Week 2 writing Assignment BLA 303 (1)
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Wilmington University *
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303
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Law
Date
Feb 20, 2024
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docx
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Evolution of the Commerce Clause
Antonio Gonzales Wilmington University
Legal and Ethical Environment of Business, BLA 303
Kelly Law, Instructor
Due Date: September 10th, 2023
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Evolution of the Commerce Clause
The scope and application of the Commerce Clause has evolved a lot throughout history. The Commerce Clause refers to Article 1, Section 8, Clause 3 of the U.S. Constitution, which gives Congress the power “to regulate commerce with foreign nations, among states, and with the Indian tribes.” (Legal Information Institute) As time has gone on the interpretation of the clause by the courts and practical application in the United States have changed in response to societal, economic, and legal developments. The Commerce Clause has historically been viewed as both a grant of congressional authority and as a restriction on the regulatory authority of the States. (Legal Information Institute) In “1824 Gibbons v. Ogden the Supreme Court held intrastate activity could be regulated under the Commerce Clause, provided that the activity is part of a larger interstate commercial scheme.” (Legal Information Institute) This decision expanded the scope of federal power under the Commerce Clause. From 1905 to 1937 we entered the Lochner era. This was a time when courts experimented with the idea that the Commerce Clause does not empower Congress to pass laws that impede an individual's right to enter a business contract. (Legal Information Institute) The interpretation and application of the Commerce Clause has evolved over time, The evolution has had a profound impact on the balance of power between the federal government and the states in regulating the economy. Looking at the South Dakota v. Wayfair case in 2018 involved the Commerce Clause. The facts of the case were that South Dakota like other states imposes a sales tax on goods and services sold within the state. A previous Supreme Court decision of National Bellas Hess, Inc v.
Department of Revenue of Ill. and Quill Corp v. North Dakota states that it could not require businesses with no physical presence within their borders to collect and remit sales taxes. (Legal Information Institute) This was concerning to South Dakota as they realized they were losing out
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on a ton of revenue due to online sales that went untaxed. So South Dakota passed a law requiring out-of-state sellers to collect and remit sales tax even if they didn’t have a physical brick-and-mortar presence in the state. This “Act applies only to sellers that on an annual basis deliver more than $100,000 of goods or services into the State or engage in 200 or more separate transactions for the delivery of goods and services into the State.” (Legal Information Institute) Wayfair met the minimum sales or transaction requirements of South Dakota’s law but failed to collect the state's sales tax. So, South Dakota filed a lawsuit seeking to enforce its law. The Supreme Court opinion stated that the physical presence rule established by Quill and Bellas Hess was unsound and incorrect, overruling Quill and Bellas Hess. The Court argued that the physical presence rule was no longer a valid representation of the Commerce Clause and had received backlash for giving out-of-state sellers an advantage. The Court also emphasized how crucial it was for the states authority to collect taxes and the need for a level playing field among businesses and online retailers.
The impact the Commerce Clause has had is enormous the state will now be able to put standards in place to ensure they are collecting their state tax. It was estimated that Bellas Hess and Quill caused South Dakota to lose between 48 and 58 million annually. (Legal Information Institute) It also impacted businesses involved in e-commerce because it requires them to navigate these state tax laws and compliance requirements. Most states passed laws to collect state tax from online retailers which results in additional revenue for the state. This decision also made it more fair between online and brick-and-mortar retailers. I think it can be hard to predict the future scope but looking back historically I would say the court is willing to change based on the evolving economic landscapes. Looking 10 years in the future I think it’s highly likely that the scope and application of the Commerce Clause will
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continue to change to address a lot of the challenges we see in the digital economy, advanced technology and changes in consumer behavior I think can help shift the evolution of the Commerce Clause.
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References
Legal Information Institute. (n.d.-a). Commerce clause. Legal Information Institute. https://www.law.cornell.edu/wex/commerce_clause Legal Information Institute. (n.d.-b). South Dakota v. Wayfair, inc.. Legal Information Institute. https://www.law.cornell.edu/supremecourt/text/17-494