Constitutional Law: Federalism: State Taxation of Interstate Commerce

  • State Taxation of Interstate Commerce – generally for a state tax to be valid:
    • (1) it is reasonable and nondiscriminatory (satisfies commerce clause)
    • (2) must be a substantial nexus between state interest and activity being taxed. (satisfies due process clause).
    • General principles:
      • GOODS which are in the stream of interstate commerce: MAY NOT be taxed, however, they may be taxed at the beginning of transit, may also be taxed at end of transit – and if there is a break in transit.
      • INSTRUMENTALITIES may be taxed provided the tax is fairly apportioned to the extent of taxpayer use. Taxpayer must acquire a taxable situs in the state. (Georgia may tax Delta based on the # of planes and # of days logged in state).
      • DIRECT TAXES must be apportioned. These are income taxes and property taxes.
      • INDIRECT TAXES must be geographically uniform. These are sales taxes and use taxes.