Constitutional Foundations of Nexus
A state’s power to tax is limited by the U.S. Constitution – primarily the Due Process Clause and the Commerce Clause – explained Mathew Landwehr, a partner at Thompson Coburn.
The Due Process Clause requires a “definite link, or minimum connection” between the state and the taxpayer it seeks to tax. Meanwhile, the Commerce Clause, as interpreted by the Supreme Court in cases like Complete Auto Transit, Inc. v. Brady, (430 U.S. 274 (1977)), requires that a state tax have “substantial nexus” with the activity or taxpayer being taxed.
To dig deeper, visit the original article on the Thomson Reuters blog.