Effective January 1, 2016, Alabama requires remote vendors to collect Alabama sales tax when exceeding $250,000 of sales, and either advertising or sending catalogs into the state. Ala. Reg. 810.6-2-.90.03. Although this provision is clearly unconstitutional based upon the U.S. Supreme Court’s decision in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), Alabama seems determined to test the continued application of the bright-line physical presence nexus rule. This challenge was invited by Justice Kennedy’s concurrence in Direct Marketing Assoc. v. Brohl, 135 S.Ct. 1124, 1135 (2015) which questioned the continued validity of Quill based upon the changes in technology, customer sophistication, and harm to the states.

Instituting an economic or factor presence nexus standard directly contradicts existing Supreme Court precedent and should be found unconstitutional. Nonetheless, out-of-state retailers should consider minimizing their activity associated with the state until the appropriate test case works its way through the system.

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