors, or property within

a State, and those who do no more than communicate with customers

in the State by mail or common carrier as a part of a general

interstate business." 386 U. S., at 758.

Our due process jurisprudence has evolved substantially in the 25

years since Bellas Hess, particularly in the area of judicial

jurisdiction. Building on the seminal case of International Shoe

Co. v. Washington, 326 U. S. 310 (1945), we have framed the

relevant inquiry as whether a defendant had minimum contacts with

the jurisdiction "such that the maintenance of the suit does not

offend `traditional notions of fair play and substantial

justice."' Id., at 316 (quoting Milliken v. Meyer, 311 U. S. 457,

463 (1940)). In that spirit, we have abandoned more formalistic

tests that focused on a defendant's "presence" within a State in

favor of a more flexible inquiry into whether a defendant's

contacts with the forum made it reasonable, in the context of our

federal system of government, to require it to defend the suit in

that State. In Shaffer v. Heitner, 433 U. S. 186, 212 (1977),

the Court extended the flexible approach that International Shoe

had prescribed for purposes of in personam jurisdiction to in rem

jurisdiction, concluding that "all assertions of state-court

jurisdiction must be evaluated according to the standards set

forth in International Shoe and its progeny."

Applying these principles, we have held that if a foreign

corporation purposefully avails itself of the benefits of an

economic market in the forum State, it may subject itself to the

State's in personam jurisdiction even if it has no physical

presence in the State. As we explained in Burger King Corp. v.

Rudzewicz, 471 U. S. 462 (1985):

"Jurisdiction in these circumstances may not be avoided merely

because the defendant did not physical- ly enter the forum State.

Although territorial presence frequently will enhance a potential

defendant's affilia- tion with a State and reinforce the

reasonable foresee- ability of suit there, it is an inescapable

fact of modern commercial life that a substantial amount of

business is transacted solely by mail and wire communications

across state lines, thus obviating the need for physical presence

within a State in which business is conducted. So long as a

commercial actor's efforts are `purposefully directed' toward

residents of another State, we have consistently rejected the

notion that an absence of physical contacts can defeat personal

jurisdiction there." Id., at 476 (emphasis in original).

Comparable reasoning justifies the imposition of the collection

duty on a mail-order house that is engaged in continuous and

widespread solicitation of business within a State. Such a

corporation clearly has "fair warning that [its] activity may

subject [it] to the jurisdiction of a foreign sovereign." Shaffer

v. Heitner, 433 U. S., at 218 (Stevens, J., concurring in

judgment). In "modern commercial life" it matters little that

such solicitation is accomplished by a deluge of catalogs rather

than a phalanx of drummers: the requirements of due process are

met irrespective of a corporation's lack of physical presence in

the taxing State. Thus, to the extent that our decisions have

indicated that the Due Process Clause requires physical presence

in a State for the imposition of duty to collect a use tax, we

overrule those holdings as superseded by developments in the law

of due process.

In this case, there is no question that Quill has purposefully

directed its activities at North Dakota residents, that the

magnitude of those contacts are more than sufficient for due

process purposes, and that the use tax is related to the benefits

Quill receives from access to the State. We therefore agree with

the North Dakota Supreme Court's conclusion that the Due Process

Clause does not bar enforcement of that State's use tax against

Quill.

IV

Article I, 8, cl. 3 of the Constitution expressly authorizes

Congress to "regulate Commerce with foreign Nations, and among

the several States." It says nothing about the protection of

interstate commerce in the absence of any action by Congress.

Nevertheless, as Justice Johnson suggested in his concurring

opinion in Gibbons v. Ogden, 9 Wheat. 1, 231232, 239 (1824), the

Commerce Clause is more than an affirmative grant of power; it

has a negative sweep as well. The clause, in Justice Stone's

phrasing, "by its own force" prohibits certain state actions that

interfere with interstate commerce. South Carolina State Highway

Dept. v. Barnwell Bros., Inc., 303 U. S. 177, 185 (1938).

Our interpretation of the "negative" or "dormant" Commerce Clause

has evolved substantially over the years, particularly as that

clause concerns limitations on state taxation powers. See

generally, P. Hartman, Federal Limitations on State and Local

Taxation 2:92:17 (1981). Our early cases, beginning with Brown

v. Maryland, 12 Wheat. 419 (1827), swept broadly, and in Leloup

v. Port of Mobile, 127 U. S. 640, 648 (1888), we declared that

"no State has the right to lay a tax on interstate commerce in

any form." We later narrowed that rule and distinguished between

direct burdens on interstate commerce, which were prohibited, and

indirect burdens, which generally were not. See, e. g., Sanford

v. Poe, 69 F. 546 (CA6 1895), aff'd sub nom. Adams Express Co. v.

Ohio State Auditor, 165 U. S. 194, 220 (1897). Western Live

Stock v. Bureau of Revenue, 303 U. S. 250, 256258 (1938), and

subsequent decisions rejected this formal, categorical analysis

and adopted a "multiple-taxation doctrine" that focused not on

whether a tax was "direct" or "indirect" but rather on whether a

tax subjected interstate commerce to a risk of multiple taxation.

However, in Freeman v. Hewit, 329 U. S. 249, 256 (1946), we

embraced again the formal distinction between direct and indirect

taxation, invalidating Indiana's imposition of a gross receipts

tax on a particular transaction because that application would

"impos[e] a direct tax on interstate sales." Most recently, in

Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 285 (1977),

we renounced the Freeman approach as "attaching constitutional

significance to a semantic difference." We expressly overruled

one of Freeman's progeny, Spector Motor Service, Inc. v.

O'Connor, 340 U. S. 602 (1951), which held that a tax on "the

privilege of doing interstate business" was unconstitutional,

while recognizing that a differently denominated tax with the

same economic effect would not be unconstitutional. Spector, as

we observed in Railway Express Agency, Inc. v. Virginia, 358

U.S. 434, 441 (1959), created a situation in which "magic words

or labels" could "disable an otherwise constitutional levy."

Complete Auto emphasized the importance of looking past "the

formal language of the tax statute [to] its practical effect,"

Complete Auto, 430 U. S., at 279, and set forth a four-part test

that continues to govern the validity of state taxes under the

Commerce Clause.

Bellas Hess was decided in 1967, in the middle of this latest

rally between formalism and pragmatism. Contrary to the

suggestion of the North Dakota Supreme Court, this timing does

not mean that Complete Auto rendered Bellas Hess "obsolete."

Complete Auto rejected Freeman and Spector's formal distinction

between "direct" and "indirect" taxes on interstate commerce

because that formalism allowed the validity of statutes to hinge

on "legal terminology," "draftsmanship and phraseology." 430 U.

S., at 281. Bellas Hess did not rely on any such labeling of

taxes and therefore did not automatically fall with Freeman and

its progeny.

While contemporary Commerce Clause jurisprudence might not

dictate the same result were the issue to arise for the first

time today, Bellas Hess is not inconsistent with Complete Auto

and our recent cases. Under Complete Auto's four-part test, we

will sustain a tax against a Commerce Clause challenge so long as

the "tax [1] is applied to an activity with a substantial nexus

with the taxing State, [2] is fairly apportioned, [3] does not

discriminate against interstate commerce, and [4] is fairly

related to the services provided by the State." 430 U. S., at

279. Bellas Hess concerns the first of these tests and stands

for the proposition that a vendor whose only contacts with the

taxing State are by mail or common carrier lacks the "substantial

nexus" required by the Commerce Clause.

Thus, three weeks after Complete Auto was handed down, we cited

Bellas Hess for this proposition and discussed the case at some

length. In National Geographic Society v. California Bd. of

Equalization, 430 U. S. 551, 559 (1977), we affirmed the

continuing vitality of Bellas Hess' "sharp distinction . . .

between mail-order sellers with [a physical presence in the

taxing] State and those . . . who do no more than communicate

with customers in the State by mail or common carrier as part of

a general interstate business." We have continued to cite Bellas

Hess with approval ever since. For example, in Goldberg v.

Sweet, 488 U. S. 252, 263 (1989), we expressed "doubt that

termination of an interstate telephone call, by itself, provides

a substantial enough nexus for a State to tax a call. See

National Bellas Hess . . . (receipt of mail provides insufficient

nexus)." See also D. H. Holmes Co. v. McNamara, 486 U. S. 24, 33

(1988); Commonwealth Edison Co. v. Montana, 453 U. S. 609, 626

(1981); Mobil Oil Corp. v. Commissioner of Taxes, 445 U. S., at

437; National Geographic Society, 430 U. S., at 559. For these

reasons, we disagree with the State Supreme Court's conclusion

that our decision in Complete Auto undercut the Bellas Hess rule.

The State of North Dakota relies less on Complete Auto and more

on the evolution of our due process jurisprudence. The State

contends that the nexus requirements imposed by the Due Process

and Commerce Clauses are equivalent and that if, as we concluded

above, a mail-order house that lacks a physical presence in the

taxing State nonetheless satisfies the due process "minimum

contacts" test, then that corporation also meets the Commerce

Clause "substantial nexus" test. We disagree. Despite the

similarity in phrasing, the nexus requirements of the Due Process

and Commerce Clauses are not identical. The two standards are

animated by different constitutional concerns and policies.

Due process centrally concerns the fundamental fairness of

governmental activity. Thus, at the most general level, the due

process nexus analysis requires that we ask whether an

individual's connections with a State are substantial enough to

legitimate the State's exercise of power over him. We have,

therefore, often identified "notice" or "fair warning" as the

analytic touchstone of due process nexus analysis. In contrast,

the Commerce Clause, and its nexus requirement, are informed not

so much by concerns about fairness for the individual defendant

as by structural concerns about the effects of state regulation

on the national economy. Under the Articles of Confederation,

State taxes and duties hindered and suppressed interstate

commerce; the Framers intended the Commerce Clause as a cure for

these structural ills. See generally The Federalist Nos. 7, 11

(A. Hamilton). It is in this light that we have interpreted the

negative implication of the Commerce Clause. Accordingly, we

have ruled that that Clause prohibits discrimination against

interstate commerce, see, e.g., Philadelphia v. New Jersey, 437

U. S. 617 (1978), and bars state regulations that unduly burden

interstate commerce, see, e. g., Kassel v. Consolidated

Freightways Corp. of Del., 450 U.S. 662 (1981).

The Complete Auto analysis reflects these concerns about the

national economy. The second and third parts of that analysis,

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, contrary to the State's

suggestion, 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 Supreme Court reviewed our recent Commerce Clause

decisions and concluded that those rulings signalled a "retreat

from the formalistic constrictions of a stringent physical

presence test in favor of a more flexible substantive approach"

and thus supported its decision not to apply Bellas Hess. 470 N.

W. 2d, at 214 (citing Standard Pressed Steel Co. v. Department of

Revenue of Wash., 419 U. S. 560 (1975), and Tyler Pipe

Industries, Inc. v. Washington State Dept. of Revenue, 483 U. S.

232 (1987)). Although we agree with the State Court's assessment

of the evolution of our cases, we do not share its conclusion

that this evolution indicates that the Commerce Clause ruling of

Bellas Hess is no longer good law.

First, as the State Court itself noted, 470 N. W. 2d, at 214, all

of these cases involved taxpayers who had a physical presence in

the taxing State and therefore do not directly conflict with the

rule of Bellas Hess or compel that it be overruled. Second, and

more importantly, although our Commerce Clause jurisprudence now

favors more flexible balancing analyses, we have never intimated

a desire to reject all established "bright-line" tests. Although

we have not, in our review of other types of taxes, articulated

the same physical-presence requirement that Bellas Hess

established for sales and use taxes, that silence does not imply

repudiation of the Bellas Hess rule.

Complete Auto, it is true, renounced Freeman and its progeny as

"formalistic." But not all formalism is alike. Spector's formal

distinction between taxes on the "privilege of doing business"

and all other taxes served no purpose within our Commerce Clause

jurisprudence, but stood "only as a trap for the unwary

draftsman." Complete Auto, 430 U.S., at 279. In contrast, the

bright-line rule of Bellas Hess furthers the ends of the dormant

Commerce Clause. Undue burdens on interstate commerce may be

avoided not only by a case-by-case evaluation of the actual

burdens imposed by particular regulations or taxes, but also, in

some situations, by the demarcation of a discrete realm of

commercial activity that is free from interstate taxation.

Bellas Hess followed the latter approach and created a safe

harbor for vendors "whose only connection with customers in the

[taxing] State is by common carrier or the United States mail."

Under Bellas Hess, such vendors are free from state-imposed

duties to collect sales and use taxes.

Like other bright-line tests, the Bellas Hess rule appears

artificial at its edges: whether or not a State may compel a

vendor to collect a sales or use tax may turn on the presence in

the taxing State of a small sales force, plant, or office. Cf.

National Geographic Society v. California Bd. of Equalization,

430 U. S. 551 (1977); Scripto, Inc. v. Carson, 362 U. S. 207

(1960). This artificiality, however, is more than offset by the

benefits of a clear rule. Such a rule firmly establishes the

boundaries of legitimate state authority to impose a duty to

collect sales and use taxes and reduces litigation concerning

those taxes. This benefit is important, for as we have so

frequently noted, our law in this area is something of a

"quagmire" and the "application of constitutional principles to

specific state statutes leaves much room for controversy and

confusion and little in the way of precise guides to the States

in the exercise of their indispensable power of taxation."

Northwestern States Portland Cement Co. v. Minnesota, 358 U. S.

450, 457458 (1959).

Moreover, a bright-line rule in the area of sales and use taxes

also encourages settled expectations and, in doing so, fosters

investment by businesses and individuals. Indeed, it is not

unlikely that the mail-order industry's dramatic growth over the

last quarter-century is due in part to the bright-line exemption

from state taxation created in Bellas Hess.

Notwithstanding the benefits of bright-line tests, we have, in

some situations, decided to replace such tests with more

contextual balancing inquiries. For example, in Arkansas

Electric Cooperative Corp. v. Arkansas Pub. Serv. Comm'n, 461 U.

S. 375 (1983), we reconsidered a bright-line test set forth in

Public Utilities Comm'n of R. I. v. Attleboro Steam & Electric

Co., 273 U. S. 83 (1927). Attleboro distinguished between state

regulation of wholesale sales of electricity, which was

constitutional as an "indirect" regulation of interstate

commerce, and state regulation of retail sales of electricity,

which was unconstitutional as a "direct regulation" of commerce.

In Arkansas Electric, we considered whether to "follow the

mechanical test set out in Attleboro, or the balance-of-interests

test applied in our Commerce Clause cases." Arkansas Electric

Cooperative Corp., 461 U. S., at 390391. We first observed that

"the principle of stare decisis counsels us, here as elsewhere,

not lightly to set aside specific guidance of the sort we find in

Attleboro." Id., at 391. In deciding to reject the Attleboro

analysis, we were influenced by the fact that the "mechanical

test" was "anachronistic," that the Court had rarely relied on

the test, and that we could "see no strong reliance interests"

that would be upset by the rejection of that test. Id., at

391392. None of those factors obtains in this case. First, the

Attleboro rule was "anachronistic" because it relied on formal

distinctions between "direct" and "indirect" regulation (and on

the regulatory counterparts of our Freeman line of cases); as

discussed above, Bellas Hess turned on a different logic and thus

remained sound after the Court repudiated an analogous

distinction in Complete Auto. Second, unlike the Attleboro rule,

we have, in our decisions, frequently relied on the Bellas Hess

rule in the last 25 years, see supra, at 11, and we have never

intimated in our review of sales or use taxes that Bellas Hess

was unsound. Finally, again unlike the Attleboro rule, the

Bellas Hess rule has engendered substantial reliance and has

become part of the basic framework of a sizeable industry. The

"interest in stability and orderly development of the law" that

undergirds the doctrine of stare decisis, see Runyon v. McCrary,

427 U.S. 160, (1976) (Stevens, J., concurring), therefore

counsels adherence to settled precedent.

In sum, although in our cases subsequent to Bellas Hess and

concerning other types of taxes we have not adopted a similar

bright-line, physical-presence requirement, our reasoning in

those cases does not compel that we now reject the rule that

Bellas Hess established in the area of sales and use taxes. To

the contrary, the continuing value of a bright-line rule in this

area and the doctrine and principles of stare decisis indicate

that the Bellas Hess rule remains good law. For these reasons,

we disagree with the North Dakota Supreme Court's conclusion that

the time has come to renounce the bright-line test of Bellas

Hess.

This aspect of our decision is made easier by the fact that the

underlying issue is not only one that Congress may be better

qualified to resolve, but also one that Congress has the ultimate

power to resolve. No matter how we evaluate the burdens that use

taxes impose on interstate commerce, Congress remains free to

disagree with our conclusions. See Prudential Insurance Co. v.

Benjamin, 328 U.S. 408 (1946). Indeed, in recent years Congress

has considered legislation that would "overrule" the Bellas Hess

rule. Its decision not to take action in this direction may, of

course, have been dictated by respect for our holding in Bellas

Hess that the Due Process Clause prohibits States from imposing

such taxes, but today we have put that problem to rest.

/* The Court admits to being able to read the handwriting on the

wall. Since the Congress COULD overrule a decision of the US

Supreme Court to allow such taxes, it is clear that the Court

does not want to lead. */

Accordingly, Congress is now free to decide whether, when, and to

what extent the States may burden interstate mail-order concerns

with a duty to collect use taxes.

Indeed, even if we were convinced that Bellas Hess was

inconsistent with our Commerce Clause jurisprudence, "this very

fact [might] giv[e us] pause and counse[l] withholding our hand,

at least for now. Congress has the power to protect interstate

commerce from intolerable or even undesirable burdens."

Commonwealth Edison Co. v. Montana, 453 U. S. 609, 637 (1981)

(White, J., concurring). In this situation, it may be that "the

better part of both wisdom and valor is to respect the judgment

of the other branches of the Government." Id., at 638.

The judgment of the Supreme Court of North Dakota is reversed and

the case is remanded for further proceedings not inconsistent

with this opinion.

It is so ordered.