State Taxation of Interstate Commerce

Question 1

State Taxation of Interstate Commerce

Answer 1

State taxes must have a substantial connection to the state and may not tax in a way that discriminates against interstate commerce

Question 2

State Taxation of Interstate Commerce: Analysis

Answer 2

Does the tax discriminate against interstate commerce?

If YES - tax is invalid for violating Dormant Commerce Clause

If NO - ask, does the burden placed on interstate commerce outweigh its benefits to the state?

Question 3

State Taxation of Interstate Commerce: 3 Requirements if Tax is Non-Discriminatory

Answer 3

1) Substantial Nexus
2) Fair apportionment
3) Fair relationship

Question 4

State Taxation of Interstate Commerce: Substantial Nexus

Answer 4

Tax must have a substantial nexus to the taxing state

I.e. item taxes is based on significant in-state activity

Question 5

State Taxation of Interstate Commerce: Fair Apportionment

Answer 5

Tax must be fairly apportioned

i.e. state can only tax the portion of the activity connected to the state

Question 6

State Taxation of Interstate Commerce: Fair Relationship

Answer 6

Tax must be fairly related to services or benefits provided by the state

(i.e. tax must be fairly related to some government service or benefit)