Delaware imposes a gross receipts tax on all money received from wholesale goods delivered in the state, regardless of whether the bulk of the actual sales activity attributable to such sales occur outside the state. For an automobile manufacturer like Ford, in many cases only a small portion of the activities related to the sale of a vehicle occurs in the state. The Delaware Supreme Court rejected Ford’s argument that the tax unfairly discriminates against interstate commerce. That ruling is now being appealed to the U.S. Supreme Court, and the NAM joined with the Council on State Taxation in an amicus brief June 16 urging the Court to hear the case. Lower courts like Delaware’s are confused over apportionment rules that apply to gross receipts taxes. A gross receipts tax is akin to an income tax that must be apportioned to reflect the location of the various interstate activities by which it was earned. States and cities around the country are divided on how to properly apportion a variety of alternative tax regimes that differ greatly from traditional income taxes. In light of the overwhelming revenue shortfalls that state and local governments now face, it is more important than ever for the Supreme Court to clearly state how to administer such taxes constitutionally. Last year, the Court declined to hear a similar case in which the NAM participated, but we are hopeful that our continued efforts to bring this issue to the Court’s attention will ultimately lead to a successful result.
Cert denied on 10/6/2009.