TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, December 7, 2012

Commerce Clause, Taxation, and the Physical Presence Test

Lucas Humble (J.D. 2012, Kentucky), Note, Common Sense and the Commerce Clause: Why Elimination of the Physical Presence Test for Taxation Defies Both, 100 Ky. L.J. 707 (2012):

This Note presents the argument that the physical presence standard has always applied, and still does apply, to all state taxes, and not just sales and use taxes, and that the Supreme Court of the United States should grant certiorari on the issue and clarify the confusion evidenced by conflicting state courts and statutes. Part I contains a brief summary of the two cases developing the physical presence standard, Bellas Hess and Quill, and explains why even though those cases involved sales and use taxes, their shared principle extends to all levels of state taxation. It contends that Justices Stevens's ambiguous language in Quill has led several state courts and legislatures throughout the United States to adopt laws that violate the Commerce Clause, a trend that will continue to gain momentum as technology expands the possibility of out-of-state sales. Part II examines the Commerce Clause of the United States Constitution, discussing the development of the dormant Commerce Clause doctrine and explaining why the doctrine mandates a physical presence requirement. Part III reviews legislative and judicial interpretations of the physical presence requirement, focusing on the confusion displayed by the Kentucky Court of Appeals in its recent Asworth decision. Finally, Part IV discusses the advancement of technology and its relationship to the Internet, explaining, through the use of a modern example, why a bright-line test is exceedingly important as technology capabilities expand.

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