Seattle and Tacoma, Washington, impose a business activity tax on companies doing business there. In this case, the cities tax wholesalers on all receipts received from wholesale goods delivered in the cities, even though only a small portion of the activities related to those sales are done within those cities. The Washington Supreme Court ruled 5 to 4 that the taxes do not discriminate against interstate commerce.
The NAM joined with the Council on State Taxation and the U.S. Chamber of Commerce in an amicus brief urging the Supreme Court to review this decision. Lower courts are confused over how to treat business activity taxes with respect to apportionment rules between various taxing jurisdictions. State and local authorities are deceptively labeling taxes as either specific to transactions or specific to activities in order to avoid long-standing legal principles that may apply in one instance but not the other.
On Feb. 19, 2008, the Court declined to review this appeal. The case would have been an important vehicle for the Court to clarify the rules by which state and local governments may impose taxes on interstate business. Our brief cited business activity taxes in Kansas City, Missouri, and Bristol, Tennessee, as well as conflicting court decisions over this issue in many states. Because an increasing number of the more than 1,000 local jurisdictions rely on business activities taxes on gross receipts as a major source of revenue, this issue will continue to be a problem for manufacturers until the Supreme Court agrees to decide it.