Thursday, January 17, 2019
Hayes Holderness (Richmond), Whither Substantial Nexus?:
Hailed as a massive victory for coherence in defining the state tax jurisdiction standard of “substantial nexus,” the 2018 South Dakota v. Wayfair case fundamentally altered the state and local tax jurisprudence. However, the vagueness of the decision left the substantial nexus doctrine at a crossroads: it may wither away into meaningless platitudes or solidify into a coherent standard that meaningfully protects interstate commerce from undue state tax burdens. This Article guides the substantial nexus doctrine down the latter path by developing a robust theory of substantial nexus that focuses on the potential burden of tax compliance costs and explaining the substantial nexus standard that follows from that theory.
The proposed standard is then applied to issues likely to rise from Wayfair’s unanswered questions to demonstrate how Wayfair’s movement towards a coherent substantial nexus doctrine can continue.