Editor's Note: The excerpt below is from our Washington Policy analyst JT Taylor's morning "Capital Brief" research note to subscribers.

“Kill Quill” SCOTUS Ruling May Hurt Online Retailers - zco

Quill v. North Dakota prohibits states from forcing out-of-state retailers to collect sales taxes absent a physical presence in the state.  Amazon no longer dodges sales taxes now that it has massively expanded its warehouse and order fulfillment infrastructure across the nation. But other online retailers lack the physical presence to trigger taxing obligations.

The Supreme Court tackled the issue yesterday and it looks like a very close call, according to our Legal Policy Analyst Paul Glenchur.

The Justices seemed to agree that the physical presence test was obsolete given the rapid growth of e-commerce, but several members are worried that overturning the Court’s prior Quill decision will prove disruptive as more than 12,000 local jurisdictions could impose diverse sales tax burdens.

Glenchur gives a slight edge to online sellers, but the vote will very likely produce a narrow majority, perhaps 5-4. Maintaining the status quo would benefit pure online retailers like Wayfair and Overstock.

On the other hand, a “Kill Quill” ruling would benefit large anchor retailers like Target, Wal Mart and Home Depot that favor sales tax burdens on competing remote Internet sellers.  A decision is due by the end of June. 

Meanwhile, in another courthouse on Constitution Avenue...Glenchur is closely monitoring the AT&T/Time Warner merger trial before Federal District Judge Richard Leon. It seems to be going pretty well for AT&T, he says, as it hammers the factual and economic assumptions of the government’s primary expert.

The Justice Department claims the merger will mean higher prices for Turner Networks (TNT, TBS, CNN), driving up consumer pay-TV bills. AT&T says that won’t happen and has agreed to arbitrate programming contracts with rival distributors with no blackout threats.

The big guns will testify this week, including the CEOs of AT&T and Time Warner. Glenchur is closely tracking a number of market-impacting court decisions and brings a unique perspective to the cases from inside the room.

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