National Bellas Hess, Inc. v. Department of Revenue

1967-05-08

Headline: Mail-order catalog seller freed from Illinois use-tax collection requirement when its only contacts are mail or common carrier, as the Court reversed the State’s demand that the out-of-state company collect and remit the tax.

Holding: The Court held that a State cannot require an out-of-state mail-order seller whose only contacts with the State are by mail or common carrier to collect and pay local use taxes, and reversed the Illinois judgment.

Real World Impact:

Stops states from forcing pure mail-order sellers to collect local use taxes without local presence.
Reduces recordkeeping and tax compliance burdens for catalog companies lacking in-state agents.
May leave Illinois consumers responsible for paying use tax directly.

Topics: mail-order sales, state use taxes, interstate commerce, catalog retailers

Summary

Background

A Missouri-based mail-order company sold goods to Illinois customers by sending catalogs and occasional flyers, receiving orders by mail, and shipping by U.S. mail or common carrier. Illinois treated that activity as enough to label the company a retailer doing business in the State and required it to collect and pay Illinois use taxes. The Illinois Supreme Court upheld the tax duty, and the company appealed to the U.S. Supreme Court.

Reasoning

The Court asked whether a State may force an out-of-state seller whose only contacts with the State are by mail or common carrier to collect local use taxes. Relying on earlier decisions, the majority said the Constitution requires a definite, minimum connection between the State and the seller before imposing such collection duties. The Court distinguished sellers with local stores or agents from pure mail-order businesses and reversed Illinois’ judgment to avoid subjecting interstate commerce to many local tax burdens.

Real world impact

The decision protects mail-order sellers that have no in-state outlets or representatives from being forced by each State to collect use taxes. It reduces the immediate recordkeeping and compliance obligations that Illinois sought to impose on the company, and it prevents a system that, the Court said, could entangle mail-order commerce in a patchwork of local tax rules.

Dissents or concurrances

A dissent argued that this company regularly and systematically solicited Illinois customers, extended credit using Illinois banking connections, and so should have been required to collect the tax to avoid disadvantaging local retailers.