A Unifying Approach To Nexus Under The Dormant Commerce Clause

The Supreme Court has long debated the existence and scope of its power to restrict state regulation under the so-called negative or dormant Commerce Clause. The Court took a broad view of that power in the late 1800s, but it has refined and restricted its role over time. One area where the Court has continued to wield considerable power, however, has been in the context of state taxes. Specifically, the Court has continued to restrict states' power to compel out-of-state vendors to collect their sales and use taxes based on a physical-presence "nexus" rule.

That rule dates back to the Court's early oversight of how states taxed itinerant drummers and vendors who sold their goods via catalogue, but it has a very different meaning in today's world. States now lose an estimated $20 billion of tax revenue annually due to the combination of the physical-presence rule and the amount of commerce that is done online.