US Supreme Court Hits Back at State Tax Authorities

Budgetary pressures have led state and local governments in the US to seek additional sources of tax revenue. At the same time, political resistance to new taxes and to increases in existing taxes has limited the revenue-generation options available to state and local officials. Many are attempting to raise more revenue by more aggressively enforcing their tax laws, often at the expense of non-resident companies. The federal limits on state taxation have been affected by 4 recent US Supreme Court decisions in the area, which also have implications for international businesses operating in the US and for US companies doing business abroad. In light of the developing constitutional law of state taxes, foreign companies doing business in the US and US companies with foreign or interstate operations should reassess their organizational structure and their operating procedures and the effects they may have on their state tax liabilities. Such companies should also consider challenging taxes affecting their operations, seeking refunds of taxes paid, and preparing for possible future developments in state tax laws or federal legislation.