WEBVTT - Supreme Court Rules on Online Sales Tax Rules

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple Podcasts, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcasts. Shares of Internet

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<v Speaker 1>retailers plunged after a decision by the Supreme Court today.

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<v Speaker 1>In a five to four vote, the Court ruled that

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<v Speaker 1>states can start collecting billions of dollars in sales taxes

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<v Speaker 1>from Internet retailers that don't currently charge tax to their customers.

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<v Speaker 1>The Justice has reversed in ruling that had made most

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<v Speaker 1>of the Internet at tax free zone. Joining me Bloomberg,

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<v Speaker 1>New Supreme Court reporter Greg Store Greg Justice Kennedy wrote

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<v Speaker 1>the majority opinion. What did he base the reversal on?

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<v Speaker 1>He based it both on the fact that he didn't

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<v Speaker 1>think the physical presence rule made a whole lot of

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<v Speaker 1>sense in and he said, it really doesn't make a

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<v Speaker 1>lot of sense today when commerce is uh is the

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<v Speaker 1>way so much business gets done. UH. South Dakota's law

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<v Speaker 1>uses instead of a physical presence requirement that says you

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<v Speaker 1>have to have an economic connection to the state by

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<v Speaker 1>having a certain minimum amount of sales. And uh, he

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<v Speaker 1>said that's a better way to determine whether a state

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<v Speaker 1>should have the right to impose tax collection responsibilities. It

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<v Speaker 1>wasn't a typical lineup of justices joining Justice Kennedy in

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<v Speaker 1>the majority, where Justices Clarence Thomas, Ruth Bader Ginsburg, Samuel Alito,

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<v Speaker 1>and Neil Gorst. So to what do you attribute this? Yeah,

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<v Speaker 1>this the underlying legal doctrine which is known as the

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<v Speaker 1>dormant Commerce clause, which sounds like something that would put

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<v Speaker 1>you to sleep, but it's basically the idea that states

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<v Speaker 1>can't interfere with interstate commerce, at least unless Congress lets

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<v Speaker 1>them explicitly says they can. That underlying doctrine, for whatever reason,

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<v Speaker 1>just cuts across ideological lines. It has never divided the

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<v Speaker 1>Court the way so many other issues UH do. And

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<v Speaker 1>in this case, it was very clear that the arguments

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<v Speaker 1>UH that Justice Ginsburg was poised to overturn this physical

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<v Speaker 1>presence requirement. Uh. She didn't see any reason why a

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<v Speaker 1>state should not be allowed to UH impose tax collection responsibilities,

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<v Speaker 1>and she joined with people like Justice Thomas, who thinks

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<v Speaker 1>that the whole Dorman's dormant commerce clause idea actually isn't

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<v Speaker 1>in the Constitution. So he was even uh more excited

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<v Speaker 1>about overturning the Quill decision. What did the descent say

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<v Speaker 1>and who wrote out well that the you know, it

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<v Speaker 1>wasn't so much. He was written by the Chief Justice

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<v Speaker 1>John Roberts, and it was so much that he was

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<v Speaker 1>saying the physical presence requirement was a good one, but

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<v Speaker 1>basically that this is going to have a lot of implications,

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<v Speaker 1>implications we can't fully understand. And Congress is the one

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<v Speaker 1>who should deal with us. So this entire area of

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<v Speaker 1>law is one where uh, you know, both before this

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<v Speaker 1>ruling and after this ruling, Congress can come in and

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<v Speaker 1>set the rules for the states in terms of what

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<v Speaker 1>they can what they can do, and and Chief Justice

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<v Speaker 1>Roberts essentially said, it would be much better if we

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<v Speaker 1>let Congress overturn the physical presence rule and therefore be

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<v Speaker 1>able to set whatever, you know, sort of minimum requirements.

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<v Speaker 1>It would want, uh for first states to avoid imposing

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<v Speaker 1>too much of a burden on small businesses. So Congress

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<v Speaker 1>has never been able to pass that kind of a

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<v Speaker 1>of a law, but might states Now all the states

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<v Speaker 1>having different kinds of requirements. Might that lead Congress to

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<v Speaker 1>move intet a federal standard, Yeah, it's sure might. Um,

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<v Speaker 1>there are you know, some of the internet retailers Amazon has,

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<v Speaker 1>for example, has wanted for a while for Congress to

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<v Speaker 1>step in and do something like that. Uh. So you

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<v Speaker 1>have both the concern of a patchwork of state laws

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<v Speaker 1>and a concern that uh small businesses might be forced

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<v Speaker 1>to collect taxes. And there will be a push for

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<v Speaker 1>Congress to set a clear minimum threshold. Uh. You know,

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<v Speaker 1>I mean, obviously it's it's it's tough to get much

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<v Speaker 1>through Congress these days at all, but there is certainly

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<v Speaker 1>a lot of talk about trying to get Congress to act.

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<v Speaker 1>At this point. Another ruling could effect about a hundred

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<v Speaker 1>cases currently at the SEC, along with a dozen that

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<v Speaker 1>are on appeal. Tell us about that it hasn't gotten

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<v Speaker 1>as much play, obviously as the Internet ruling. No, it

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<v Speaker 1>has it. Um. It is uh involving a guy UH

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<v Speaker 1>named Ray Lucia who UH was an investment office investment advisor,

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<v Speaker 1>and he uh touted his investment strategy as buckets of money,

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<v Speaker 1>and he was accused by the SEC of misleading potential

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<v Speaker 1>investors and his arguments, which could be really important for

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<v Speaker 1>the way administrative agencies work, is that the judge who

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<v Speaker 1>decided his case and find him and banned them from

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<v Speaker 1>the investment advisory business UH wasn't properly appointed under the constitution.

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<v Speaker 1>So basically, the Constitution says, there are certain people who

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<v Speaker 1>are called officer and because they're pretty darn important, more

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<v Speaker 1>important than just the run of the mill employee, they

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<v Speaker 1>have to be appointed in a specific way, like directly

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<v Speaker 1>by the Commission and the SECS administrative law judges were

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<v Speaker 1>not appointed. It was through UH the federal government's Personnel

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<v Speaker 1>Office was involved. They weren't appointed directly by the Commission UH,

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<v Speaker 1>and so he challenged the finding against him on those grounds.

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<v Speaker 1>The Supreme Court agreed with them. And what could be

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<v Speaker 1>really important about this more broadly is that UM, it's

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<v Speaker 1>all part of a doctrine that could give the president

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<v Speaker 1>more control and ultimately give the president more ability to

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<v Speaker 1>have somebody fired for not going along with administrative priorities.

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<v Speaker 1>Explain how that could happen, GREG, and what kind of circumstances.

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<v Speaker 1>So if if UM, the so now we know that

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<v Speaker 1>administrative law judges are officers. UM. The argument from some

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<v Speaker 1>other cases. Is that it's you're an officer, you have

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<v Speaker 1>to have a certain level of accountability, and at least

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<v Speaker 1>the agency, which is politically appointed, the SEC has to

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<v Speaker 1>have ability to file to fire you for not going

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<v Speaker 1>along with administrative administration priorities. UM. So that issue wasn't

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<v Speaker 1>directly before the court in this case, but it seems

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<v Speaker 1>very likely that soon we'll get a case saying uh

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<v Speaker 1>that the SEC um whose members are are you know,

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<v Speaker 1>we're appointed by the president. Uh, you should have more

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<v Speaker 1>ability to fire people like administrative law judges and potentially

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<v Speaker 1>other people who work for for the agency. Does this

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<v Speaker 1>mean that the SEC now has to go back and

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<v Speaker 1>appoint all the judges are already on the stats, so

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<v Speaker 1>they've already tried to do that. Um. But what the

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<v Speaker 1>court said in this case is that's not good enough. Uh.

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<v Speaker 1>Mr Lucia has a right to a hearing before a

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<v Speaker 1>different administrative law judge because you you um, uh you know,

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<v Speaker 1>even if this person will be able to stay in

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<v Speaker 1>the job. Uh while he was while this a l

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<v Speaker 1>J was considering uh the Luccia case. Uh, he had

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<v Speaker 1>not been properly appointed. And it doesn't make any sense

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<v Speaker 1>that we need to send it to another person to

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<v Speaker 1>kind of give him a fresh start in front of

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<v Speaker 1>a judge who was properly appointed. It's a technical issue

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<v Speaker 1>that actually has a lot of repercussions. Let's talk about

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<v Speaker 1>what's coming up. I understand that we're having opinions on

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<v Speaker 1>a Friday as well. Tomorrow. We are having opinions on

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<v Speaker 1>a Friday bonus opinion day tomorrow at the Supreme Court.

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<v Speaker 1>We are now down to tin cases that are still

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<v Speaker 1>to come. The biggest, the one that people are really

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<v Speaker 1>watching for, of course, as a Trump travel band. Another

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<v Speaker 1>really big business case that that is important involves American

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<v Speaker 1>Express UH and an anti trust case against them for

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<v Speaker 1>with what's known as its anti steering rules, those bar

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<v Speaker 1>merchants who accept American Express cards from steering customers to

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<v Speaker 1>another card that may h charge the merchant lower fees.

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<v Speaker 1>In other words, the merchant can't say, hey, if you

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<v Speaker 1>pay with X card, will give you a discount. Um.

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<v Speaker 1>There's an trust case against that. The Court could revive

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<v Speaker 1>that case. There's also a big case involving mandatory union

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<v Speaker 1>fees by public sector workers and whether they have a

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<v Speaker 1>government Workers have a First Amendment right to say I

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<v Speaker 1>don't want to contribute to to my union. All right,

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<v Speaker 1>Thanks so much, Greg. We will check back with you

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<v Speaker 1>tomorrow for all the latest opinions. Thanks for listening to

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<v Speaker 1>the Bloomberg Law Podcast. You can subscribe and listen to

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<v Speaker 1>the show on Apple podcast, SoundCloud, and on Bloomberg dot

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<v Speaker 1>com slash podcast. I'm June Basso. This is Bloomberg yea