How will Gorsuch Field State and Local Tax Issues?

The presence of Neil M. Gorsuch could prove to be a key factor in decisions regarding state and local tax (acronym “SALT”) that the Supreme Court will soon consider.

Currently the SALT community is focused on how he may impact decisions on two issues in particular: states’ challenges to the physical-presence nexus standard in the Supreme Court’s 1992 ruling in Quill v. North Dakota; and limitations on retroactive tax legislation.

Quill requires an out-of-state company to have physical presence to be subject to a sales-and-use tax collection obligation. Based on his Tenth Circuit record, Gorsuch may side with the camp that believes Quill is past its useful life. However, that supposition needs to be tempered by the fact that Quill is a complicated decision involving issues of judicial restraint and separation of powers.

In recent years, some states have enacted retroactive tax legislation to effectively overturn court decisions favorable to taxpayers, and the Supreme Court has repeatedly upheld such legislation against a due process challenge. In this area, it’s possible to read Judge Gorsuch’s confirmation hearing comments as favorable for limiting a state’s ability to enact retroactive tax legislation.

It is difficult to predict how Justice Gorsuch may approach these thorny SALT issues, given that DMA is the only substantive SALT decision that he authored or joined while at the Tenth Circuit. It is safe to say that the SALT community will be watching closely as these issues play out.