His answer is: not much, at least in terms of substance. In form, however, more has survived than is warranted. As Thimmesch’s research shows, current doctrine reflects a deep tension between two trends: on the one hand, Commerce Clause jurisprudence has steadily marched away from formalism and bright-line rules, as seen most recently in Wayfair. On the other hand, the Court continues to cling to formal distinctions and has “shown little interest” in balancing “or even faith in its ability to do so.”
One result of this tension, according to Thimmesch, has been a reluctance on the part of the Court to unify tax and nontax dormant commerce clause jurisprudence. As many readers are aware, the Wayfair decision overruled the so-called physical presence test that was previously upheld by Quill Corp. v. North Dakota. The physical presence test was a bright-line rule that made it unconstitutional to tax (or impose tax collection obligations on) remote sellers that did not maintain a physical presence in the taxing state. The rule, which significantly limited states’ ability to tax online retailers, had been derided by scholars as overly formalistic and bad tax policy.
Some of these scholars, including Thimmesch, had hoped that the Court would not only kill the Quill physical presence test, but would also eliminate the distinction between tax and nontax commerce clause doctrines by clearly subjecting all state laws to the same balancing test. It did not.
The article begins with a brief review of nontax dormant commerce clause jurisprudence, under which discriminatory laws are subject to strict scrutiny and facially neutral laws are tested under a balancing test set forth in Pike v. Bruce Church, Inc. (1970). Pike balancing is used to identify laws that are non-discriminatory but nevertheless burden interstate commerce. Laws that are too burdensome are struck down. Thimmesch would like to see the same test applied to state tax laws—and it sort of is, but not quite.
As Thimmesch explains, the Wayfair Court joined with scholars and other critics of the physical-presence nexus test by criticizing its formalistic nature, but it failed to abandon formalism in its entirety—and it declined to fully unify tax and nontax dormant commerce clause jurisprudence. Instead, the Court implicitly introduced “an apparent two-step process by which state nexus provisions are subject to analysis first under Complete Auto and then under Pike,” ultimately subjecting state tax laws to both tax and nontax tests. In this way, Wayfair maintained the formal distinction between tax and nontax laws.
The new two-part test, according to Thimmesch, is not only complex, but it is also unnecessary. After all, says Thimmesch, the tax and nontax doctrines are already similar in substance. The Complete Auto test has four pongs, which require state taxes to: (1) apply to taxpayers with a substantial nexus to the taxing state, (2) be non-discriminatory, (3) be fairly apportioned, and (4) be fairly related to the services provided by the state.
In revisiting the four-part test, Thimmesch first argues that, although the Court was vague in its prescriptions, in the post-Wayfair world the substantial nexus requirement is best understood as requiring Pike balancing. He also argues that the Court has already abandoned the fourth prong. That leaves two other prongs: the non-discrimination prong and the fair apportionment prong.
Here, Thimmesch presents a compelling argument that the fair apportionment prong has functionally merged with the non-discrimination requirement, and neither adds much to nontax dormant commerce clause doctrine. In brief, tax laws are deemed to be fairly apportioned if they are both externally consistent and internally consistent. Thimmesch argues that the external consistency test has lost its teeth. Meanwhile, the internal consistency test is most useful for identifying discriminatory taxes—making the fair apportionment and non-discrimination prongs of Complete Auto substantively duplicative, both with each other and with the nondiscrimination requirements of nontax doctrine.
In short, Complete Auto adds very little to nontax commerce clause jurisprudence, and it contains no meaningful test for undue burdens unless the nexus requirement is understood as Thimmesch understands it. That is to say, as a stand in for Pike balancing. In essence, taxes that pass Constitutional muster under Complete Auto—by proving themselves nondiscriminatory under the internal consistency test—must nevertheless be subjected to Pike balancing.
In substance, then, Thimmesch argues that tax and nontax doctrines have merged. And yet, the artificial and formalistic distinctions that remain will almost certainly lead to complex litigation and continued confusion in the lower courts. For this reason, Thimmesch proposes that the Court take one more step: abandon Complete Auto and unify the dormant commerce clause in order to simplify the doctrine and eliminate the formalistic distinctions between tax and nontax laws.
Time will tell whether the Court will take the recommended step. In the meantime, this Article provides a valuable analysis of the current state of commerce clause restrictions on state taxing power and raises several areas for further research. This Article should be of interest to any tax scholar interested in state taxation or Constitutional law.