Abstract
Part II of this Article begins with a brief introduction to sales and use taxes in the United States. Although these taxes are complementary in nature, they are treated differently for constitutional purposes. This Part then examines the Due Process Clause and Commerce Clause constraints on state taxation, which are animated by very different concerns. Next, this Part explores footnote eight in Quill to dispel the notion that Quill established a facts-and-circumstances test. The section concludes by discussing the problems lower courts have had in applying the Quill nexus tests. The primary problem encountered by the lower courts, exemplified by four lower court opinions, involves fact patterns near the bright-line that involve some quantum of physical presence but something less than a permanent physical presence in the taxing jurisdiction. Part III will then look at ways of bridging the apparent Quill chasm. First, there is a step back to an earlier era in Due Process Clause jurisprudence with an examination of the physical presence test that existed prior to International Shoe. The idea is to take the lessons from that era (i.e., due process cases decided using a physical presence test) and transfer them into the Commerce Clause context. After all, it seems pointless to relitigate issues that were decided eighty years ago. Once a nexus is established, the next logical question is “When does it end?” The Article spends some time in this Part looking at the various approaches states have taken in answering that question. Part III also proposes a model statute to deal with the perceived unfairness of taxing very small businesses through a minimum filing threshold. With the power to tax comes the responsibility to tax efficiently. Administrative costs are associated with having an out-of-state business comply with a state's regulatory taxing authority, both to the business and to the state. A bright-line physical presence test might require very small businesses--those with $100 of sales tax liability or less a year--to file sales and use tax returns. The states would be better off creating a mechanism to exempt these small businesses because the cost of collecting this revenue might exceed the tax collected. The conclusion of Part III discusses the ethical and professional considerations the tax profession is dealing with not only at the practical level, but more importantly at the philosophical level. At its root, the fundamental problem facing the profession today is the question whether truth is relative or universal. To the extent people reject objectivity, their philosophy will likely be reflected in their court submissions, which may then appear in a court opinion. This Article hopes to make a contribution by helping states strengthen their sales tax base and assisting taxpayers in understanding their legal obligations. Whether state revenues are up or down, it cannot be emphasized enough that “taxes are the life-blood of government, and their prompt and certain availability an imperious need.” A bright-line test, admittedly an artificial construct, has the primary advantage of providing notice to those that cross the line that they must collect the tax. Taxation is not just another area of government regulation: in the words of Justice Oliver Wendell Holmes, Jr., “[t]axes are what we pay for civilized society.”
Recommended Citation
H. Beau Baez III, The Rush to the Goblin Market: The Blurring of Quill's Two Nexus Tests, 29 SEATTLE U. L. REV. 581 (2006).
