Amdt5. Jurisdiction to Tax

Fifth Amendment:

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

The operation of the Due Process Clause as a jurisdictional limitation on the taxing power of the states has been an issue in a variety of different contexts, but most involve one of two basic questions. First, is there a sufficient relationship between the state exercising taxing power and the object of the exercise of that power? Second, is the degree of contact sufficient to justify the state’s imposition of a particular obligation? Illustrative of the factual settings in which such issues arise are 1) determining the scope of the business activity of a multi-jurisdictional entity that is subject to a state’s taxing power; 2) application of wealth transfer taxes to gifts or bequests of nonresidents; 3) allocation of the income of multi-jurisdictional entities for tax purposes; 4) the scope of state authority to tax income of nonresidents; and 5) collection of state use taxes.

The Court’s opinions in these cases have often discussed due process and dormant commerce clause issues as if they were indistinguishable.1 A later decision, Quill Corp. v. North Dakota,2 however, used a two-tier analysis that found sufficient contact to satisfy due process but not dormant commerce clause requirements. In Quill,3 the Court struck down a state statute requiring an out-of-state mail order company with neither outlets nor sales representatives in the state to collect and transmit use taxes on sales to state residents, but did so based on Commerce Clause rather than due process grounds. In 2018, the Court, however, reversed course in South Dakota v. Wayfair, overturning Quill's Commerce Clause holding and upholding a South Dakota law that required certain large retailers that lacked a physical presence in the state to collect and remit sales taxes from retail sales to South Dakota residents.4 In so holding, the Wayfair Court concluded that while the Due Process and Commerce Clause standards “may not be identical or coterminous,” they are “closely related,” and there are “significant parallels” between the two standards.5

For discussion of the relationship between the taxation of interstate commerce and the dormant commerce clause, see Taxation, supra. back
504 U.S. 298 (1992). back
504 U.S. 298 (1992). back
138 S. Ct. 2080, 2099 (2018). back
Id. at 2093. back