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1 Joseph Henchman, et al., Ending the Nexus Guessing Game for Taxpayers: Lamtec Corp. v. Washington Department of Revenue 1 (2011)

handle is hein.taxfoundation/ffchexz0001 and id is 1 raw text is: FOU NT!N I +110 IME \44\.i . June 16, 2011 No. 274 Ending the Nexus Guessing Game for Taxpayers: Lamtec Corp. v. Washington Department of Revenue By Joseph Henchman, Dirk Giseburt, and Laura Lieberman The Tax Foundation today filed a brief with the U.S. Supreme Court, asking them to take the case of Lamtec Corp. v. Department of Revenue of the State of Washington. The case involves the State of Washington's effort to impose tax on economic activity occurring in other states. Our brief argues that this activity is properly taxed by other states, and that Washington's action threatens to impose unconstitutional burdens on interstate commerce. We ask the Supreme Court to reaffirm its physical presence rule for state taxation, which limits state taxing power to entities with property or employees within the state. Such a ruling would provide relief from increasingly burdensome uncertainty and inconsistency in interstate taxation. States Have Resisted 1992 Supreme Court Ruling Upholding Physical Presence Rule In Quill Corp. v. North Dakota (1992), the U.S. Supreme Court reaffirmed a physical presence standard in the context of sales and use taxes.1 The Court cited the fact that the statute in question encompassed vendors who merely advertised in the state, and that replicating it nationwide would subject them to collection duties and compliance costs associated with tracking thousands of different tax rates, exemption lists, and administrative requirements. The Court noted the value of a bright-line standard in Quill. Undue burdens on interstate commerce may be avoided not only by a case-by-case evaluation of the actual burdens imposed by particular regulations or taxes, but also, in some situations, by the demarcation of a discrete realm of commercial activity that is free from interstate taxation.'2 This bright-line standard has achieved this objective; litigation about the content of the physical presence standard in corporate, individual, and sales tax contexts has been limited. Many states have nonetheless sought to impose business activity taxes on remote entities under the general Joseph Henchman is Vice President of State & Legal Projects at the Tax Foundation, Dirk Giseburt is Counsel of Record, and Laura Lieberman is a law clerk at the Tax Foundation. 1 Quill Corp. v. North Dakota, 504 U.S. 298 (1992). 2 Id at 315.