Scripto, Inc. v. Carson
1960 U.S. LEXIS 1449, 362 US 207, 4 L. Ed. 2d 660 (1960)
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Rule of Law:
An out-of-state seller can be required by a state to collect and remit a use tax on sales made to the state's residents if the seller engages in continuous and systematic solicitation of sales within the state, even if that solicitation is carried out by independent contractors rather than employees.
Facts:
- Scripto, Inc. was a Georgia corporation that sold mechanical writing instruments.
- Scripto had no office, warehouse, property, or regular employees in Florida.
- Scripto contracted with ten Florida residents who acted as advertising specialty brokers, or 'salesmen', to solicit orders for its products in Florida.
- These brokers were designated as 'independent contractors' in their contracts and were paid on a commission basis.
- The brokers were furnished with catalogs and samples and solicited orders within assigned territories in Florida.
- Orders were sent by the brokers to Scripto's Atlanta office for acceptance, and if accepted, the products were shipped directly from Georgia to the Florida customer.
Procedural Posture:
- The Florida Comptroller levied a use tax liability of $5,150.66 against Scripto, Inc. for its failure to collect the tax.
- Scripto, Inc. initiated a lawsuit in a Florida trial court to challenge the validity of the tax assessment.
- The Florida trial court ruled in favor of the Comptroller, holding that Scripto had sufficient contacts to be required to collect the tax.
- Scripto, Inc. (appellant) appealed the decision to the Supreme Court of Florida.
- The Supreme Court of Florida affirmed the trial court's ruling.
- Scripto, Inc. then appealed to the Supreme Court of the United States, which noted probable jurisdiction to hear the case.
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Issue:
Does a state law requiring an out-of-state seller to collect and remit a use tax on sales to its residents violate the Due Process and Commerce Clauses when the seller's only connection to the state is the continuous solicitation of orders by independent contractors?
Opinions:
Majority - Mr. Justice Clark
No, a state law requiring an out-of-state seller to collect a use tax does not violate the Due Process or Commerce Clauses where the seller engages in continuous local solicitation through independent contractors. There must be a 'definite link, some minimum connection' or 'nexus' between the state and the person it seeks to tax. This nexus is present because Scripto had 10 salesmen conducting continuous local solicitation in Florida, resulting in a substantial flow of goods into the state. The distinction between regular employees and independent contractors is a 'fine distinction' without constitutional significance, as the test is the nature and extent of the seller's activities in the state. Allowing this 'formal contractual shift' to make a constitutional difference would open the door to widespread tax avoidance. This case is controlled by General Trading Co., as requiring an out-of-state seller to act as a tax collector is a 'familiar and sanctioned device.' This situation is distinct from Miller Bros. Co. v. Maryland, where the seller had no solicitors in the taxing state and did not exploit the consumer market there.
Concurring - Mr. Justice Frankfurter
I agree the judgment should be affirmed. This case is closer to the precedent set in General Trading Co. v. State Tax Commission than it is to Miller Bros. Co. v. Maryland.
Dissenting - Mr. Justice Whittaker
Florida's requirement does violate the Constitution. The state's action denies Scripto due process of law and directly burdens interstate commerce, as held in Miller Bros. Co. v. Maryland and McLeod v. Dilworth Co. The judgment should be reversed.
Analysis:
This decision significantly clarified the 'physical presence' standard for state tax nexus, establishing that the activities of independent contractors can create a sufficient connection to a state. It prevents out-of-state sellers from avoiding tax collection duties simply by altering the contractual status of their sales force. By focusing on the economic reality of continuous and systematic solicitation rather than formal employment labels, the Court broadened the ability of states to impose use tax collection obligations on remote sellers, a principle that became foundational in state tax jurisprudence for decades.
