Sample Research Memorandum

The following pages are intended to give students an idea of what a research memorandum should look like and contain. Because every research problem is different, the substance of memoranda differ. However, the general format should not differ. This should not be read as meaning all problems present two substantive issues, one with two subparts, or that the Analysis part must contain any particular number of subparts.

As with almost any writing, this sample could be improved. For example, there are some "facts" mentioned in the "Analysis" that are not clearly included in the "Facts." (I would take five points off the grade for a paper with the same fault.) But, like students, professors are sometimes content with something less than perfection.

The "Scenario" is the equivalent of what students receive in a research assignment. The memorandum that follows is based on the Scenario and appropriate research. While the "facts" in the scenario are hypothetical, the research and cited authorities are not.

Iva's Edsel Collection
Scenario

Iva Fortune decided to retire at 42, after 25 years working in a automobile factory. It was not because he was tired, but because he won $73 million in the PowerBall™ lottery. That was about 10 years ago. After six or seven months driving around the country, bought a farm and settled down. It was not long before Iva decided that he needed a hobby, so he decided to collect Edsel™ automobiles. Iva started combing the classified ads in the local newspaper, then expanded to the LA Times, then went all the way and started using the Internet. Within three years, Iva had to build three large buildings to store his collection. The buildings were needed because a county planning agent told Iva if the cars were not put inside something, his property would be declared a junk yard. The buildings also made it more convenient for Iva to work on the cars. Many of the Edsels Iva purchased were in very bad shape – missing engines, transmissions, trunks, etc. These he kept to supply parts for the ones that were restorable.

On the Internet Iva learned about the Edsel Owners Club, a large group of Edsel enthusiasts. (See http://www.edsel.com/eoc/index.html.) Some members, he learned, were collectors, some suppliers, and others just liked Edsels. Iva joined the association and started going to regional and national conventions. One thing that happens at those conventions is "swapping;" persons with too many of one part trade with others for parts they do not have. As his collection grew, so did Iva's swapping activities. However, after about six years, Iva had all the parts he needed, and then some. He began to swap extra parts for money. He also gained a reputation as having every part an Edsel enthusiast might ever need. People started calling Iva from all over the country (and even further) asking to buy parts.

Two years ago, Iva's good friend Irma set up a small "reception" room in one of the buildings because she spent so much time there answering the telephone. Iva agreed to "hire" Irma so she would not need to work at the meat-packing plant. While she was not on the telephone, Irma set up a parts inventory using a program downloaded from the Internet. That made it easier to answer calls about parts. The word soon got around the Edsel Owners Club that Iva was the best place to call, thanks to Irma. Within six months Iva hired two more workers, one to help Irma with inventory, packing and shipping and one to help Iva with restorations. Now Iva has five people working for him. They take calls for parts, take non-restorable cars apart for parts (to use and to sell), send parts to purchasers, collect money, restore cars, refurbish parts, etc. In reality, Iva's hobby has turned into a very profitable business.

The 2001 Edsel Owners Club national convention was held in Branson, Missouri (the 2002 convention will be there, too). Iva took a printout of the current list of parts. At the convention, Iva showed the list to people who asked him about parts. If they found a part, those persons wrote their name and address on the inventory sheet next to the part they wanted, along with what they were willing to pay. Iva told all of those people that he had to check with Irma to see if the price was okay. Irma was in Branson, but she went to shows and shopping, never to the convention. In other words, no sales or agreements to sell were made at the convention. After the convention, Iva and Irma went over the offers and decided which ones to accept. Iva's staff then wrote a letter to the offeree informing her or him that Iva was willing to sell them the part(s) at the price(s) offered and that the offeree should send the money. When the money was received, Iva's employees sent the parts out via United Parcel Service.

Unfortunately for Iva, the Deputy Commissioner for Sales Tax of the Missouri Department of Revenue is an Edsel enthusiast. That person attended the Branson convention and observed Iva's activities. When she returned to the office, she directed a new and enthusiastic employee to look into the possibility of collecting some sales taxes from Iva and others. After doing some research, that employee called Iva's telephone number and spoke with one of Iva's workers. The tax department employee inquired about possibly purchasing parts, discussed availability, prices, delivery, and so on, but made no purchase. During the conversation, Iva's worker said something to the effect that they had shipped parts to about 30 states in the last six months. All this information was passed on to the Deputy Commissioner. The Deputy Commissioner ordered the Sales and Use Tax Collection Unit to demand that Iva pay sales tax on all the sales made as a result of the Branson convention and all other sales to Missouri residents.

Iva recently received a demand letter from the Missouri Department of Revenue demanding that he report, and remit "sales/use taxes" measured by, all sales resulting from the Branson convention and all other sales where the product was shipped to a Missouri address. The letter did not specify the time period for which Iva was to report and remit.

After Irma took an accounting course in early 2001, she established a routine of recording purchasers' names and addresses and saving shipping invoices, which include the name and address of the recipient but do not identify the item shipped. About six months ago, Irma updated the inventory/client control program. Now, each sale is recorded and can be cross-referenced by purchaser's name, the person to whom the item is shipped and where, amount received, and shipping date and cost. Iva thinks it is possible to enter information from some prior sales, but that the information would generally be incomplete. Iva indicates that before 2000, the only "record" kept was deposits and withdrawals from his personal bank account, plus a few shipping receipts that "might be laying around." A separate bank account was set up in October, 1999, because Iva did not want to have his employees writing checks on his personal account. As a general rule, deposits to that account were not referenced to particular sales or customers.

Iva is now seeking advice concerning how he should respond to the Missouri Department of Revenue's demands.

[ COVER PAGE ]

Peter Peon

Advanced Taxation, A339

Spring Term 2002

Research Project Memorandum

February 29, 2002

[ END OF COVER PAGE, START OF FIRST MEMO PAGE ]

MEMORANDUM

TO: Head Honcho

FROM: Peter Peon

DATE: Feb. 29, 2001

RE: Iva Fortune

FACTS:

Our client, Iva Fortune (who insists that we call him "Ol' Iva"), came to us with questions about letters he recently received from Missouri tax officials. The letter demands that Iva file sales/use tax reports and pay taxes with respect to the sale of Edsel parts. Iva provided some relevant sales information and copies of some documents, which are in his file. The relevant facts are as follows:

Iva began collecting Edsels as a hobby about 10 years ago. In a few years, his collection grew to the point that he had build some large storage/shop buildings to avoid his property being classified as a junk yard. Many of his Edsels are not complete enough to restore, so they are used to supply parts for restorable cars.

Iva is a member of the national Edsel Owners Club, which holds meetings and conventions, sponsors contests and shows, and hosts many other activities. At most gatherings, the attendees sell cars and bargain with each other for parts. Iva engaged in "swapping" for a number of years, but more recently, he has just sold parts because he has an oversupply. During the past five years, Iva has sold many parts to persons in many states and some foreign countries. He stated that he usually sells parts for whatever the buyer offers, unless the offer is totally unreasonable. Iva's "hobby" has turned into a business.

Last summer, Iva attended an Edsel Owners Club convention in Branson, Missouri. At the convention, he had a list of all the parts he had in inventory. Persons who wanted to buy a part wrote their name and address next to the desired part, together with the price they were willing to pay. Most of time, Iva did not even look at what had been written, but merely said he would check with his assistant when he returned home. When he returned from the convention, Iva reviewed the written information with his assistant and the two of them decided which offers would be accepted. The offerors were contact, by mail, and instructed to send money if they were still interested. After money was received, the parts were sent to the address indicated by the purchaser, via UPS, freight collect.

Iva's standard method of business is to receive a telephone or written inquiry at his in-state location, to enter into sales agreements requiring up-front payment, and to ship parts via UPS or FedEx at the purchaser's expense. Iva has not agreed to any parts sales or swaps at out-of-state locations for at least five years.

Iva's record keeping has been less than optimal. For at least the first five years Iva sold parts, there are really no records other than amounts occasionally deposited in Iva's bank account. Before Iva established a separate bank account (in October, 1999) fixing the amount sales receipts would be highly speculative and fixing to whom sales were made would be impossible. For most years, Iva's records indicate the parts sold and selling price – sometimes one without the other, sometimes neither. Starting about three years ago, more-complete documentation has been retained, such as customers' and shipping consignees' names and addresses. During the past six months record keeping has been vastly improved by installing a computer inventory and sales program which cross-references sales, receipts, customer and consignee names. The possibility of reconstructing sales that occurred before 2001 become increasingly more difficult as one goes back in time.

About five months after the 2001 convention in Branson, Iva received a demand letter from the Missouri Department of Revenue. That letter instructed Iva to complete the enclosed Missouri Sales/Use Tax reporting forms and send the amount of tax due to the Department. The letter specifically instructed Iva to: (1) include and remit sales tax on all of the sales made at the Branson convention, and (2) include and remit use taxes on all sales where the items were shipped to a Missouri address. The enclosed use tax forms were for the years 1999 through 2002, inclusive. Only the 2001 sales tax form was enclosed.

Iva has asked if he must comply with Missouri's demands.

ISSUES:

1. Does Missouri sales and use tax law require Iva to register as a vendor and collect and remit Missouri state or local sales or use taxes:

   (a) with respect to sales made as a result of offers received at the Branson convention, or

   (b) with respect to sales not related to the convention but made to Missouri residents or shipped to Missouri addresses?

2. If one or more parts of the preceding question must be answered "yes," does the relevant Missouri law violate the U.S. Constitution?

ANALYSIS:

Missouri imposes sales taxes and use taxes very similar to those imposed by other states. Missouri's tax rules are, on the whole, not significantly different from sales and use tax rules around the United States. But there are some notable features. Missouri's sales tax is imposed on the seller, "for the privilege" of doing business in the state. Mo. Rev. Stat. § 144.021 (2001). Most states' tax rates are consistent throughout the state and use tax rates are equal to sales tax rates. Missouri's sales and use tax rates vary wildly from county to county, city to city. The Missouri Department of Revenue's list of rates is 21 pages long, with at least 55 rate lines on each page. See http://dor.state.mo.us/tax/business/sales/salestbl.htm. Kansas City apparently spreads across four counties and has four different sets of sales/use tax rates. The rates vary significantly from location to location. On one page of the Department's list, sales tax rates vary from 4.725% to 7.975%; the four Kansas City counties have

Comment: When there is more than one law or legal rule that might decide an issue, the normal approach is to use the simplest first. Thus, if an issue might be decided by Common Law, statutes, or the Constitution, one first discusses the statute, then the Common Law, and last the Constitution. Courts often go to great lengths to avoid deciding cases on Constitutional grounds, particularly tax cases. If a decision is based on a statute, a legislature can produce a different result by amending the statute. But the results of a decision based on the Constitution often cannot be changed. In the Quill case (mentioned in this memo), the Court created a new distinction so that it could decide the issue based on the Commerce Clause rather than Due Process. As a result, Congress can, if it chooses, change the result, but state legislatures cannot.

three different sales tax rates. In most instances, the use tax rate is not the same as the sales tax rate. However, use tax rates vary less, with a significant majority of locations imposing a 4.225% use tax, but at least one location imposes a 7.975% rate. The four Kansas City counties impose only two different rates.

A. Missouri Sales and Use Taxes

1. Sales Tax.

The Missouri sales tax is imposed on "the privilege of engaging in the business, in [Missouri], of selling tangible personal property and those services listed in section 144.020." Mo. Rev. Stat. § 144.021 (2001). The statutory definition of "business" is essentially circular, but can be interpreted to include any activity engaged in for the purpose of direct or indirect gain and which includes some act or acts that fall within the statutory definitions of "taxable sales". Mo. Rev. Stat. § 144.010.1(2) (2001). The definition of "engaging in business" does exclude "the isolated or occasional sale[s]" of consumer or non-business type personal property that do not exceed $3,000 in a year. Id. In addition, Missouri specifically exempts:

[R]etail sales as may be made in commerce between this state and any other state of the United States, or between this state and any foreign country, and any retail sale which the state of Missouri is prohibited from taxing pursuant to the Constitution or laws of the United States of America . . . the constitution of this state.

Mo. Rev. Stat. § 144.030.1 (2001). While the provision does preclude taxation of some transactions, by implication it provides that interstate transactions not specifically exempt under constitutional principles are subject to Missouri sales tax.

2. Use Tax

Missouri's use tax provisions include some more-precise definitions, but those definitions are expressly limited to use taxes. The use tax is imposed for "the privilege of storing, using or consuming" any article of tangible personal property in Missouri. Mo. Rev. Stat. § 144.610.1 (2001). It is imposed on the person "storing, using or consuming" tangible personal property in Missouri. Mo. Rev. Stat. § 144.610.2 (2001). That liability continues until the tax is paid, unless the person has a receipt from a registered vendor.

Despite the fact that the use tax is imposed on the in-state user, the principal obligation to collect and remit the use tax is imposed on vendors:

Every vendor making a sale of tangible personal property for the purpose of storage, use or consumption in [Missouri] shall collect from the purchaser [the use tax amount] and give the purchaser a receipt therefor.

Mo. Rev. Stat. § 144.635 (2001). The receipt must state the tax amount separately. Vendors are required to report and remit the collected use tax monthly, quarterly, or annually, depending on the amounts collected. Mo. Rev. Stat. § 144.655 (2001).

There appears to be no de minimis amount below which a vendor is not required to register, report and remit. In contrast, for the in-state persons upon whom the use tax is imposed (the user, consumer, etc.), there is a generous de minimus exemption. Every such person is required to file a quarterly or annual return and pay the tax due. However, no return is required (and therefore no remittance obligation is imposed) if the aggregate unpaid use taxes during any calendar year do not exceed $2,000. Mo. Rev. Stat. § 144.655.5 (2001). Depending on where the taxpayer-user is located, the exemption means he, she, or it can purchase between $29,200 and $47,300 of use-taxable, but tax-free, goods each year.

Since the Missouri Department of Revenue is not apparently contending that Iva engaged in any taxable use in Missouri, his liability for use taxes depends on whether he is a "vendor" for collection, reporting and remission purposes. The definition of "vendor" is not an exemplar of clarity. The definition appears intended to include the description of any and all means and methods whereby tangible goods might be transferred and come to rest in the state. The result is a 100-plus word sentence with nearly 20 commas separating words or phrases, or both. The apparently more relevant parts state:

"Vendor", [means and includes] every person engaged in making sales of personal property by mail order, by advertising, by agent or peddling tangible personal property, [or engaged in] soliciting or taking orders for sales of tangible personal property, for use or consumption in this state . . . and every person who maintains a place of business in this state, maintains a stock of goods in this state, or engages in business activities within this state. . . .

Mo. Rev. Stat. § 144.605(15). However, the final sentence of that section provides:

A person shall not be considered a vendor for [use tax] purposes . . . if all of the following apply:

(a) The person's total gross receipts do not exceed five hundred thousand dollars [$500,000] in this state, or twelve and one-half million dollars [$12.5 million] in the entire United States, in the immediately preceding calendar year;

(b) The person maintains no place of business in this state; and

(c) The person has no selling agents in this state.

Id. Because the Missouri Department of Revenue contacted Iva and demanded that he comply with the obligations of a "vendor," the Department must be contending that Iva does not satisfy one or more of the exemption qualifications.

Though he has not provided detailed records, it is rather obvious that Iva did not sell $500,000 worth of used Edsel parts in any calendar year. It is highly unlikely that all of the parts Iva transferred during all the years he has been bartering and selling, regardless of the transferees' location, add up to $500,000.

It is equally clear that Iva does not have, and never has had, an agent in Missouri. The only persons that might be considered Iva's agents are his employees. All of those employees work only at his local operations. None have ever accompanied him to or at regional or national conventions. Thus, the only possibility for finding Iva not exempt under the quoted provision is that he maintained a place of business in Missouri.

The Missouri use tax provisions provide:

"Maintains a place of business in this state" includes maintaining, occupying, or using, permanently or temporarily, directly or indirectly, or through a subsidiary, or agent, by whatever name called, an office, place of distribution, sales or sample room or place, warehouse or storage place, or other place of business

Mo. Rev. Stat. § 144.605(3). Even the broadest reasonable reading of this definition does not appear to support a conclusion that Iva does, or ever did, maintain a place of business in Missouri. As stated earlier, the only time Iva has been in Missouri since he started collecting Edsels was when he attended the convention in Branson. During the convention's four days, Iva was present at the convention site each day, but stayed in a hotel some distance away. So far as Iva knows, no other person attending the Branson convention stayed at, or even visited, the hotel where Iva stayed. While he was at the convention site, Iva normally had sheets of paper on which his inventory was printed, and he showed them to anyone who asked if he had anything to sell. Iva often visited the convention room set aside for bartering, but did not have a table there but did have some contacts in that room with persons looking for parts. Iva indicated that most of his contacts with persons looking for parts was in the lounge where people gathered between events or when nothing interesting was happening.

To conclude that Iva is a Missouri use-tax "vendor," the above definition would have to be read broadly enough to conclude that being irregularly present in a common, semi-public room over a four-day period, where people occasionally approached him with inquiries is "maintaining a business" in Missouri. Such a reading would stretch the words used to, if not beyond, the limits of common understanding, and would be beyond the provision's apparent intent.

The Missouri Department of Revenue might contend that Iva is responsible for collecting and remitting use taxes because he "engages in business activities" in that state. The Missouri use tax definition of that term includes:

[E]xploiting the market [in Missouri] by any media-assisted, media-facilitated, or media-solicited means, including, but not limited to, direct mail advertising, distribution of catalogs, computer-assisted shopping, telephone, television, radio, or other electronic media, or magazine or newspaper advertisements, or other media. . . .

Mo. Rev. Stat. § 144.605(2)(a). That definition appears intended to impose obligations on all persons and companies that purposefully direct marketing and sales efforts at Missouri residents.

One trial court held that a few contacts with Missouri residents via an Internet website was sufficient contact for long arm purposes in a tort case. Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996). But even if it were a tax case, it is insufficient to support a conclusion that Iva is subject to Missouri use tax rules. Both Maritz and § 144.605(2)(a) require that the out-of-state person make some purposeful effort to entice Missouri residents to become customers. Iva does not advertise anywhere; he has no mail-order catalog; he has no Internet website, no telemarketers, no newspaper ads, no other media advertising. The fact that Iva received tentative purchase offers in Missouri was pure happenstance, that is where other persons decided to have a convention.

Again, even if the statutory language could be stretched far enough to conclude that allowing persons to write unsolicited offers on informal inventory sheets constituted "exploiting the market" in Missouri, the conclusion would not subject Iva to use-tax collection and remission obligations. Under Mo. Rev. Stat. § 144.605(14), "engaging in business activities" in Missouri is one activity that makes a person a "vendor." However, such a "vendor" can still be exempt under the final sentence of that subsection. In the Missouri use tax statute, "engaging in business activities" (§ 144.605(2)) is distinct from, and not included in, "maintaining a place of business" (§ 144.605(3)). Based on the plain language of § 144.605(14), even if Iva might be said to have engaged in business in Missouri, the fact that he did not also maintain a place of business there exempts him from the "vendor" definition.

By any reasonable interpretation of the Missouri use tax statutes, Iva has neither "engaged in business activities" nor "maintain[ed] a place of business" in that state. Thus he is not required by Missouri law to collect or remit use taxes with respect to items that he sells which might be used by other persons in that state.

3. Combining Sales and Use Tax Provisions

Given the astounding feats of self-serving rationalizations to which state tax officials are prone these days. It is possible that Missouri might contend that Iva was engaging in business in Missouri during the convention and therefore (1) owes sales tax for the transactions made there, (2) established sufficient contact with the state to impose an obligation to collect and remit Missouri use taxes, (3) all of Iva's sales shipped to Missouri addresses are "legally" sales in Missouri and therefore subject to Missouri sales tax, or (4) any combination of those. None of those contentions would be supported by Missouri law.

Actually, all three contentions can be answered at once. Each contention would require that a "sale" occur in Missouri. For sales tax purposes, a "sale at retail" involves a person engaged in business transferring ownership of, or title to, tangible personal to a purchaser. Mo. Rev. Stat. § 144.010(10) (2001). Similarly, for use tax purposes, a "sale" consists of a transfer of ownership of personal property. Mo. Rev. Stat. § 144.605(7) (2001). The latter section goes on to state that the "place of delivery of the property to the purchaser . . . is deemed to be the place of sale" regardless of the mode of delivery. Of itself, this provision might be ambiguous because it does not specify whether "delivery" means physical delivery or legal delivery. Section 144.010(1) and the first portion of § 144.605(7) use terms generally intended to describe legal delivery. Nevertheless, it is possible one might infer from the last portion of § 144.605(7) that physical delivery is intended. The Department's regulations remove any potential ambiguity.

Under Missouri sales and use tax regulations, a "sale" is deemed consummated when and where title passes. See Mo. Code Regs. Ann., tit. 12, § 10-3.148 (2001). Unless otherwise agreed by the parties, title passes when the property is delivered to the purchaser. Mo. Code Regs. Ann., tit. 12, § 10-3.150 (2001). The regulations track the provisions of the Uniform Commercial Code where "delivery" means legal delivery, which occurs when the seller has completed what the contract requires to place the goods under the purchaser's control. The annotations to Missouri's Reg. § 10-3.150 cite a number of court and administrative decisions employing a U.C.C.-type definition. Missouri regulations relating directly to transactions involving movement across state lines are also based on standard U.C.C. passage of title rules. See Mo. Code Regs. Ann., tit. 12, § 10-3.888 (2001).

When Iva was in Branson, he told interested offerors that he would not agree to any sale until after he checked his physical inventory. Obviously title cannot pass before a contract is made. After Iva agreed (from outside Missouri) the sell a particular item, shipment was not made until payment for the item, and shipping costs, was received (outside of Missouri). The sold items were then delivered to a carrier (outside of Missouri). Based on the parties' contract, both title and risk of loss passed to the purchaser when and where Iva delivered the goods to the carrier. Therefore, based on Missouri's statutes and regulations, no "sale" took place in Missouri.

Only sales in Missouri are subject to Missouri sales taxes. Since Iva did not solicit orders in, nor make sales in, nor make delivery in, Missouri, he has not engaged in any transaction subject to Missouri sales taxes.

4. Constitutional Issues

For all practical purposes, the constitutional issues that might arise in Iva's situation have already been answered by the U.S. Supreme Court in Quill Corp. v. North Dakota ex rel Heitkamp, 504 U.S. 298 (1992). Perhaps one very narrow issue in Iva's situation is not answered by Quill.

The principal issue in Quill was whether a state could constitutionally impose use tax collection and remission obligations on an out-of-state mail-order seller. The Quill Corporation sold hundreds of thousands of dollars worth of office supplies to North Dakota residents. Quill Corp. knowingly shipped the products to North Dakota via common carrier. However, Quill Corp. did not have any agents in North Dakota. Nor did it have any business-operation locations of any kind in that state. All sales were made from catalogs that made their way into North Dakota residents' hands, many because Quill Corp. regularly mailed its catalogs to North Dakota addresses.

Before the U.S. Supreme Court, Quill Corp. contended that North Dakota's attempt to impose use tax collection duties, under the circumstances, violated both the Due Process Clause and the Commerce Clause. Quill Corp. relied heavily on the Court's 25-year-old decision in National Bellas Hess, Inc. v. Dept. of Revenue, 386 U.S. 753 (1967). In Bellas Hess, the Court had held that states could not impose sales or use tax collection duties on out-of-state catalog sellers unless the seller had some in-state physical presence. That decision referred to both the Due Process Clause and the Commerce Clause, but seemed to rely more heavily on the former.

In its Quill decision, the Supreme Court held that post-Bellas Hess developments in Due Process jurisprudence required that Bellas Hess be overruled on the Due Process issue. The Court found that for Due Process purposes, it is sufficient that the person knowingly direct some action toward the forum state. Since Quill Corp. had intentionally sent both catalogs and goods to North Dakota residents, the Court held that Due Process requirements were satisfied.

However, the Court held that different considerations come into play with respect to the Commerce Clause. The Court said that, among other things, the Commerce Clause was intended to foster an orderly, national, market. After the Bellas Hess decision, the Court noted, the catalog or "mail-order" industry had grown immensely. The Court held that both the Commerce Clause and principles of stare decisis required that North Dakota's attempt to impose tax collection duties on Quill Corp. be found unconstitutional. The key factor, according to the Court, was that Quill Corp. had no substantial physical presence in that state. The fact that there were a small number of Quill Corp.-owned computer floppy disks in North Dakota was held to not constitute a substantial physical presence.

The analogy between the Quill situation and Iva's is obvious. On the Due Process issue, Iva may have a better argument than the Quill Corp. had. Iva has never specifically targeted Missouri residents as a market; Iva has no organized marketing activities – no catalogs, no brochures, no marketing letters, no media advertising, not even any sales personnel. Iva has sold a few parts to a small number of Missouri residents, but nothing remotely approaching the market share that Quill Corp. had in North Dakota. Iva has a greater chance of prevailing on the Due Process issue than Quill Corp. had.

Iva's position on the Commerce Clause issue seems at least as strong as the Quill Corp.'s. Iva has never owned any property that was sited in Missouri. The only times Iva or any of his employees were in Missouri, they were there for personal reasons, not business. With one exception, Iva has been in Missouri only on his way somewhere else, i.e. during part of an interstate trip. The one exception was Iva's attendance at the three-day Edsel enthusiasts' convention in Branson. He attended the convention for personal reasons, not for the purpose of marketing his business' products. There is nothing in the Supreme Court's Quill decision that would support a conclusion that a business owner's three-day presence in a state on a personal pleasure trip constitutes a physical presence substantial enough to allow imposition of the onerous burden of collecting, reporting, and remitting use taxes to that state.

There are a few post-Quill state court decisions that have found sufficient in-state physical presence to avoid Quill's result. See, e.g., Orvis Co. v. Tax Appeals Tribunal, 654 N.E.2d 954 (N.Y. 1995). Some state regulators have tried to squeeze Quill out of existence by defining "substantial physical presence" in such a manner that the "substantial" portion effectively disappears. See, e.g. Use Tax Nexus Standards, Mich. Dep't of Treasury, Mich. Rev. Admin. Bull. 1999-1 (May 1, 1999). However, even under those highly questionable decisions and advocatory positions, Iva's contact with Missouri does not meet the minimum required to find a "substantial physical presence" in that state.

CONCLUSIONS

None of the transactions between Iva and Missouri residents constitute a Missouri sale for Missouri sales tax purposes. Nor has Iva ever engaged in business activities, or established a place of business, in Missouri, as those terms are defined for Missouri use tax purposes. Even if Iva had engaged in such activities, his activities clearly fall within exceptions provided by Missouri use tax statutes. Further, even if Iva's activities were considered sufficient to place him in the category of Missouri use-tax collectors, the U.S. Supreme Court's decision in Quill appears quite sufficient to bar any attempt to enforce the Missouri statutes.

The only remaining question is what Iva should do about the letter he received from the Missouri Department of Revenue. His options range from sending a letter politely declining satisfaction of the Department's demands to just ignoring them.