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Federalism and the Commerce Clause: A Comparative Perspective
The article was authored by Reuven S. Avi-Yonah and is 6 pages in length. It was originally published in the State and Local Tax Lawyer 2007 Symposium Edition.
In the field of state and local taxation, no other clause of -- or silence within -- the Constitution has as much significance as the Commerce Clause. It yields the fundamental limitations on state taxing power with which professionals in our field grapple daily -- nexus, discrimination, and fair apportionment to name a few. This compilation of articles and essays presents analyses by preeminent authorities of not only the intricacies of these "day-to-day" issues, but also the theoretical underpinnings of Commerce Clause jurisprudence. The day-long program from which these pieces are adapted was held at Georgetown University Law Center on May 16th, 2007.
For information on the State and Local Tax Lawyer 2007 Symposium Edition, click here.
Article Excerpt
The U.S. Supreme Court has on numerous occasions addressed the constitutionality of state taxes under the U.S. Constitution (most often under the Commerce Clause, but sometimes under the Equal Protection and Due Process Clauses). In general, the Supreme Court has granted wide leeway to the states to adopt any tax system they wish, only striking down the most egregious cases of discrimination against out-of-state residents. Thus, for example, the Court has generally refused to intervene against state tax competition to attract business into the state. It has twice upheld a method of calculating how much income of a multinational enterprise can be taxed by a state that is widely seen as both incompatible with the methods used by the Federal government and other countries, and as potentially producing double taxation. And it has allowed states to impose higher income taxes on importers than on exporters through the use of so-called "single factor sales formulas," under which a business pays tax to the state only if it makes sales to residents of the state, but not if it makes sales outside the state. Most recently, the Supreme Court has refused to intervene in two cases in which states imposed income taxes on an "economic nexus" theory on taxpayers with no physical presence in the taxing state.
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