The power to tax is the power to destroy
March 12, 2008 3:04 PM   Subscribe

Does the 'use tax' charged by states for purchases made outside their borders violate the commerce clause?

Inspired by this question and my desire to not completely derail it. If a state can, through whatever legal contortions it can devise, tax an out-of-state purchase at all, can't it ultimately destroy the ability to purchase goods and services out of state? After all, if it can tax 1%, can't it tax 1,000,000%? It seems to me that this kind of state-held power could lead to intranational trade wars if it's allowed. Imagine the ramifications if California decided to viciously protect its economy. The fact that it's perhaps difficult to enforce right now doesn't seem relevant, given the trivial nature of recording and auditing a person's spending history.
posted by mullingitover to Law & Government (3 answers total)
No. The tax must equally affect in-state and out-of-state interests, if my con law memory serves me right. If it isn't specifically targeted towards out-of-state businesses, then it does not violate the commerce clause. It gets more complex, but it would not add materially to the answer.
posted by Ironmouth at 3:13 PM on March 12, 2008

Best answer: From here:
In Complete Auto Transit v. Brady, the Supreme Court articulated a four-part test to determine if a state tax violates the Commerce Clause:

· Nexus: there must be a sufficient connection between the taxpayer and the state to warrant the imposition of state tax authority
· Fair Apportionment: the state must not tax more than it’s fair share of the income of a taxpayer
· No discrimination: the state must not treat out-of-state taxpayers differently than in-state taxpayers
· Related to services: the tax must be fairly related to services provided to the taxpayer by the state
posted by smackfu at 3:14 PM on March 12, 2008 [1 favorite]

Damn, people here are crazy quick. The distinction, as I remember from my public budgeting and finance class, is equality--if a tax achieves equality between an interstate and intrastate transaction (for instance, it requires you pay the taxes that you would have paid if you had purchased locally), its OK. If it is the equivalent of a tariff, it is not OK. Collection and administration is a whole separate can of worms.
posted by jtfowl0 at 3:24 PM on March 12, 2008

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