-: SJC-13283.
U.S. Auto Parts Network, Inc. v. Commissioner of Revenue.
Judge: Okay. Attorney Green, good morning.
-: Good morning, your honor.
May it please the court,
Assistant Attorney General Julie Green
for the Commissioner of Revenue.
The essential issue in this case
is which constitutional standard governs this court's review
of the assessment at issue,
the standard of Wayfair, or of Quill.
The Appellate Tax Board committed error
when it declined to apply Wayfair, mistakenly believing
that the doctrine of retroactivity is limited to the facts
of Harper and Beam, where a court declares a tax scheme
to be unconstitutional.
-: Can you answer a question
that I should know the answer to?
That's perhaps overtly simple.
We have the physical presence standard.
The DOR imposes a different regulation,
which is more than the physical presence,
in anticipation, I guess, of the internet context.
So why is that regulation imposed
when there was already on the books
the physical presence standard?
-: I think I disagree with both parts of that,
and maybe I'm not understanding your question.
So first, the regulation was not different-
-: That's on me, but go on and answer.
Go on and answer.
-: Well, let me make sure I answer.
First of all, the regulation was not broader.
The regulation was not attempting to go beyond
the physical presence standard.
It was applying the physical presence standard,
interpreting the internet, the facts of the internet,
differently than anyone had looked at them before.
-: But cookies are physical presence?
-: Cookies, downloaded software, and very importantly,
use of content distribution networks, CDNs,
which are physical server farms that sit in Massachusetts.
-: I got the third, but the first two, you know,
the apps and the cookies.
I'm not getting the physical part of that.
-: So let me submit that is no longer a live question,
but I can answer it for you,
which is that the Commissioner's computer science expert,
Professor Miller, explains in his declarations
that the way those work is that electrons physically
on a consumer's device,
a computer or an iPhone, for example,
that the electrons physically take up charge space.
It's an actual physical process that operates physically
on your device in a way
that does constitute physical presence.
It's also important to understand the body of case law
that has developed over the decades
of the physical presence standard.
Physical presence does not necessarily mean
a tangible object.
It can consist of a lot of different types of things.
And a very good example is the case called overstock.com,
in which click-through nexus sales arrangements
were held to be physical presence,
where Amazon contracted with residents of a state
who hosted websites to put an Amazon link on their page,
and every time a consumer would click on the Amazon link
on that other website, the website owner
would earn a commission from any sales made by Amazon.
-: So you started off that answer with saying
that's not longer a live issue, and thank the lord.
(Green chuckles)
What is the live issue?
In terms of the physical presence question
that Justice Gaziano had posed.
-: The live issue is whether the standard
of Wayfair is satisfied.
-: No, no, no.
In terms of whether or not the regulation fits
within the physical presence standard,
which was applicable at the time the regulation was issued.
-: So that's not the live issue because the-
-: But let's just say it was.
Okay.
So you're saying electrons
satisfy a substantial nexus to Massachusetts?
That was the Commissioner's position?
-: At the time, in 2017,
when physical presence was the standard,
the position was that those electrons created,
those among other types of contacts,
created physical presence.
But when Wayfair was decided,
that ceased to be the standard.
The standard now in the live issue
before this court is substantial nexus.
To satisfy substantial nexus, you only need sales volume.
-: But you weren't applying the substantial nexus.
When they taxed his clients,
you weren't applying the substantial nexus.
You were applying a physical presence requirement.
So you didn't.
I mean, whether Wayfair changes Quill,
you were applying Quill.
Don't we have to just decide?
I mean, you don't get to create a new standard.
You were taxing under an old standard.
-: But this court on review must apply Wayfair.
-: We apply Wayfair to the federal constitutional requirement
about contacts, but if you were applying
a physical presence test,
and that didn't satisfy physical presence,
that's what the tax was based on.
-: The tax was based on sales volume
and the presence of certain facts.
Kafker: Electrons.
-: Sales volume plus jurisdictional facts
established in jurisdictional nexus.
Since Wayfair, those facts, the electrons-
Wendlandt: Can I just...
-: Are irrelevant.
-: I know you wanna get to the retroactivity of Wayfair,
and that's fine.
And maybe you'll get there in the next nine minutes,
but can I...
So the regulation doesn't say,
"We're gonna tax internet vendors
on the basis of whatever is constitutional."
Instead, the regulation says,
"And we're gonna tax internet vendors
on the physical presence
of the Dormant Commerce Clause standard
as set forth in Quill."
So the state, or the Commissioner, has made a decision
to limit it's taxing authority
to whatever Quill articulated is the standard.
And so I'm...
Given that limitation self-imposed,
why is physical presence satisfied by electrons?
-: I disagree with the premise.
Can I address that first?
The basis for the tax is sales volume.
The tax rule is if you have more than $500,000 in sales
and 200 or more transactions, then you must collect the tax.
The physical presence standard comes into it only to explain
the jurisdictional nexus that needs to also be satisfied.
But the jurisdictional nexus is satisfied
if certain facts are present,
that is to say does the taxpayer
have any of these three internet contacts.
-: Though I have to say, I really don't understand that.
Quite frankly, what I'm interested in
is if the regulation is tied to Quill,
then what's the constitutional analysis matter?
The regulation is tied to a standard.
A regulation can tie itself
to an old United States Supreme Court standard.
And if you couldn't...
I'm not saying that it's not ambiguous, but if it is clear,
then it's Quill that is the vehicle that we look to
to see if the tax is appropriate.
Said more simply, if the regulation is based on Quill,
then we apply Quill
and we don't have a constitutional concern.
-: I disagree with that
because that's not what this regulation says.
The regulation does not say,
"You have to pay tax if you have physical presence,
and by the way, here's what we think physical presence is."
I think that's how U.S. Auto is reading the regulation,
but what the regulation says
the operative legal command of the regulation
is, "If you have more than $500,000 in sales
and 200 or more transactions, then you must collect the tax.
You are exempt if you lack any of these three contacts."
In other words, the three contacts are there
because they establish jurisdictional nexus,
just like minimum contacts establish jurisdictional nexus
with a court.
The court can't order anybody to do anything
without those facts of minimum contacts being present,
but that doesn't change what the order is.
The clear command of the regulation is,
"If you meet the sales threshold,
then you must collect the tax."
-: All right. Let's say I disagree with you.
And I'm actually reading the regs,
which actually call upon Quill.
How do these three things
satisfy physical presence under Quill?
-: Okay, if you apply Quill, and I wanna be clear-
-: I think you've been perfectly clear
you're not applying Quill, but let's just assume
that I'm gonna read the words on the page that say Quill,
and that you're suggesting that these three types
of electrons satisfy the physical presence.
Tell me how.
-: For the reasons explained by Professor Miller,
I'd refer you to his declarations.
I think most importantly content distribution networks,
which are sort of physically sitting in Massachusetts,
and they sit in Massachusetts in order to facilitate sales.
-: And do they contain anything other than electrons?
-: They host-
-: The servers are owned by a different entity, right?
Green: They are. -: Yeah. Okay.
-: But they host the vendor's website.
The-
-: And when you say they host the vendor's website,
those are electrons?
Green: They're electrons.
-: Okay.
So all the physical aspects of the servers,
the storage, all that stuff, is owned not by U.S. Auto.
-: It's not owned by U.S. Auto, but physical presence test-
-: Okay, so all they do is license a space,
then they fill that space with electrons.
-: Which would be enough to satisfy physical presence.
There's a lot of case law involving relationships
with independent third parties, for example,
you may remember Scholastic Books,
where the teacher in a classroom is not an employee
of Scholastic Books, but the teacher hands out
the Scholastic Books catalogs.
That relationship alone with the teacher,
who is not an employee or even an independent contractor,
that constitutes physical presence
under several cases addressing the issue.
Physical presence is a term of art
that developed with decades of elaboration.
But here, the Appellate Tax Board
wasn't applying any of the development
of what physical presence means.
It wasn't looking at those cases,
and it short-circuited the entire analysis of Quill
by mistakenly concluding that the Supreme Court
had resolved the physical presence question in Wayfair,
which it clearly did not
because the issue wasn't presented.
-: Before you run out of time,
can you address the retroactivity standard,
and what tests we should apply, and why Wayfair applies?
-: Okay.
The court must apply Wayfair to this situation
because the Supreme Court requires that it applies.
And I think that really the important issue
for retroactivity is that neither the tax payer
nor any of the amici have identified a single exception
to the doctrine of retroactivity.
No single case where a court refused to apply retroactivity.
It's a required feature of federal law, as in this case.
Applying Wayfair, you don't evaluate
whether the tax payer had physical presence,
you don't reach the question of whether electrons-
-: The case was on review at the time.
-: Exactly because retroactivity applies
in all pending cases still open on review.
All types of civil cases, without exception.
And I know the taxpayer relies heavily
on its claim of justifiable reliance on prior law,
but I wanna be clear that the Supreme Court
has considered that type of claim,
and held that it's not enough to create an exception
when to retroactivity.
Reynoldsville Casket, where the plaintiff...
In fact, a very compelling set of facts,
the plaintiff filed suit in reliance on a tolling statute,
which was later invalidated.
And the court held...
The court in Reynoldsville Casket held
that that invalidation was worked retroactively
so that her entire suit was untimely.
And she offered four different rationales
for why retroactivity should not apply to render
her whole claim untimely.
And the court rejected each one of them.
In fact, it reversed the Ohio Supreme Court,
which had refused to apply it.
-: This is my issue with the retroactive application
of Wayfair in this particular factual scenario.
And when Justice Stevens wrote his Quill decision,
he recognized that the physical presence line
was a bright-line.
And one of the reasons he said
I'm gonna stick to the bright-line
is because of the importance of people settling their fares
and having a reliance interest in the physical presence.
So it seems perverse to me,
and I'm gonna ask you why it's not perverse, to then say,
"Guess what?
We're gonna revisit this,
and we're gonna retroactively apply something that will,
by definition, upset settled expectations on the basis
of a case that had nothing to do with settled expectations."
That is the rule in...
And I forget the name of Justice Thomas's decision,
what was it?
You know, the rule was you can't treat people
out of state versus in state differently.
Harper and the Davis case.
And that seems quintessentially
what the Interstate Commerce Clause is about,
but when you set up a rule
that's based on bright-line expectations,
and the reason that that's important
is recognizing it's arbitrary.
People have to conduct their affairs this way.
And then you change that.
Why isn't it important in assessing
whether or not something should be retroactive?
The fact that the rule itself was set up
in order to allow a reliance interest.
-: Because the Supreme Court considered that issue
in Reynoldsville Casket explicitly and rejected it
because that's exactly what the Ohio Supreme Court
reasoned in Reynoldsville.
It said, "This is just unfair."
She relied on a tolling statute,
and to which she filed her claim,
and to retroactively invalidate
that tolling statute would just be unfair.
-: And I think your analogy is different.
So if the tolling statute itself had been set up
as a bright-line rule so that people
can conduct their affairs, then the analogy would work,
but here, the physical presence rule was set up in order
so people could rely on it for tax purposes,
and then, you know, Wayfair came along
and said, "You know what?
It doesn't work anymore."
Green: Two answers.
-: Yeah.
-: First, there is no bright-line exception
to the retroactivity doctrine.
We have four briefs in front of us that had the opportunity
to identify any case, any exception.
Nobody has identified an exception.
Retroactivity is the rule in bright-line cases.
It's in the rule in tolling statute cases.
It's the rule for every case, including this one.
The Supreme Court has made that clear.
Dozens of cases since 1993 have made that clear.
I appreciate why that doesn't seem like a fair result
in all cases, but nevertheless,
the Supreme Court Justice Breyer
weighed those considerations back in 1993,
and again in '96, and he made clear that is the rule
in all cases, no exception.
And the second reason I'll just add
is that Wayfair itself said, "Look, the Quill rule
was intended to be a bright-line, but it really isn't.
We can see..."
The court specifically talked about justifiable reliance
on bright-line rules, and it said,
"Look, at this stage, there is no justifiable reliance
on bright-line rules because Quill has ceased
to be a bright-line.
It hasn't been a bright-line in years."
And that's where it specifically referenced
Massachusetts regulation.
It said, "Look, people can argue.
It's hard to even know how to apply it
in the internet world.
It's a very unclear rule.
People aren't even sure how to apply it anymore."
And that's the section of the Wayfair decision
where it says that a claim of justifiable reliance
is misplaced or language to that effect.
So my two answers to your question
are there's no exception to retroactivity.
The court must apply retroactivity. It has no choice.
I regret speaking of it that way,
but that's simply the Supreme Court has given courts
no choice when they're applying federal law.
And the second one is that Quill
really isn't a bright-line at all,
as the myriad cases bemoaning the unclarity
of the Quill rule right up to the Supreme Court,
where it said the rule
is simply not clear at all have recognized.
-: I just have one last question 'cause I'm now confused.
So you're saying that the regulation dealing with Quill
and Wayfair, all it deals with
is the Dormant Commerce Clause issue.
The power to tax and the tax itself are separate, right?
Is that what you're...
Our original questions were focused on,
you know, that basically we're taxing
under the Quill standard, but I think you're...
And you said, "No, we got it wrong."
Is it because you're saying because our power to tax
is set out in the statute
related to how much business you do.
This reg, which is a morass, is really just a conversation
about the Dormant Commerce Clause.
Is that what...
-: No, the reg is not about
the Dormant Commerce Clause at all.
-: Well, is it about the power to tax?
-: The power to tax, the jurisdictional authority
is given by the statute, Chapter 64 Section 1.
The sales tax statute imposes a sales tax,
and the reg explains how out of state vendors,
how the sales tax statute applies to out of state vendors.
It says, "If you're a large internet vendor
over the sales volume, then you must collect the sales tax."
And then it explains, "Well, why can we tax you
if you're out of state?
We've never taxed you before when you're out of state."
And it explains, "Here's why.
It's because there are facts here
that create jurisdictional nexus.
What are those facts?
Those facts are CDNs, and downloaded software,
and cookies."
So in other words-
Kafker: So the fact that that...
If we thought that was wrong, it wouldn't matter 'cause-
-: That's right.
It wouldn't matter if you thought
those facts were insufficient.
-: Say I think that's just a ridiculous interpretation
of Quill, and you were wrong at the time,
but I take it you're saying it doesn't matter anymore,
even though that was ridiculous because our power to tax
is set out in the statutes
and our silly interpretation doesn't matter.
Is that...
-: I'm saying it doesn't matter since Wayfair
because the constitutional limitation
is not physical presence anymore.
You don't need those three facts
establishing jurisdictional nexus, the physical facts.
You need different facts now.
Wayfair says the facts you need are sales volume.
That's enough to create jurisdictional nexus.
Nexus looks a whole lot more like minimum contacts
for a court's exercise of authority.
It's just sales volume.
And because there's no dispute that those facts
are present here.
There's no dispute that this exercise of taxing authority
satisfies the only constitutional standard that applies
in this case, which is Wayfair, and therefore,
the court should vacate the judgment of the board
and should enter direct judgment for the Commissioner.
Judge: Okay. Thank you very much.
-: Thank you very much.
Judge: Attorney Isaacson.
-: May it please the court.
My name is George Isaacson, and I'm council for U.S. Auto.
The court appropriately in questioning my sister
focused on the issue
of what does the regulation itself state,
which is the more important issue than the issue
of retroactivity, which I am eager to address as well.
It's interesting to note that-
-: It's interesting to me that neither of you
can agree on the premise.
(Isaacson laughs)
Right?
She says that the most important thing
is retroactivity, and you're saying
that the regulation limits the jurisdictional reach
of the Commissioner.
And how are we to decide which is the right one?
-: Your Honor, if we look at the words of my sister
in the reply brief, she makes this statement on page 14
that the Commissioner is bound by his own regulations.
And then if we look at the language of the regulation,
the Internet Vendor Rule, it says specifically
that the regulation is, "Enforced to the extent
allowed by the physical presence
Dormant Commerce Clause standard set forth in Quill court."
So-
-: So if that reg instead said,
"Enforced to the extent allowable
under the United States Constitution,"
you wouldn't have an argument.
-: Well, I'd say then we look to the issue
of retroactivity.
-: Of the retroactivity.
-: Due process, and the question
of what is the applicable nexus standard
under the Constitution.
But I think the court doesn't even need
to reach that question.
-: Well, yeah. I understand that.
But can you answer that question?
If the reg instead said, "We shall tax you
to the extent permissible under the Constitution,"
is Wayfair retroactive or not?
Isaacson: It is not.
Wendlandt: Why?
-: Justice Breyer in the Reynoldsville Case,
the very case that was cited by my sister,
points out the fact that you need to look at each case
based on its own facts.
Now the cases that have been cited by my sister-
-: That's not what Harper says.
Harper says, you know, the rule in all civil cases
is that our decisions,
that is the United States Supreme Court decisions,
are retroactive.
-: What Harper, James Bean, and Reynoldsville
are all talking about is discrimination
against out of state either taxpayers,
or in the case of Reynoldsville, litigants.
And the court said that there are two manners
by which you can correct the problem that exists
when there's a discrimination against the commerce clause.
One thing that you can do-
-: But you chew up both people, right?
You can either refund, (chuckles) or you can tax the others.
-: Right. So they said that in order to cure the problem,
you can, in fact, treat the favored party
the same way you treated the unfavored party,
or you can refund to the favored party.
The Commissioner has cited no case
that stands for the proposition
that a subsequent Supreme Court case
that has changed our Constitutional standard
regarding the scope of regulatory authority
can be applied retroactively to effectively rewrite-
-: This is the decision by Justice Thomas?
I mean, you're relying on the Souter opinion, right?
I get the names confused.
Souter talks about difference between right and remedy.
Thomas is kinda collapsing the whole thing
and saying essentially everything's retroactive.
And I mean, it's pretty bold and pretty explicit, isn't it?
The Thomas decision.
Justice Thomas's decision.
-: If you look at Thomas's decision, for example,
his concurring opinion in the Dobbs case-
-: I'm trying to avoid more complication,
but he seems to say in the civil cases
when we change the rule it's retroactive,
and he doesn't have the sort of nuance that Justice Souter
puts into the other case
about rights and remedies, does he?
-: Yeah, I think that's because Justice Thomas
does not believe in substantive due process,
and is eager to go back-
-: I mean, it's not Justice Thomas.
It's the majority decision
of the United States Supreme Court and Harper,
so what he's saying in that majority decision
on behalf of the court is that in civil cases,
you apply it to everything on direct still pending.
And this is still pending.
-: So one of the things that Justice Breyer makes clear,
I believe, in Reynoldsville
is that if there is an independent basis for not applying
the law retroactively, then that independent basis
needs to be evaluated, and it's also interesting
that the Commissioner acknowledges in his brief
on page 16 that, "The due process clause
embodies an independent principle of law
that must be separately evaluated
based on the specific facts and circumstances of the case."
So in this instance, I think the very point
that you were questioning my sister on,
the inherit unfairness that is associated
with taking a change in a constitutional doctrine,
applying it retroactively
so that a taxpayer that was in complete conformity
with the law during the relevant tax period
is nonetheless subject to a tax liability
that it had no way to anticipate,
had no prior notice, a clear violation of-
-: Well, I mean, there was a published regulation,
and the Commissioner said, "We think these electrons
are enough for physical presence,"
so the notion that your client didn't have any notice
is questionable at best for you.
-: To the extent that Wayfair is the basis
for my sister's argument that that should be the case
that we look at to determine
what is the relevant standard during the time,
Wayfair itself makes clear that these electrons and apps
do not constitute a physical presence.
If I can quote from the Wayfair decision,
the Supreme Court said that, "Unless the retailer maintained
a physical presence, such as retail outlets, solicitors,
or property within a state, the state lacked the power
to require that retailer to collect a local use tax."
And the quote went on in Wayfair to actually identify
cookies and apps as being examples
of the kind of electronic commerce contacts
that are insufficient.
It was the very insufficiency of those contacts
that warranted the court saying
that we are going to overrule the Quill decision,
that we can't fit it within Quill,
and therefore, we will overrule Quill
and establish an economic presence standard
in lieu of the prior physical presence.
-: Are the CDNs different?
-: The court pointed out when it was going through
the categories of items that were insufficient,
it refers to, "A website may leave cookies
saved to the customer's hard drives,
or customer's may download the company's app
onto their phones, or a company may lease data storage
that is permanently, or even occasionally,
located in South Dakota."
-: That's the CDNs?
Isaacson: That is what a CDN is.
-: Okay.
-: The court has made clear under its Quill line of cases
that the instrumentalities of interstate commerce
did not constitute a physical presence.
Consequently, a mailbox doesn't constitute physical presence
for a catalog company, or a UPS delivery driver.
Kafker: The statute doesn't have any reference
to physical presence, right?
Isaacson: I'm sorry, Your Honor.
-: The statute...
You know, we're skipping over the statute, right?
The statute basically imposes this tax
on your clients to collect, right?
What you're saved by is the Supreme Court's
Dormant Commerce Clause, right?
The statute applies on its face
to your transactional work, doesn't it?
-: So I think two things, Your Honor.
One, when the statute was adopted, there was also a reg
that was issued, Trad. 13,
that said that it was not going to be enforced
until such time as either by federal statute
or Supreme Court decision.
The state could in fact impose a tax collection obligation
on out of state companies.
And then, in the regulation that we're looking at now-
Kafker: But so the statute had that provision in it
that basically it was unenforceable until what?
-: No, that was a technical release that the Commissioner
issued after the adoption of the statute.
-: Right (chuckles), but we gotta...
Again, I'm actually, at this point, completely confused.
So the statute provides for this tax.
The TR said, "Well, we can't do it because of Quill."
Then they pass a regulation that says,
"Well, because of CDNs and cookies, we can do it."
That's probably wrong under Quill,
but then Quill's wiped out,
and then we get back to retroactivity,
but it's not just that we're interpreting this regulation.
We gotta look at this whole package, right?
The statute, the regulations, the retroactivity, everything.
Right?
-: Justice Kafker, it absolutely is a whole package,
and I think when you look at the whole package,
what you see is that the Commonwealth was interested
in expanding the scope of its tax collection obligations
imposed on out of state companies,
recognized the fact that Quill was a constraint
in that regard, initially passed a TR that said
that they were not going to enforce that regulation.
They subsequently passed an adopted promulgated regulation
that said, "We have this new theory.
We now have a theory based upon electrons
sitting on customer's websites, but we also recognize,
in the language that I read to you from the regulation,
that it's limited to a physical presence.
So it raised the issue of are these electrons
sufficient to create a physical presence.
-: If we didn't have this regulatory guidance,
we'd have a statute that would be controlled
by the Supreme Court law, and probably retroactive,
at least I thought the decision in Harper seems...
Thomas's decision seems to make it retroactive.
But you're...
If you lose the retroactivity argument,
you still have this argument that the reg limited them
to Quill, right?
The reg somehow limited the statute
and the collection of taxes to Quill, right?
-: Absolutely.
-: So explain why when I asked
Assistant Attorney General Green the question,
the tax to the extent Quill allows
under the commerce clause, that regulation,
why isn't that divorced
from any constitutional interpretation?
She points to the other regulation
and the words of the taxing statute.
Why are you right and she's wrong?
-: Well, when the Commissioner acts pursuant
to the enabling legislation, to create a regulation
that in effect is seeking to enforce, implement,
the underlying statute, and makes the statement
that this is limited by the physical presence standard,
then the Commissioner's bound by his own regulation.
-: He says that's only tied to the jurisdictional issue.
-: I mean, I read to the court the language.
It doesn't speak to just the jurisdictional issue.
It says...
The language says that it will be enforced to the extent
that the physical presence rule allows.
It doesn't speak to a jurisdictional limitation.
The other factor that I comment on, Justice Kafker,
is that the Internet Tax Freedom Act is a further bar
to the enforcement of this regulation.
This regulation is specifically targeted
toward internet vendors, in fact, the very title
of the regulation is the Internet Vendor Rule.
And the rule does not apply to catalog companies
that may have more than $500,000 in sales.
They are not covered by it.
It doesn't apply to telephone sales
that originate from out of state.
And the Internet Tax Freedom Act specifically was targeted
at not having state's legislation or regulation
that affects only internet sales,
and doesn't affect other forms of remote commerce sales.
Wendlandt: Is that issue before us?
-: It is before you.
It was before the Appellate Tax Board.
It was not the basis-
-: That was the wrong answer (chuckles).
(Isaacson chuckles)
-: I believe it is, and in fact, this court invited
amicus to address that issue.
So I think that the court recognized the fact
that it's an important matter.
It's a critical-
-: You're saying that if it is applied in this way
that there is a disparate treatment
between internet companies and the mail-order companies.
Isaacson: Exactly.
-: Okay.
-: Exactly.
You know, and I think when we're talking
about mail-order companies, the Quill case
said you can have catalogs that are located in the state,
which are much more tangible
than these electronic invisible elements.
And that doesn't create a physical presence.
And it was a bright-line.
Reason why the court stood by the line of cases,
the Quill line of cases,
is that they said a physical presence is having employees,
having stores, having warehouses that are located
within the state.
And that's what ultimately in Wayfair, the court concluded,
was the problem.
That we no longer believe that physical presence
is the relevant standard to be applied
in this electronic age, and that instead, we should look
at an economic presence standard.
-: I have sort of a basic question.
What is the sales volume statute
that caused U.S. Auto Parts
arguably to have to require...
There are these thresholds, right?
Isaacson: $500,000.
-: Yeah.
What statute is that?
-: That appears in the internet vendor regulation.
-: But what is that, actually?
General Laws Chapter-
Isaacson: Oh, you wanna know-
-: (chuckles) Yes, thank you.
-: I'm sorry.
It's Massachusetts General Law Chapter 64H, Section 1.
-: Well, that's the definition standard.
That's got the sales volumes in it as well?
Is that what you're saying?
-: Yes, that's the regulation that contains the sales volume.
That a company needs to reach that sales level
of internet sales in order to be subject to the regulation.