Yesterday in my conflict of laws class I taught South Dakota v. Wayfair, the 2018 case which allows states to require out-of-state sellers to collect and remit use taxes. This morning I pondered why it hasn’t been brought up more in discussions about interstate restrictions on abortion.
Wayfair dealt with a South Dakota regulation that mandates businesses to pay sales taxes on products they sell in the state. If they fail to do so, their customers are expected to pay a use tax at the same rate, which is rarely done. The Court ruled that South Dakota could, under the Fourteenth Amendment’s Due Process Clause and the “dormant” Commerce Clause, compel Wayfair to collect and remit the tax even if Wayfair had no physical presence in South Dakota. The Court deemed due process satisfied as long as Wayfair was subject to South Dakota’s personal jurisdiction, which they were due to their business activities in the state. The dormant commerce clause was satisfied through a multi-prong test, focusing on whether Wayfair’s activities had a substantial nexus with the taxing state, and emphasizing that the sale of goods or services has a sufficient nexus to the state where the sale is made.
I bring this up because Wayfair could impact current debates regarding abortion pills like mifepristone. Imagine an out-of-state entity such as a pharmacy or abortion-rights nonprofit shipping abortion pills to a user in a state where abortion is illegal. Currently, the Supreme Court is reviewing a case questioning the legality of such mail shipments under the Comstock Act. A state prohibiting such shipments may struggle to enforce its laws across state lines due to the general rule that penal judgments are not enforced by other states.
What if a state utilizes tax law instead, following the Al Capone strategy? For instance, Alabama could impose a use tax on mifepristone, requiring providers to report, collect, and remit the tax. This would establish a sufficient nexus since a sale is attributed to its destination. The tax would apply equally to in-state and out-of-state providers, eliminating claims of discrimination against interstate commerce. While Wayfair emphasized the volume of business conducted, it did not set a strict minimum for the number of shipments required to satisfy the commerce clause. Why should an out-of-state provider evade a tax that an in-state provider must pay? The remaining parts of the dormant commerce test, derived from the Complete Auto case, could likely be met as well. Additionally, there is no prohibition against taxing illegal activities, as evidenced by the case of Capone.
If a state taxes mifepristone, it could likely enforce that tax. While the general doctrine states that foreign tax judgments are only enforceable by the imposing sovereign, the Supreme Court altered this stance for state tax judgments in 1935, requiring every state to honor such judgments. Thus, if Alabama had an out-of-state pharmacy sell mifepristone and failed to receive timely payment, it could initiate tax proceedings in its own courts and potentially seek recovery in other states while imposing penalties for nonpayment. State laws attempting to restrict enforcement of out-of-state laws or judgments on abortion may not hold against judgments entitled to full faith and credit. Alternatively, a state could utilize the Supreme Court’s original jurisdiction against an out-of-state individual, or a county or city could use diversity jurisdiction in federal court to enforce its tax judgment.
The purpose of discussing this is not necessarily to propose a strategy for limiting abortion but to highlight reasons why we should reconsider our confidence in Wayfair. It is peculiar that an out-of-state entity may be obligated to comply with other states’ tax laws, including reporting transactions, even if those states lack general regulatory authority over the entity. This peculiarity is often overlooked in discussions about competition between online and physical retailers, but becomes apparent when discussing reporting of abortion pill shipments. Congress is the natural regulator for interstate shipments, and while the Comstock Act may already ban interstate shipment of abortion pills, the Biden Administration’s narrow interpretation leaves a gap in federal regulation. As long as each state can require out-of-state entities to collect and remit taxes, they can also become entangled in the abortion debate.
