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    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 Scalia, with whom Justice Kennedy and Justice Thomas
join, concurring in part and concurring in the judgment.

National Bellas Hess, Inc. v. Department of Revenue of Ill., 386
U. S. 753 (1967), held that the Due Process and Commerce Clauses
of the Constitution prohibit a State from imposing the duty of
use-tax collection and payment upon a seller whose only
connection with the State is through common carrier or the United
States mail.  I agree with the Court that the Due Process Clause
holding of Bellas Hess should be overruled.  Even before Bellas
Hess, we had held, correctly I think, that state regulatory
jurisdiction could be asserted on the basis of contacts with the
State through the United States mail.  See Travelers Health Assn.
v. Virginia ex rel. State Corp. Comm'n, 339 U. S. 643, (1950)
(Blue Sky laws).  It is difficult to discern any principled basis
for distinguishing between jurisdiction to regulate and
jurisdiction to tax.  As an original matter, it might have been
possible to distinguish between jurisdiction to tax and
jurisdiction to compel collection of taxes as agent for the
State, but we have rejected that.  National Geographic Soc.
v. California Bd. of Equalization, 430 U. S. 551, 558 (1977);
Scripto, Inc. v. Carson, 362 U. S. 207, 211 (1960).  I agree with
the Court, moreover, that abandonment of Bellas Hess's due
process holding is compelled by reasoning [c]omparable to that
contained in our post-1967 cases dealing with state jurisdiction
to adjudicate.  Ante, at 8.  I do not understand this to mean
that the due process standards for adjudicative jurisdiction and
those for legislative (or prescriptive) jurisdiction are
necessarily identical; and on that basis I join Parts I, II, and
III of the Court's opinion.  Compare Asahi Metal Industry Co. v.
Superior Court, 480 U.S. 102 (1987) with American Oil Co. v.
Neill, 380 U. S. 451 (1965).

I also agree that the Commerce Clause holding of Bellas Hess
should not be overruled.  Unlike the Court, however, I would not
revisit the merits of that holding, but would adhere to it on the
basis of stare decisis.  American Trucking Assns., Inc. v. Smith,
496 U. S. 167, 204 (1990) (Scalia, J., concurring in judgment).
Congress has the final say over regulation of interstate
commerce, and it can change the rule of Bellas Hess by simply
saying so.  We have long recognized that the doctrine of stare
decisis has special force where Congress remains free to alter
what we have done.  Patterson v. McLean Credit Union, 491 U. S.
164, 172173 (1989).  See also Hilton v. South Carolina Pub.
Railways Comm'n, 502 U. S. ___, ___ (1991) (slip op., at 4);
Illinois Brick Co. v. Illinois, 431 U. S. 720, 736 (1977).
Moreover, the demands of the doctrine are at their acme . . .
where reliance interests are involved, Payne v. Tennessee, 501 U.
S. ___, ___ (1991) (slip op., at 18).  As the Court notes, the
Bellas Hess rule has engendered substantial reliance and has
become part of the basic framework of a sizeable industry, ante,
at 17.

I do not share Justice White's view that we may disregard these
reliance interests because it has become unreasonable to rely
upon Bellas Hess, post, at 1112.  Even assuming for the sake of
argument (I do not consider the point) that later decisions in
related areas are inconsistent with the principles upon which
Bellas Hess rested, we have never acknowledged that, but have
instead carefully distinguished the case on its facts.  See,
e.g., D. H. Holmes Co. v. McNamara, 486 U. S. 24, 33 (1988);
National Geographic Soc., supra, at 559.  It seems to me
important that we retain our ability" and, what comes to the same
thing, that we maintain public confidence in our ability"
sometimes to adopt new principles for the resolution of new
issues without abandoning clear holdings of the past that those
principles contradict.  We seemed to be doing that in this area.
Having affirmatively suggested that the physical presence rule
could be reconciled with our new jurisprudence, we ought not
visit economic hardship upon those who took us at our word.  We
have recently told lower courts that [i]f a precedent of this
Court has direct application in a case, yet appears to rest on
reasons rejected in some other line of decisions, [they] should
follow the case which directly controls, leaving to this Court
the prerogative of overruling its own decisions.  Rodriguez de
Quijas v. Shearson/American Express, Inc., 490 U. S. 477, 484
(1989).  It is strangely incompatible with this to demand that
private parties anticipate our overrulings.  It is my view, in
short, that reliance upon a square, unabandoned holding of the
Supreme Court is always justifiable reliance (though reliance
alone may not always carry the day).  Finally, the physical
presence rule established in Bellas Hess is not unworkable,
Patterson, supra, at 173; to the contrary, whatever else may be
the substantive pros and cons of the rule, the bright-line regime
that it establishes, see ante, at 1516, is unqualifiedly in its
favor.  Justice White's concern that reaffirmance of Bellas Hess
will lead to a flurry of litigation over the meaning of physical
presence, see post, at 10, seems to me contradicted by 25 years
of experience under the decision.

For these reasons, I concur in the judgment of the Court and join
Parts I, II, and III of its opinion.

Justice White, concurring in part and dissenting in part.  Today
the Court repudiates that aspect of our decision in National
Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753
(1967), which restricts, under the Due Process Clause of the
Fourteenth Amendment, the power of the States to impose use tax
collection responsibilities on out-of- state mail order
businesses that do not have a "physical presence" in the State.
The Court stops short, however, of giving Bellas Hess the
complete burial it justly deserves.  In my view, the Court should
also overrule that part of Bellas Hess which justifies its
holding under the Commerce Clause.  I, therefore, respectfully
dissent from Part IV.

I

In Part IV of its opinion, the majority goes to some lengths to
justify the Bellas Hess physical presence requirement under our
Commerce Clause jurisprudence.  I am unpersuaded by its
interpretation of our cases.  In Bellas Hess, the majority placed
great weight on the interstate quality of the mail order sales,
stating that "it is difficult to conceive of commercial
transactions more exclusively interstate in character than the
mail order transactions here involved." Bellas Hess, supra, at
759.  As the majority correctly observes, the idea of prohibiting
States from taxing "exclusively interstate" transactions had been
an important part of our jurisprudence for many decades, ranging
intermittently from such cases as Case of State Freight Tax, 15
Wall. 232, 279 (1873), through Freeman v.  Hewit, 329 U. S. 249,
256 (1946), and Spector Motor Service, Inc. v. O'Connor, 340 U.
S. 602 (1951).  But though it recognizes that Bellas Hess was
decided amidst an upheaval in our Commerce Clause jurisprudence,
in which we began to hold that "a State, with proper drafting,
may tax exclusively interstate commerce so long as the tax does
not create any effect forbidden by the Commerce Clause," Complete
Auto Transit, Inc. v. Brady, 430 U. S. 274, 285 (1977), the
majority draws entirely the wrong conclusion from this period of
ferment.

The Court attempts to paint Bellas Hess in a different hue from
Freeman and Spector because the former "did not rely" on labeling
taxes that had "direct" and "indirect" effects on interstate
commerce.  See ante, at 1011.  Thus, the Court concludes, Bellas
Hess "did not automatically fall with Freeman and its progeny" in
our decision in Complete Auto.  See id., at 11.  I am unpersuaded
by this attempt to distinguish Bellas Hess from Freeman and
Spector, both of which were repudiated by this Court.  See
Complete Auto, supra, at 288289, and n.15.  What we disavowed in
Complete Auto was not just the "formal distinction between
`direct' and `indirect' taxes on interstate commerce," ante, at
10, but also the whole notion underlying the Bellas Hess physical
presence rule that "interstate commerce is immune from state
taxation." Complete Auto, supra, at 288.  The Court compounds its
misreading by attempting to show that Bellas Hess "is not
inconsistent with Complete Auto and our recent cases." Ante, at
11.  This will be news to commentators, who have rightly
criticized Bellas Hess.  Indeed, the majority displays no small
amount of audacity in claiming that our decision in National
Geographic Society v. California Bd. of Equalization, 430 U. S.
551, 559 (1977), which was rendered several weeks after Complete
Auto, reaffirmed the continuing vitality of Bellas Hess.  See
ante, at 11.

Our decision in that case did just the opposite.  National
Geographic held that the National Geographic Society was liable
for use tax collection responsibilities in California.  The
Society conducted an out-of-state mail order business similar to
the one at issue here and in Bellas Hess, and in addition,
maintained two small offices in California that solicited
advertisements for National Geographic Magazine.  The Society
argued that its physical presence in California was unrelated to
its mail order sales, and thus that the Bellas Hess rule
compelled us to hold that the tax collection responsibilities
could not be imposed.  We expressly rejected that view, holding
that the "requisite nexus for requiring an out-of-state seller
[the Society] to collect and pay the use tax is not whether the
duty to collect the use tax relates to the seller's activities
carried on within the State, but simply whether the facts
demonstrate `some definite link, some minimum connection, between
(the State and) the person . . . it seeks to tax."' 430 U. S., at
561 (citation omitted).  By decoupling any notion of a
transactional nexus from the inquiry, the National Geographic
Court in fact repudiated the free trade rationale of the Bellas
Hess majority.  Instead, the National Geographic Court relied on
a due process-type minimum contacts analysis that examined
whether a link existed between the seller and the State wholly
apart from the seller's in-state transaction that was being
taxed.  Citations to Bellas Hess notwithstanding, see 430 U. S.,
at 559, it is clear that rather than adopting the rationale of
Bellas Hess, the National Geographic Court was instead politely
brushing it aside.  Even were I to agree that the free trade
rationale embodied in Bellas Hess' rule against taxes of purely
interstate sales was required by our cases prior to 1967,
therefore, I see no basis in the majority's opening premise that
this substantive underpinning of Bellas Hess has not since been
disavowed by our cases.

II

The Court next launches into an uncharted and treacherous foray
into differentiating between the "nexus" requirements under the
Due Process and Commerce Clauses.  As the Court explains,
"[d]espite 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." Ante, at 12.    The due process nexus, which the Court
properly holds is met in this case, see ante, at Part III,
"concerns the fundamental fairness of governmental activity."
Ante, at 12. The Commerce Clause nexus requirement, on the other
hand, is "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." Ibid.

Citing Complete Auto, the Court then explains that the Commerce
Clause 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." Ante, at 13.
This is very curious, because parts two and three of the Complete
Auto test, which require fair apportionment and nondiscrimination
in order that inter-state commerce not be unduly burdened, now
appear to become the animating features of the nexus requirement,
which is the first prong of the Complete Auto inquiry.  The Court
freely acknowledges that there is no authority for this novel
interpretation of our cases and that we have never before found,
as we do in this case, sufficient contacts for due process
purposes but an insufficient nexus under the Commerce Clause.
See ante, at 1314, and n.6.

The majority's attempt to disavow language in our opinions
acknowledging the presence of due process requirements in the
Complete Auto test is also unpersuasive.  See ante, at 1314, n. 6
(citing Trinova Corp. v.  Michigan Dept. of Treasury, 498 U. S.
___, ___ (1991) (slip op., at "")).  Instead of explaining the
doctrinal origins of the Commerce Clause nexus requirement, the
majority breezily announces the rule and moves on to other
matters.  See ante, at 1314.  In my view, before resting on the
assertion that the Constitution mandates inquiry into two readily
distinct "nexus" requirements, it would seem prudent to discern
the origins of the "nexus" requirement in order better to
understand whether the Court's concern traditionally has been
with the fairness of a State's tax or some other value.

The cases from which the Complete Auto Court derived the nexus
requirement in its four-part test convince me that the issue of
"nexus" is really a due process fairness inquiry.  In explaining
the sources of the four-part inquiry in Complete Auto, the Court
relied heavily on Justice Rutledge's separate concurring opinion
in Freeman v. Hewit, 329 U. S. 249 (1946), the case whose
majority opinion the Complete Auto Court was in the process of
comprehensively disavowing.  Instead of the formalistic inquiry
into whether the State was taxing interstate commerce, the
Complete Auto Court adopted the more functionalist approach of
Justice Rutledge in Freeman.  See Complete Auto, 430 U. S., at
280281.  In conducting his inquiry, Justice Rutledge used
language that by now should be familiar, arguing that a tax was
unconstitutional if the activity lacked a sufficient connection
to the State to give "jurisdiction to tax," Free man, supra, at
271; or if the tax discriminated against interstate commerce; or
if the activity was subjected to multiple tax burdens.  329 U.S.,
at 276277.  Justice Rutledge later refined these principles in
Memphis Natural Gas Co. v. Stone, 335 U. S. 80 (1948), in which
he described the principles that the Complete Auto Court would
later substantially adopt:  "[I]t is enough for me to sustain the
tax imposed in this case that it is one clearly within the
state's power to lay insofar as any limitation of due process or
`jurisdiction to tax' in that sense is concerned; it is
nondiscriminatory . . . ; [it] is duly apportioned . . .; and
cannot be repeated by any other state." 335 U.S., at 9697
(concurring opinion) (footnotes omitted).

By the time the Court decided Northwestern States Portland Cement
Co. v. Minnesota, 358 U. S. 450 (1959), Justice Rutledge was no
longer on the Court, but his view of the nexus requirement as
grounded in the Due Process Clause was decisively adopted.  In
rejecting challenges to a state tax based on the Due Process and
Commerce Clauses, the Court stated that "[t]he taxes imposed are
levied only on that portion of the taxpayer's net income which
arises from its activities within the taxing State.  These
activities form a sufficient `nexus between such a tax and
transactions within a state for which the tax is an exaction."'
Id., at 464 (citation omitted).  The Court went on to observe
that "[i]t strains reality to say, in terms of our decisions,
that each of the corporations here was not sufficiently involved
in local events to forge `some definite link, some minimum
connection' sufficient to satisfy due process requirements." Id.,
at 464465 (quoting Miller Bros. v.  Maryland, 347 U. S. 340,
344345 (1954)).  When the Court announced its four-part synthesis
in Complete Auto, the nexus requirement was definitely traceable
to concerns grounded in the Due Process Clause, and not the
Commerce Clause, as the Court's discussion of the doctrinal
anteced- ents for its rule made clear.  See Complete Auto, supra,
at 281282, 285.  For the Court now to assert that our Commerce
Clause jurisprudence supports a separate notion of nexus is
without precedent or explanation.

Even were there to be such an independent requirement under the
Commerce Clause, there is no relationship between the physical
presence/nexus rule the Court retains and Commerce Clause
considerations that allegedly justify it.  Perhaps long ago a
seller's "physical presence" was a sufficient part of a trade to
condition imposition of a tax on such presence.  But in today's
economy, physical presence frequently has very little to do with
a transaction a State might seek to tax.  Wire transfers of money
involving billions of dollars occur every day; purchasers place
orders with sellers by fax, phone, and computer linkup; sellers
ship goods by air, road, and sea through sundry delivery services
without leaving their place of business.  It is certainly true
that the days of the door-to-door salesperson are not gone.
Nevertheless, an out-of-state direct marketer derives numerous
commercial benefits from the State in which it does business.
These advantages include laws establishing sound local banking
institutions to support credit transactions; courts to insure
collection of the purchase price from the seller's customers;
means of waste disposal from garbage generated by mail order
solicitations; and creation and enforcement of consumer
protection laws, which protect buyers and sellers alike, the
former by ensuring that they will have a ready means of
protecting against fraud, and the latter by creating a climate of
consumer confidence that inures to the benefit of reputable
dealers in mail order transactions.  To create, for the first
time, a nexus requirement under the Commerce Clause independent
of that established for due process purposes is one thing; to
attempt to justify an anachronistic notion of physical presence
in economic terms is quite another.

III

The illogic of retaining the physical presence requirement in
these circumstances is palpable.  Under the majority's analysis,
and our decision in National Geographic, an out- of-state seller
with one salesperson in a State would be subject to use tax
collection burdens on its entire mail order sales even if those
sales were unrelated to the salesperson's solicitation efforts.
By contrast, an out-of-state seller in a neighboring State could
be the dominant business in the putative taxing State, creating
the greatest infrastructure burdens and undercutting the State's
home companies by its comparative price advantage in selling
products free of use taxes, and yet not have to collect such
taxes if it lacks a physical presence in the taxing State.  The
majority clings to the physical presence rule not because of any
logical relation to fairness or any economic rationale related to
principles underlying the Commerce Clause, but simply out of the
supposed convenience of having a bright-line rule.  I am less
impressed by the convenience of such adherence than the
unfairness it produces.  Here, convenience should give way.  Cf.
Complete Auto, supra, at 289, n.15 ("We believe, however, that
administrative convenience . . . is insufficient justification
for abandoning the principle that `interstate commerce may be
made to pay its way"').

Also very questionable is the rationality of perpetuating a rule
that creates an interstate tax shelter for one form of business
"mail order sellers" but no countervailing advantage for its
competitors.  If the Commerce Clause was intended to put
businesses on an even playing field, the majority's rule is
hardly a way to achieve that goal.  Indeed, arguably even under
the majority's explanation for its "Commerce Clause nexus"
requirement, the unfairness of its rule on retailers other than
direct marketers should be taken into account.  See ante, at 12
(stating that the Commerce Clause nexus requirement addresses the
"structural concerns about the effects of state regulation on the
national economy").  I would think that protectionist rules
favoring a $180 billion-a-year industry might come within the
scope of such "structural concerns." See Brief for State of New
Jersey as Amicus Curiae 4.

IV

The Court attempts to justify what it rightly acknowledges is an
"artificial" rule in several ways.  See ante, at 15.  First, it
asserts that the Bellas Hess principle "firmly establishes the
boundaries of legitimate state taxing authority and reduces
litigation concerning state taxation." Ibid.  It is very
doubtful, however, that the Court's opinion can achieve its aims.
Certainly our cases now demonstrate two "bright-line" rules for
mail order sellers to follow:  under the physical presence
requirement reaffirmed here they will not be subjected to use tax
collection if they have no physical presence in the taxing State;
under the National Geographic rule, mail order sellers will be
subject to use tax collection if they have some presence in the
taxing State even if that activity has no relation to the
transaction being taxed.  See National Geographic, 430 U. S., at
560562.  Between these narrow lines lies the issue of what
constitutes the requisite "physical presence" to justify
imposition of use tax collection responsibilities.

Instead of confronting this question head-on, the majority offers
only a cursory analysis of whether Quill's physical presence in
North Dakota was sufficient to justify its use tax collection
burdens, despite briefing on this point by the State.  See Brief
for Respondent 4547.  North Dakota contends that even should the
Court reaffirm the Bellas Hess rule, Quill's physical presence in
North Dakota was sufficient to justify application of its use tax
collection law.  Quill concedes it owns software sent to its
North Dakota customers, but suggests that such property is
insufficient to justify a finding of nexus.  In my view, the
question of Quill's actual physical presence is sufficiently
close to cast doubt on the majority's confidence that it is
propounding a truly "bright-line" rule.  Reasonable minds surely
can, and will, differ over what showing is required to make out a
"physical presence" adequate to justify imposing responsibil-
ities for use tax collection.  And given the estimated loss in
revenue to States of more than $3.2 billion this year alone, see
Brief for Respondent 9, it is a sure bet that the vagaries of
"physical presence" will be tested to their fullest in our
courts.

The majority next explains that its "bright-line" rule encourages
"settled expectations" and business investment.  Ante, at 1516.
Though legal certainty promotes business confidence, the mail
order business has grown exponentially despite the long line of
our post Bellas Hess precedents that signalled the demise of the
physical presence requirement.  Moreover, the Court's seeming but
inadequate justification of encouraging settled expectations in
fact connotes a substantive economic decision to favor out-of-
state direct marketers to the detriment of other retailers.  By
justifying the Bellas Hess rule in terms of "the mail order
industry's dramatic growth over the last quarter-century," ante,
at 16, the Court is effectively imposing its own economic
preferences in deciding this case.  The Court's invitation to
Congress to legislate in this area signals that its preferences
are not immutable, but its approach is different from past
instances in which we have deferred to state legislatures when
they enacted tax obligations on the State's share of interstate
commerce.  See, e.g., Goldberg v. Sweet, 488 U. S. 252 (1989);
Commonwealth Edison Co. v. Montana, 453 U. S. 609 (1981).

Finally, the Court accords far greater weight to stare decisis
than was given to that principle in Complete Auto itself.  As
that case demonstrates, we have not been averse to overruling our
precedents under the Commerce Clause when they have become
anachronistic in light of later decisions.  See Complete Auto,
430 U.S., at 288289.  One typically invoked rationale for stare
decisis "an unwillingness to upset settled expectations"is
particularly weak in this case.  It is unreasonable for companies
such as Quill to invoke a "settled expectation" in conducting
affairs without being taxed.  Neither Quill nor any of its amici
point to any investment decisions or reliance interests that
suggest any unfairness in overturning Bellas Hess.  And the costs
of compliance with the rule, in light of today's modern computer
and software technology, appear to be nominal.  See Brief for
Respondents 40; Brief for State of New Jersey as Amicus Curiae
18.  To the extent Quill developed any reliance on the old rule,
I would submit that its reliance was unreasonable because of its
failure to comply with the law as enacted by the North Dakota
state legislature.  Instead of rewarding companies for ignoring
the studied judgments of duly-elected officials, we should insist
that the appropriate way to challenge a tax as unconstitutional
is to pay it (or in this case collect it and remit it or place it
in escrow) and then sue for declaratory judgment and refund.
Quill's refusal to comply with a state tax statute prior to its
being held unconstitutional hardly merits a determination that
its reliance interests were reasonable.

The Court hints, but does not state directly, that a basis for
its invocation of stare decisis is a fear that overturning Bellas
Hess will lead to the imposition of retroactive liability.  Ante,
at 18, and n.10.  See James B. Beam Distilling Co. v. Georgia,
501 U.S. "" (1991).  As I thought in that case, such fears are
groundless because no one can "sensibly insist on automatic
retroactivity for any and all judicial decisions in the federal
system." Id., at ___ (White, J., concurring in judgment).  Since
we specifically limited the question on which certiorari was
granted in order not to consider the potential retroactive
effects of overruling Bellas Hess, I believe we should leave that
issue for another day.  If indeed fears about retroactivity are
driving the Court's decision in this case, we would be better
served, in my view, to address those concerns directly rather
than permit them to infect our formulation of the applicable
substantive rule.

Although Congress can and should address itself to this area of
law, we should not adhere to a decision, however right it was at
the time, that by reason of later cases and economic reality can
no longer be rationally justified.  The Commerce Clause aspect of
Bellas Hess, along with its due process holding, should be
overruled.