Big Win for Remote Sellers in Alabama Economic Nexus Case

ACMA’s Legal Team Successfully Leads Online Seller Newegg in ‘Bama

While not necessarily a precursor to the forthcoming Supreme Court decision in South Dakota v. Wayfair, Inc., we’re excited to report a significant win for ACMA’s lawyers at Brann & Isaacson. Yesterday, the Alabama Tax Tribunal ruled in favor of e-commerce merchant Newegg in its challenge when the Alabama Department of Revenue sought enforcement of its economic nexus regulation in 2016.

This ruling negates the first significant “Kill Quill” measure by Alabama Commissioner of Revenue Julie Magee, to promulgate the rule that required companies such as Newegg to register to collect the sales tax even though they did not have a physical presence. Newegg was one of the few companies that fought the Department.

The AL Department of Revenue argued that the State can impose tax collection obligations on any company as long as permitted to do so under the U.S. Constitution. The Department also argued that the Quill v. North Dakota precedent is no longer good law, so that the Commerce Clause authorized assessment based upon sales to the state.

The Tribunal rejected this argument, stating that Quill remains the law of the land unless and until the Supreme Court changes the law. Also, the Department argued that Newegg’s online promotions in the State required it to collect. But the Tribunal held that merely operating a website and sending emails does not constitute distribution of promotional materials.

As you know, Brann & Isaacson represents the ACMA in our suits against OH, MA, SD, WY, IN, and TN. The significance of this victory is that if the Supreme Court were to abrogate Quill it would not be given retroactive effect. Furthermore, the Department has committed not to enforce the Rule until it has modified the Rule to incorporate the changes that may be required as a result of the SD v. Wayfair decision.