Search

Justice Kennedy's concurring opinion in Direct Marketing Association v. Brohl marked a rare occasion: a Supreme Court Justice urged states to promulgate laws that violate the Commerce Clause. The hope that Justice Kennedy shares with the states is that the Supreme Court will ultimately have an opportunity to recraft the Commerce Clause analysis in relation to sales and use tax collection. Given the chance, Justice Kennedy would do away with Quill Corp. v. North Dakota's physical presence standard and replace it, in all likelihood, with some sort of measurement based on an out-of-state vendor's economic presence in the state. As the issue plays out in coming years, the Commerce Clause will take center stage. In all of this though, the Due Process Clause should not be ignored. This Article considers due process implications related to state economic nexus laws that were promulgated in response to Justice Kennedy's concurring opinion. It identifies due process vulnerabilities among these laws and offers a recommendation on how the states might accommodate both the Commerce Clause (assuming a reversion from physical presence) and the Due Process Clause. To complement this discussion, a due process analysis is offered with respect to state notice-and-reporting statutes. The Tenth Circuit recently upheld Colorado's notice-and-reporting law as a lawful exercise of state power under the Commerce Clause. Other states have followed Colorado's model and enacted their own versions. This Article tests these laws for due process vulnerability and identifies Louisiana's version as a model for other states., Table of Contents I. Introduction 834 II. Quill and Due Process 841 III. Economic Nexus 841 A. Alabama 842 B. South Dakota 843 C. Vermont 845 D. Analysis 845 1. [...]

This Article provides a comprehensive examination of post-recession sales tax nexus expansion developments as a primer for what is likely to be continued rapid developments and judicial conflict. States advanced expansive approaches to sales tax nexus as the nation emerged from the Great Recession. Those approaches included attributional nexus techniques like click-through nexus, affiliate nexus, and conventional agency nexus, as well as alternative techniques like use tax notice requirements and negotiated presence. The post-recession state-level sales tax nexus expansion phenomenon was accelerated by Justice Kennedy's call to find an appropriate case for the United States Supreme Court to reexamine the bright-line physical presence rule for sales tax nexus. The states responded provocatively with economic nexus, more notice requirements, more click-through nexus, more affiliate nexus, more conventional agency nexus, and more negotiated presence. All this state action has provoked federal activity legislatively and judicially. Congress responded by enacting the Trade Facilitation and Trade Enforcement Act of 2015 with provisions making the Internet Tax Freedom Act's state and local taxation limitations permanent. The United States Supreme Court denied certiorari on Colorado's use tax notice requirements for out-of-state retailers. Moving forward, states are likely to continue to expand sales tax nexus within the bright-line physical presence rule. Economic nexus' viability is hobbled by ongoing litigation in Alabama and South Dakota. The viability of attributional nexus techniques, like click-through nexus, affiliate nexus, and conventional agency nexus, remain strong. Alternative sales tax nexus expansion techniques, like use tax notice requirements and negotiated presence, also remain viable. These dynamics are likely to cause further innovation in expanding attributional nexus through e-commerce and integrated business activities, further innovation in alternative techniques like use tax notice requirements and negotiated presence, and more state-level variations in sales tax nexus criteria., Table of Contents I. Introduction 908 II. Legal Backdrop 911 III. Economic Nexus 913 IV. Notice 916 V. Attributional Nexus 921 A. Click-Through Nexus 921 B. Affiliate Nexus 929 C. [...]

I. Introduction The taxpayer's successful challenge of Maryland's tax scheme in Comptroller of Treasury of Maryland v. Wynne placed the constitutionality of many states' tax schemes into question. (1) The [...]

ON AN AVERAGE WEEKDAY IN NEW YORK CITY, APPROXIMATELY 114,000 LONG ISLAND RAIL ROAD ('LIRR') customers stream into Pennsylvania Station ('Penn Station') on their way to work or another destination. [...]

I. Introduction Benjamin Franklin warned that "[n]othing is certain but death and taxes." But what about double taxes? This term, the Supreme Court may decide that issue. The Due Process [...]

IN THE LAST TWENTY YEARS, A CADRE OF CITIES AND TOWNS across the United States has prohibited or otherwise limited the number of 'formula' businesses through use of the local [...]

I. Introduction II. The Early Days A. Colonial America and the Crown B. The Revolutionary War and the Confederation 1. The Revolutionary War 2. Articles of Confederation 3. Article IX [...]

V. Modern Jurisprudence A. Williams v. Lee In the 20th century, the Supreme Court was fairly quiescent on matters of Indian sovereignty until Williams v. Lee, (376) a non-tax case. [...]

I. Introduction In Polar Tankers, Inc. v. City of Valdez, Alaska, (1) the Supreme Court recently held that a local personal property tax based on an oil tanker's carrying capacity [...]

D. The Cigarette Cases 1. Moe v. Confederated Salish and Kootenai Tribes of the Flathead Reservation With his typical insight, Dean Getches sets the stage for Moe: In the 1970's, [...]

I. Introduction This Article shall consider the legality of taxes enacted by United States territorial possessions that discriminate against interstate commerce, with a focus on the case of a use [...]

I. Introduction The explosion of online shopping and Internet commerce has greatly impacted state revenues generated from sales taxes. (1) The traditional state sales tax can no longer capture the [...]

What began as a downturn in national housing prices has subsequently degenerated into a global economic crisis. Domestically, the federal government has propped up corporate giants and flooded the markets [...]

I. Introduction Like most of her sister states, Kentucky law exempts from state income taxation the interest earned on municipal bonds (1) issued by the State and its political subdivisions. [...]

TOLL ROADS ENJOY a LONG AND STORIED HISTORY as an integral part of the national interstate highway system. From the earliest Pennsylvania turnpike built in the late 1700s to the [...]

States use investment tax credits and a host of similar incentives to attract businesses in the hopes of stimulating economic growth and creating jobs. Although the economic evidence indicates that [...]

Justice Cardozo once wrote, "[t]he Constitution ... was framed upon the theory that the peoples of the several states must sink or swim together, and that in the long run [...]

I. Introduction Nowadays, a company is almost certain to conduct business across state lines, which may subject the company to tax in multiple jurisdictions. This, in turn, leads to the [...]

Online retail recently lost its most coveted edge: tax-free internet sales. While states across the nation had passed legislation targeting online retail leader, Amazon.com, New York was the first to [...]

I. Introduction In 2012, the top 25 multisystem operators provided video (cable or satellite) service to almost 86 million people in the United States. (1) Many state and local governments [...]

4. Is Physical Presence Required for Commerce Clause Nexus for Taxes Other Than Sales and Use Taxes? a. Quill Does Not Answer This Question. The question of whether physical presence [...]

In Quill Corp. v. North Dakota, 504 U.S. 298 (1992), the United States Supreme Court held that the state of North Dakota could not constitutionally require Quill-a non-resident office supply and mail order company-to collect use taxes on sales made to in-state residents on the basis of Quill's economic-as opposed to physical-presence in the state. For the first time in state tax nexus jurisprudence, the Court articulated a difference between Due Process and Commerce Clause nexus-a seller's physical presence in the state is not required for Due Process nexus but is required for Commerce Clause sales and use tax nexus. The Court held that obligating Quill to collect use taxes, without its physical presence in the state, placed an unconstitutional burden on interstate commerce and, therefore, violated the Commerce Clause. The Quill decision left in its wake a flood of divergent state court decisions and commentators' opinions on Due Process and Commerce Clause nexus analysis and the sufficient connection to a state necessary to satisfy the differing nexus requirements of various taxes. The confusion and disputes continue in audits around the country. The controversy is also currently represented by general interest in the collection of use taxes on internet purchases, proposed federal legislation, and proposed and recently enacted state legislation, the agendas of state and local tax professional meetings, and the prediction by a Bureau of National Affairs article that nexus will be among the most active topics this year. This Article attempts to alleviate the confusion over Due Process and Commerce Clause nexus in the aftermath of the Quill decision. It defines and discusses the difference between Due Process and Commerce Clause nexus and its implications on state and local taxation by analyzing the Supreme Court's Due Process and Commerce Clause opinions before and after Quill. The Article expounds on the physical presence requirement of Commerce Clause nexus for sales and use tax purposes, including when the physical presence of a third party in a state will be imputed to the taxpayer; whether the taxpayer's physical presence is constitutionally required for other state taxes; and what is required for other taxes, if physical presence is not. It also discusses the effects of current and proposed federal and state legislation on a state's ability to tax multistate businesses. This Article gives the reader a clearer understanding of the constitutional allowances and limits of Due Process and Commerce Clause nexus in the ongoing debate over state and local tax nexus., Table of Contents I. Introduction II. Quill-Due Process and Commerce Clauses-The Basics A. Due Process B. Commerce Clause C. The Difference Between Due Process and Commerce Clause Nexus III. Due [...]