October 10, 2011
Practice Groups:
Appellate,
Constitutional &
Governmental
Litigation
Public Policy & Law
Tax
Technology
Transactions and
Data Protection
Supreme Court Denies Cert in KFC and
Lamtec Cases
By Cynthia M. Ohlenforst, Danny S. Ashby, Eli R. Mattioli, Sam Megally
On Monday, October 3, 2011, the U.S. Supreme Court denied certiorari in two cases that
would have given the Court the opportunity to clarify whether a business must have a
physical presence in a state to be subject to certain tax requirements in the state.
In its seminal 1992 decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the
Supreme Court ruled that, to be subject to sales and use tax collection and remittance
obligations in a state, an out-of-state retailer must have a physical presence in the state.
Quill undoubtedly remains the law of the land. Nonetheless, in the face of an
increasingly difficult economy, many states are aggressively pushing the boundaries of
the Commerce Clause of the U.S. Constitution, including by taking the position that Quill
applies only to sales and use taxes and not to income, franchise, business and occupation,
or other state taxes.
The Supreme Court’s denial of certiorari in Lamtec Corp. v. Dep’t of Revenue of the
State of Washington, 246 P.3d 788 (Wash. 2011), cert. denied, 2011 WL 4530146 (U.S.
Oct 3, 2011) (No. 10-1289), and KFC Corp. v. Iowa Dep’t of Revenue, 792 N.W.2d 308
(Iowa 2010), cert. denied, 2011 WL 4530160 (U.S. Oct 3, 2011) (No. 10-1340) – cases in
which K&L Gates submitted amicus briefs in support of Supreme Court review – keeps
open the debate about the extent to which the Court’s decision in Quill applies to taxes
other than sales and use taxes. The denial also could potentially embolden states to
continue taking increasingly aggressive positions with respect to nexus and other
constitutional and statutory standards in an effort to stem growing state budgetary
shortfalls.
Multistate businesses, online retailers, drop-shippers, and companies with an interest in
determining and controlling their exposure to various states’ taxes should remain vigilant
in monitoring developments among the states on the nexus front, particularly as more
states adopt legislation designed to redefine nexus for tax purposes.
Supreme Court Denies Cert in KFC and Lamtec Cases
Authors:
Cynthia M. Ohlenforst
cindy.ohlenforst@klgates.com
+1.214.939.5512
Danny S. Ashby
danny.ashby@klgates.com
+1.214.939.5745
Eli R. Mattioli
eli.mattioli@klgates.com
+1.212.536.4019
Sam Megally
sam.megally@klgates.com
+1.214.939.5491
Page 2