Complete Home & Office Legal Guide/Complete Home and Office Legal Guide (Chestnut) (1993).ISO/stat/ussct/quill1.asc

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/* 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.