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Comment by gergles | Hacker News Reader

This is complete hokum. States aren't allowed to tax interstate commerce -- it's in the Constitution as a power reserved for Congress [1]. I have long wondered why no constitutional challenges to "use tax" have been brought (the last one I could find in an admittedly not-very-exhaustive search was brought in 1937 - excepting one brought recently in the USVI that wasn't related to this issue because everything had already been taxed in other jurisdictions and Internet purchases generally aren't taxed at all), and can't. (I've seen plenty of state supreme courts that have ruled it's OK by them - surprise, surprise.)

There's simply no basis for such a tax, and to be blunt, California can blow me if they think I'm going to remit a penny for things purchased out of state. Amazon doesn't use state resources, there's no logical justification to pay state sales or "use" taxes, period.

[1] Article 1, Section 8

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There are two big concerns with a state's ability to tax: the due process clause and the "dormant" commerce clause[0]. Quill Corp v. North Dakota[1] is the most recent SCOTUS case on point, and it really confused more issues than it settled.

The short, minimally accurate version goes like this: The analysis under the due process clause and the commerce clause looks very similar—they both deal with fairness and the connection ("nexus") the taxpayer has to the state. There is older precedent, Bellas Hess, that required a physical presence for nexus under both the due process and commerce clause. In the 67 years after Bellas Hess, the due process doctrine changed a lot, so courts around the country began to wonder if Bellas Hess was still relevant. North Dakota jumped the gun, and tried to overrule Bellas Hess for the Supreme Court. The Court was not pleased. So Quill holds that the nexus requirement is different under the due process and commerce clause. Due process does not require physical presence, but the Bellas Hess physical presence test is still the law under the commerce clause.

There are some state court decisions applying Quill every which way.

Why does this all matter? The due process limit is unavoidable, by the courts, the federal government, and the states.

The commerce clause, on the other hand, is a limit on states, but it is within congress's powers to redraw. For example, Congress clarified the state's power to tax income in P.L. 86-272.

I think states are losing revenue that is rightly theirs. Amazon has basically built a business model around avoiding sales tax. I like buying cheap stuffs on Amazon as much as anyone, but I also like having state-funded universities, decent roads, and the rest of the goods that sales/use taxes fund. States shouldn't have to suffer because so much of their economy is moving online. As long as states mind the ruptured, tangled mess left of Quill, and follow any rules thrown down by congress, I think states can get theirs without any constitutional problems.

[0] The dormant commerce clause is like the shadow of Article 1, Section 8. Congress has the power to regulate interstate commerce, so even where Congress has yet to regulate (such as use tax land), states are still prohibited from certain actions. See http://en.wikipedia.org/wiki/Dormant_Commerce_Clause

[1] http://bulk.resource.org/courts.gov/c/US/504/504.US.298.91-1...

On a somewhat related question, why does the US think it's okay to tax its citizens worldwide? If the money is not earned using US resources, there should be no claim.

Especially on income made while living and working in another country!

Here are a few guesses— 1. The Constitution doesn't prevent it. 2. Citizens haven't voted to stop it. 3. People still want citizenship/residence, so they must be "worth" the tax burden. 4. The tax code doesn't really care about tax-payer's use of resources. Not using public resources is no excuse for not paying federal income tax. 5. The U.S. government is afraid of people hiding income overseas. We lose money. Countries may begin a income tax race to the bottom.

Note, the government doesn't tax all foreign income, only citizens and residents. There are even deductions available to citizens living abroad.

That the Constitution grants Congress a power (e.g., taxation) does not mean the states are forbidden from exercising similar power (see Amendment 10). Absent a Federal law prohibiting such taxes, the states would be acting within their sovereign power. Some even argue that eliminating such state-erected barriers to trade was the purpose of the Commerce Clause.

Of course modern legal thought would approach this issue by reasoning that interstate commerce can be reached by the states if it exerts a substantial economic effect on intrastate commerce.

You're right about states not being prohibited from enacting laws governing interstate commerce, I think the clearer argument is one of jurisdiction. States have no right to compel a company that is not doing business within their borders to collect sales tax.

States can and do collect tax on interstate purchases, they just do it by compelling the individual taxpayer to report and pay tax on those transactions. The problem is, without any way of auditing those transactions, there's basically no way to enforce this rule.

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