Sonia Sotomayor on Tax Reform



Only Congress can allow out-of-state Internet sales tax

The Supreme Court ruled that states can require internet retailers to collect sales taxes, even if the merchant doesn't have a physical presence there. In a 5-4 ruling in favor of South Dakota and against online retailer Wayfair, the court decided that states can require merchants to collect sales taxes for online purchases. Online shoppers who reside in one of the 45 states that have a sales tax should have been reporting and remitting those levies to their state of residence.

The Supreme Court's decision overturns a 1992 ruling in Quill Corp. v. North Dakota, which found that states could not require retailers to collect sales taxes unless they had a physical presence in the same place where the buyer is located.

Wikipedia summary of court ruling:Majority opinion by˙Kennedy, joined by Thomas, Alito, Ginsburg, & Gorsuch, determined that the physical-presence rule of˙Quill˙was "unsound and incorrect." Roberts˙wrote the dissenting opinion, joined by Breyer,˙Sotomayor, & Kagan. ˙

Source: CNBC on 2018 SCOTUS case: "South Dakota v. Wayfair Inc" , Jun 21, 2018

State taxes must credit taxes paid in other states

Maryland Residents who pay income tax to another jurisdiction for income earned in that other jurisdiction were not allowed a credit [in Maryland]. Held: Maryland's personal income tax scheme violates the dormant Commerce Clause, [the doctrine barring state protectionism, and hence is disallowed].

Summary by Justia.comMaryland's income tax scheme discriminates against interstate commerce. If every State adopted Maryland's tax structure, interstate commerce would be taxed at a higher rate than intrastate commerce. Maryland's tax scheme is inherently discriminatory and operates as a tariff, which is fatal. Alito delivered the opinion of the Court, in which Roberts, Kennedy, Breyer, and Sotomayor joined. Scalia filed a dissenting opinion, in which Thomas joined. Ginsburg filed a dissenting opinion, in which Scalia and Kagan joined.

Source: Justia.com on 2015 SCOTUS case: "Comptroller of MD v. Wynne" , May 18, 2015

Some trust fees should be only partly tax deductible

On Taxes (Deductibility of trust fees): In 2006, Sotomayor upheld a lower tax court ruling that certain types of fees paid by a trust are only partly tax deductible. The Supreme Court upheld Sotomayor's decision but unanimously rejected the reasoning she adopted, saying that her approach "flies in the face of the statutory language." (Knight vs. Commissioner, 2006)
Source: CNN coverage of upcoming Sotomayor hearings , Aug 1, 2009

Railroads can sue for tax exemptions on other diesel users.

Justice Sotomayor joined the Court's decision on CSX v. ALABAMA on Feb 22, 2011:

Alabama requires railroads that purchase diesel fuel to pay the 4% sales tax. Alabama exempts from the sales tax the main competitors of railroads--interstate motor and water carriers. The federal Railroad Revitalization and Regulatory Reform Act (4R) prohibits four forms of taxation that discriminate railroads. Three prohibitions concern property taxes. A fourth forbids a State to “impose another tax that discriminates against a rail carrier.” CSX seeks to prohibit Alabama from collecting the State sales tax from CSX.


The State's collection at issue here is a tax. There is nothing in 4R that limits its definition to only an income tax. The plaintiff does not complain about the tax exemption given to others, it complains about the sales tax it must pay when other carriers do not. Discrimination means “the failure to treat all persons equally when no reasonable distinction can be found between those favored and those not.” Competitors in interstate transportation get a tax exemption that railroads do not. These facts state a case worthy of considering by Alabama as to whether its tax exemptions discriminate against railroads in violation of 4R.

DISSENT: Compared to broader tax base, no discrimination provable Filed by THOMAS; joined by GINSBURG

I would find that, in its context within 4R, the “another tax” clause harkens back to the three previous examples of discriminatory taxes given, all of which concern discriminatory tax policy in comparison with the class of other “commercial and industrial” taxpayers. CSX will not be able to show it was taxed differently than the general class of “commercial and industrial” taxpayers. The State's allowance of exemptions from a generally applicable tax to a few “commercial and industrial” taxpayers do not make the generally applicable tax discriminatory.
Source: Supreme Court case 11-CSX-AL argued on Nov 10, 2010

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Other Justices on Tax Reform: Sonia Sotomayor on other issues:
Samuel Alito(since 2006)
Amy Coney Barrett(since 2020)
Stephen Breyer(since 1994)
Neil Gorsuch(since 2017)
Ketanji Brown Jackson(nominated 2022)
Elena Kagan(since 2010)
Brett Kavanaugh(since 2018)
John Roberts(since 2005)
Sonia Sotomayor(since 2009)
Clarence Thomas(since 1991)

Former Justices:
Merrick Garland(nominated 2016)
Ruth Bader Ginsburg(1993-2020)
Anthony Kennedy(1988-2018)
Antonin Scalia(1986-2016)
John Paul Stevens(1975-2010)
David Souter(1990-2009)
Sandra Day O'Connor(1981-2006)
William Rehnquist(1975-2005)

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Page last updated: Mar 21, 2022