B&I Wins High-Profile Alabama Tax Dispute Over “Kill Quill” Rule

On June 14, 2018, the Alabama Tax Tribunal entered an Opinion and Final Order voiding a sales/use tax assessment issued against Newegg Inc. by the Alabama Department of Revenue under the Department’s economic nexus regulation, Ala. Admin. Code r. 810-6-2-.90.03. The regulation and Newegg’s appeal received considerable attention because the rule targeted of out-of-state retailers in an express effort to “kill Quill,” a reference to the long-standing constitutional requirement, reaffirmed by the U.S. Supreme Court in Quill Corp. v. North Dakota, that a state may not require a retailer that lacks a physical presence in the state to collect the state’s sales and use taxes.  In the Opinion and Final Order, the Tax Tribunal held that the Department’s assessment was void because the Department had not shown that Newegg engaged in any activities in Alabama that would satisfy statutory requirements for sales tax nexus. In its order, the Tribunal noted that the Department has conceded that it will not enforce its rule as currently written. Managing Partner Martin Eisenstein and Partner Matthew Schaefer represented Newegg in the case.

You can read the Tax Tribunal’s Opinion and Final Order here.