The NAM joined with the Council on State Taxation and the National Marine Manufacturers Association in support of an appeal to the Supreme Court of a West Virginia decision that would allow extensive taxation of out-of-state businesses. On 6/18/07, the Court declined to review the appeal.
Historically, the Commerce Clause has protected interstate markets from impermissible state tax burdens through the rule that a state may not impose a tax on an out-of-state business unless it has more than a de minimis "physical presence" in the state. However, many states are aggressively seeking to expand their tax revenues by asserting the power to tax the corporate income of out-of-state businesses that have no physical presence in the taxing state. In this case, West Virginia had adopted a "significant economic presence test" which would permit a state to tax the income of any business with customers in the taxing state, even if it lacked any real property, employees or other contacts there.
The brief fills many pages with examples of difficult and complicated tax situations that will face companies should West Virginia's system be allowed. The effects will be particularly severe on small and mid-sized businesses.