The rapidly evolving universe of US state taxation of cross-border online sales after South Dakota v Wayfair, Inc., and its implications for Australian businesses

The US Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc. dramatically expanded the subnational states’ power to require remote suppliers to collect taxes on in-bound sales to local consumers by repudiating the pre-existing, judicially created constitutional rule limiting the states’ authority to enforce such collection obligations to those suppliers with an in-state physical presence and replacing it with a ‘nexus’ rule based on ‘economic and virtual contacts’. The state legislatures reacted quickly and almost unanimously to the Wayfair decision by adopting rules imposing sales tax collection obligations on remote suppliers whose sales exceeded specified dollar or transaction thresholds. The states have imposed similar obligations on marketplace platforms that increasingly facilitate online cross-border sales. In principle, these post-Wayfair tax collection obligations imposed on remote suppliers apply equally to interstate and international cross-border sales and to domestic and foreign suppliers. As a practical matter, however, the states confront greater challenges in enforcing these obligations in the international context. Under the US Constitution’s ‘Full Faith and Credit Clause’, judgments against domestic suppliers that fail to comply with a state’s tax collection obligations may be enforced against such suppliers in other states where the suppliers are located. By contrast, under the so-called ‘revenue rule’ that is widely respected in the international context, judgments against foreign suppliers generally may not be enforced in the foreign suppliers’ home jurisdiction. Despite differences in the legal and practical mechanisms available to state tax authorities in enforcing tax obligations upon foreign as distinguished from domestic suppliers, states nevertheless have a variety of tools at their disposal to enforce or encourage tax collection by foreign suppliers, and there are other reasons why foreign suppliers may choose to comply with state collection requirements with respect to online sales

How Not to Read International Harvester: A Response

In this article, Hellerstein examines a recent article by Alysse McLoughlin and Kathleen Quinn and seeks to clear up the confusion surrounding International Harvester

Reflections on the Cross-Border Tax Challenges of the Digital Economy

In this article, Hellerstein discusses common problems confronting national and subnational jurisdictions in addressing the cross-border tax challenges of the digital economy. This article is based on the author\u27s November 21 inaugural lecture as a visiting professor at the Vienna University of Economics and Business

Primer on Florida\u27s Sales Tax on Services

This special report describes the basic structure and operation of the Florida sales tax as adopted in its final form by the Florida Legislature on June 6, 1987 in order to clear up confusion about the tax. It begins by addressing the amount of controversy that the recently enacted sales and use tax on services has created and states that much of the controversy is based on confusion over what the law actually says and how it works. Next, the report goes into the operation of the statute and stresses that the tax applies only to services that are consumed in the state. The report acknowledges that a state may not impose a tax, or the obligation to collect a tax, upon one with whom the state lacks a sufficient nexus. It then addresses the collection of the tax and goes in depth into the two exemptions to the tax. Next, the report discusses particularized treatment of special industries by primarily focusing on advertising services furnished by the media. The report then addresses savings provisions that ensure that the sales and use tax is construed to comply with constitutional constraints. The report concludes by stating that a more in-depth analysis of the sales tax with be conducted in the future and emphasizing that this report is only an initial summary of the law and its possible effects

Does sales-only apportionment of corporate income violate international trade rules?

Unternehmensbesteuerung, Körperschaftsteuer, Ländersteuer, WTO-Regeln, Steuerbemessung, Exportsubvention, Vereinigte Staaten, Corporate taxation, Corporate income tax, State tax, WTO rules, Tax base, Export subsidies, United states

The Effect of Interstate Branching on National, State and Local Economies

Testimony before the Subcommittee on Economic Stabilization to consider an administration proposal that would permit interstate branching by state and national banks and allow bank holding companies to acquire depository institutions across state lines

Commerce Clause Restraints on State Taxation: Purposeful Economic Protectionism and Beyond

Few questions in recent years have spawned as much controversy and as little academic interest as the scope of commerce clause restraints on state tax power. The Supreme Court has handed down an extraordinary number of significant decisions addressed to the limitations the commerce clause imposes on state taxation. Yet these decisions have barely caught the eye of the nation\u27s leading law reviews or constitutional scholars. Even those observers who have recognized the Court\u27s renaissance of interest in the dormant commerce clause have largely confined their attention to state regulation, as distinguished from state taxation, of interstate commerce. If there is an explanation for this puzzling neglect of state taxation, it may lie in the remark of Gerald Gunther--who unceremoniously dropped the subject from his casebook--that pursuit of the intricacies of state taxation ... would require more time and space than the undertaking warrants. Given the current turn in academic fashion, Donald Regan\u27s characteristically thoughtful examination of the Court\u27s commerce clause jurisprudence in THE SUPREME COURT AND STATE PROTECTIONISM: MAKING SENSE OF THE DORMANT COMMERCE CLAUSE assumes an added dimension because it discusses matters involving state taxation of interstate commerce. Although state taxation is not the principal focus of Regan\u27s analysis, his thoughts concerning the Court\u27s state tax decisions raise questions that merit further comment for two reasons: first, they shed additional light on Regan\u27s central thesis; second, they are worthy of consideration in their own right

The European Commission’s Report on Company Income Taxation: What the EU Can Learn from the Experience of the US States

The European Union Commission has proposed using consolidated base taxation and formulary apportionment to tax the EU-source income of multinational companies. This paper examines US state experience with a similar approach. Despite some positive lessons, especially the need to consolidate income of affiliated companies, lessons are mostly negative, especially regarding the choice of apportionment formula, the use of economic criteria to define the group whose income is to be consolidated, and complexity caused by lack of uniformity. US experience says nothing about using value added to apportion income—an approach that is conceptually attractive, but subject to transfer pricing problems

Federal - State Tax Coordination: What Congress Should or Should Not Do -- Testimony of Walter Hellerstein on Tax Reform: What It Means for State and Local Tax and Fiscal Policy, Before the Committee on Finance

Testimony of Walter Hellerstein, Francis Shackelford Professor of Taxation Distinguished Research Professor, before the Committee on Finance, hearing on Tax Reform: What It Means for State and Local Tax and Fiscal Policy, United States Senate, April 25, 2012