Sales and use taxes, which are levied by forty-five states, have long been an important source of revenue for state and local governments. The rigid structure of these long-standing taxes, however, has been strained by the rapid evolution of the online economy. As a result, the Multistate Tax Commission (“MTC”) devised a plan, the Streamlined State Sales Tax Project (“STP”), to recapture some of the revenue that state and local governments might otherwise lose as consumer purchases migrate from local retailers to online sellers. This plan, approved reciprocally by the states, but not by Congress, was designed by state legislators to comply with legal guidelines articulated by the Supreme Court. This Comment argues, however, that if a foreign merchant challenges these laws, the STP would be declared unconstitutional based on a modern understanding of the Commerce Clause and a structural, federalist reasoning. Part I discusses the evolution of sales and use taxes and their importance to state and local governments. Part II discusses the rising tension between the structure of sales and use taxes and the structure of the American economy. Part II also documents the STP—the states’ recent response to this tension—and explains the STP’s legal underpinnings. Part III analyzes the potential legal challenges the STP would face from a foreign merchant and concludes that while it is likely constitutional on due process grounds, the STP is unconstitutional under the Commerce Clause based on stare decisis and federalist reasoning.
Evans, Gregory R. “Separate but Taxed: A Rejection of the Steamlined Sales Tax Project through a Commerce Clause and Federalist Analysis.” American University Law Review 56, no. 2 (December 2006): 421-454.