Supreme Court Rules on Online Sales Tax Rules

In a five to four vote, the Court ruled that states can start collecting billions of dollars in sales taxes from Internet retailers that don't currently charge tax to their customers. The Justice has reversed in ruling that had made most of the Internet at tax free zone. Joining me Bloomberg, New Supreme Court reporter Greg Store Greg Justice Kennedy wrote the majority opinion. What did he base the reversal on?

He based it both on the fact that he didn't think the physical presence rule made a whole lot of sense in and he said, it really doesn't make a lot of sense today when commerce is uh is the way so much business gets done. UH. South Dakota's law uses instead of a physical presence requirement that says you have to have an economic connection to the state by having a certain minimum amount of sales. And uh, he said that's a better way to determine whether a state

should have the right to impose tax collection responsibilities. It wasn't a typical lineup of justices joining Justice Kennedy in the majority, where Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito,

and Neil Gorst. So to what do you attribute this? Yeah, this the underlying legal doctrine which is known as the dormant Commerce clause, which sounds like something that would put you to sleep, but it's basically the idea that states can't interfere with interstate commerce, at least unless Congress lets them explicitly says they can. That underlying doctrine, for whatever reason, just cuts across ideological lines. It has never divided the

Court the way so many other issues UH do. And in this case, it was very clear that the arguments UH that Justice Ginsburg was poised to overturn this physical presence requirement. Uh. She didn't see any reason why a state should not be allowed to UH impose tax collection responsibilities, and she joined with people like Justice Thomas, who thinks that the whole Dorman's dormant commerce clause idea actually isn't in the Constitution. So he was even uh more excited

about overturning the Quill decision. What did the descent say and who wrote out well that the you know, it wasn't so much. He was written by the Chief Justice John Roberts, and it was so much that he was saying the physical presence requirement was a good one, but basically that this is going to have a lot of implications, implications we can't fully understand. And Congress is the one

who should deal with us. So this entire area of law is one where uh, you know, both before this ruling and after this ruling, Congress can come in and set the rules for the states in terms of what they can what they can do, and and Chief Justice Roberts essentially said, it would be much better if we let Congress overturn the physical presence rule and therefore be able to set whatever, you know, sort of minimum requirements. It would want, uh for first states to avoid imposing

too much of a burden on small businesses. So Congress has never been able to pass that kind of a of a law, but might states Now all the states having different kinds of requirements. Might that lead Congress to move intet a federal standard, Yeah, it's sure might. Um, there are you know, some of the internet retailers Amazon has, for example, has wanted for a while for Congress to

step in and do something like that. Uh. So you have both the concern of a patchwork of state laws and a concern that uh small businesses might be forced to collect taxes. And there will be a push for Congress to set a clear minimum threshold. Uh. You know, I mean, obviously it's it's it's tough to get much through Congress these days at all, but there is certainly a lot of talk about trying to get Congress to act.

At this point. Another ruling could effect about a hundred cases currently at the SEC, along with a dozen that are on appeal. Tell us about that it hasn't gotten as much play, obviously as the Internet ruling. No, it

has it. Um. It is uh involving a guy UH named Ray Lucia who UH was an investment office investment advisor, and he uh touted his investment strategy as buckets of money, and he was accused by the SEC of misleading potential investors and his arguments, which could be really important for the way administrative agencies work, is that the judge who decided his case and find him and banned them from the investment advisory business UH wasn't properly appointed under the constitution.

So basically, the Constitution says, there are certain people who are called officer and because they're pretty darn important, more important than just the run of the mill employee, they have to be appointed in a specific way, like directly by the Commission and the SECS administrative law judges were not appointed. It was through UH the federal government's Personnel

Office was involved. They weren't appointed directly by the Commission UH, and so he challenged the finding against him on those grounds. The Supreme Court agreed with them. And what could be really important about this more broadly is that UM, it's all part of a doctrine that could give the president more control and ultimately give the president more ability to have somebody fired for not going along with administrative priorities.

Explain how that could happen, GREG, and what kind of circumstances. So if if UM, the so now we know that administrative law judges are officers. UM. The argument from some other cases. Is that it's you're an officer, you have to have a certain level of accountability, and at least the agency, which is politically appointed, the SEC has to have ability to file to fire you for not going

along with administrative administration priorities. UM. So that issue wasn't directly before the court in this case, but it seems very likely that soon we'll get a case saying uh that the SEC um whose members are are you know, we're appointed by the president. Uh, you should have more ability to fire people like administrative law judges and potentially

other people who work for for the agency. Does this mean that the SEC now has to go back and appoint all the judges are already on the stats, so they've already tried to do that. Um. But what the court said in this case is that's not good enough. Uh. Mr Lucia has a right to a hearing before a different administrative law judge because you you um, uh you know, even if this person will be able to stay in the job. Uh while he was while this a l J was considering uh the Luccia case. Uh, he had

not been properly appointed. And it doesn't make any sense that we need to send it to another person to kind of give him a fresh start in front of a judge who was properly appointed. It's a technical issue that actually has a lot of repercussions. Let's talk about what's coming up. I understand that we're having opinions on a Friday as well. Tomorrow. We are having opinions on a Friday bonus opinion day tomorrow at the Supreme Court. We are now down to tin cases that are still

to come. The biggest, the one that people are really watching for, of course, as a Trump travel band. Another really big business case that that is important involves American Express UH and an anti trust case against them for with what's known as its anti steering rules, those bar merchants who accept American Express cards from steering customers to another card that may h charge the merchant lower fees. In other words, the merchant can't say, hey, if you

pay with X card, will give you a discount. Um. There's an trust case against that. The Court could revive that case. There's also a big case involving mandatory union fees by public sector workers and whether they have a government Workers have a First Amendment right to say I don't want to contribute to to my union. All right, Thanks so much, Greg. We will check back with you tomorrow for all the latest opinions. Thanks for listening to

the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple podcast, SoundCloud, and on Bloomberg dot com slash podcast. I'm June Basso. This is Bloomberg yea