The Dormant Commerce Clause at a Crossroads: Part 2

Robert D. Plattner

Robert D. Plattner is a former deputy commissioner for tax policy in the New York State Department of Taxation and Finance. He now serves as a senior adviser to New York Senate Finance Committee Chair Liz Krueger (D) and consults on state and local tax policy and New York state tax matters. He is the 2021 recipient of the Multistate Tax Commission’s Paull Mines Award for Outstanding Contributions to State Tax Jurisprudence.

In this installment of The Plattner Perspective, the second in a two-part series, Plattner analyzes the history of the U.S. Supreme Court’s dormant commerce clause and conjectures on its future in the wake of the changes wrought by the Court’s Wayfair ruling.

I. Introduction

As stated at the outset of Part 1,¹ this two-part series has an ambitious agenda: to articulate a coherent dormant commerce clause jurisprudence true to its animating principles.

Part 1 began with an overview of the Wayfair² decision, in which the U.S. Supreme Court renounced the physical presence test it had established in Bellas Hess³ and sustained in Quill.⁴ The article went on to examine the flawed logic of Bellas Hess and trace the consequences that decision had on the Court’s commerce clause jurisprudence for over five decades.

Part 2 looks forward, first to the Court’s next dormant commerce clause state tax case and then beyond. It begins with the premise that Justice Anthony Kennedy’s opinion in Wayfair portends changes in dormant commerce clause doctrine that go well beyond the demise of the physical presence test. One such change should come sooner rather than later. The absence of the physical presence test has exposed a glaring flaw in the Complete Auto four-part test⁵: It is silent on the subject of undue burdens on interstate commerce, a central concern of the dormant commerce clause. Broached by the justices in Wayfair but not decided, the Court will need to make up its collective mind how to handle claims of undue burden.

The concluding sections of the article propose a new dormant commerce clause doctrine that breaks from existing doctrine in fundamental ways. The article argues that current dormant commerce clause doctrine has lost touch with its core animating principles, straying well beyond the boundaries of its domain into territory belonging to the due process clause. The four-pronged Complete Auto test, the centerpiece of the Court’s current doctrine, embodies this misguided expansion.

The new doctrine would return the Court’s attention to the basic principles underlying the commerce clause as reiterated by Kennedy in Wayfair. This return to fundamentals would end the “Complete Auto era” and mark the advent of a new dormant commerce clause doctrine dedicated to fulfilling its clearly defined role of safeguarding interstate commerce from discrimination and undue burdens.

II. Does the Dormant Commerce Clause Have a Future?

This article presumes the dormant commerce clause has a future. The late Justice Antonin Scalia and Justice Clarence Thomas, among others, have argued that it should not.⁶

It is outside the scope of this piece to offer a scholarly rebuttal to Scalia’s attack on the dormant commerce clause as a judicial fraud. It is also unnecessary because these rebuttals already exist.⁷ Suffice to say I fully support Kennedy’s position on the Court’s proper role in dormant commerce clause cases, which he characterizes in Wayfair as “the front line of review” in this “limited sphere” of its caseload.⁸

I also share Kennedy’s opinion that Congress has historically supported the existing distribution of responsibility between Congress and the Court. He states the position of the majority in Wayfair this way:

Given this history, and speaking practically, what better alternative does Congress have than assigning the “front line of review” to the judicial branch? Congress is too burdened with other duties and ill-suited to take on the function itself, and the legislative branch lacks the equivalent of the tiered structure of lower courts the Supreme Court can call upon to take on all but a handful of the weightiest matters. Moreover, while it is fair to express some disappointment in the Court’s track record in developing a coherent commerce clause doctrine, it is certainly true that interpreting the U.S. Constitution is a familiar function for the Court.

States appear content with the existing arrangement as well. As far as I am aware, no state has ever asserted before the Court in dormant commerce clause litigation that the Court lacks the authority under the Constitution to hear the matter.

The Court can, however, be criticized for the sweep it has given to the dormant commerce clause, as embodied in the Complete Auto four-pronged test. This topic is addressed in the concluding pages of the article.

III. What Wayfair Said

A. The Physical Presence Test

Wayfair’s long-awaited holding was plain and unequivocal: The physical presence test established in Bellas Hess was unsound and incorrect and had been from the outset. Its long run as governing precedent was over.¹⁰

But Wayfair went further than that by overruling both Bellas Hess and Quill in their entirety.¹¹ The Court explicitly prefaces its finding that Wayfair has nexus with South Dakota by noting that the determination is being made “in the absence of Quill and Bellas Hess.”¹² Again, after ruling that Wayfair has nexus, it states that “any remaining claims regarding the application of the Commerce Clause in the absence of Quill and Bellas Hess may be addressed in the first instance on remand.”¹³

As discussed in Part 1, the Bellas Hess Court did a one-time evaluation of the burden imposed on interstate commerce in the context of a remote mail-order vendor operating in a national market with thousands of sales tax jurisdictions. Based on that evaluation, it concluded that complying with the rules of those jurisdictions constituted an undue burden on interstate commerce. To relieve Bellas Hess of this burden, it held that Illinois lacked nexus with the typical mail-order catalog business. A state could not ask a business to take on a sales tax collection burden unless it had a physical presence in the state.

The company’s victory was a reasonable outcome, but the decision had unintended consequences. After Bellas Hess the presence or absence of nexus turned on physical presence. The focus on undue burden built into the Bellas Hess decision was lost. A state could require a remote seller with a small physical presence in the state to collect and remit tax no matter how burdensome the state’s sales and use tax laws. In contrast, a state could not ask a remote retailer with no physical presence in its jurisdiction to collect and remit sales tax regardless of how simple its law or how large the vendor’s volume of sales.¹⁴

Twenty-five years later Quill held that there were separate standards for commerce clause and due process clause nexus. Due process nexus was about the fundamental fairness of government action: Were an individual’s connections with the state sufficient to sanction its exercise of power over the individual? Commerce clause nexus limited the reach of state tax authorities to protect business enterprises from undue burdens on their interstate business activities. The commerce clause, Quill ruled, required physical presence to prove substantial nexus, while due process nexus did not require physical presence.¹⁵

Quill preserved the status quo for large mail-order vendors and later for internet retail giants like Amazon. Amazon’s initial business model relied on its ability to sell to customers in all but a few states without collecting sales tax. States made headway over the next decade in requiring remote vendors to collect tax. South Dakota’s contribution was a law that teed up litigation for the Court to overturn the physical presence standard. South Dakota smartly drafted the new law to minimize the burden of collecting and to avoid unfair results such as retroactive application.¹⁶

New issues emerged once the Court in Wayfair ended the physical presence test by overruling Bellas Hess and Quill. What were the implications for the dual nexus standards established in Quill? In what context would the Court now address the issue of undue burdens on interstate commerce? Could the Complete Auto four-part test continue in its long-standing role? The Court was not required to answer these questions directly to rule in Wayfair, and it chose not to. Nonetheless, the text of the decision signals that Wayfair is likely to be the first step in a significant rethinking of the Court’s dormant commerce clause doctrine.

B. The Animating Principles of the Commerce Clause

Early in the opinion, Kennedy reviews the key animating principles of modern commerce clause jurisprudence. His list is short — there are just two.

The opinion summarizes modern commerce clause doctrine as follows:

These two principles, he continues, “guide the Court in adjudicating cases challenging state laws under the Commerce Clause.” They also “animate the Court’s Commerce Clause precedents addressing the validity of state taxes.”¹⁷

The opinion goes on to lay out the specifics of the Complete Auto four-part test, citing it as the “now-accepted” framework for judging the validity of a state tax. Under the Complete Auto test, a tax would be upheld if it had sufficient nexus with the state, was fairly apportioned, did not discriminate against interstate commerce, and was related to the services provided by the state.¹⁸

Wayfair’s early discussion of animating principles is enlightening. It identifies just two animating principles of the dormant commerce clause — discrimination and undue burden — with no mention of others. The disconnect between Wayfair’s short list of animating principles and the Complete Auto four-pronged test is striking, offering an early glimpse at the tensions in existing doctrine.

IV. In the Absence of Bellas Hess and Quill

A. Undue Burden

Addressing the issue of whether South Dakota has nexus with Wayfair, the Court emphasizes that the first prong of Complete Auto “simply asks whether there are sufficient minimum connections.”¹⁹ It applies that simple rule and finds South Dakota has nexus with Wayfair based on sales by the company to South Dakota customers exceeding the $100,000 statutory threshold. Undue burden is a separate topic requiring a separate discussion.

It is unclear, however, where that discussion of undue burden should take place. After looking at each of the four Complete Auto tests, the answer appears to be none of the above.

The Court, recognizing this glaring flaw in Complete Auto, suggests that “other aspects” of commerce clause doctrine can protect against any burden on interstate commerce.²⁰

The Court goes on to note that the amicus brief of the United States asserts that South Dakota’s tax collection requirements should be analyzed under the two-part test established in Pike v. Church sometimes used in nontax cases.²¹ Having gone out of its way to mention the pro-Pike analysis espoused by the federal government, the Court curiously drops the discussion, without endorsing (or rejecting) the brief’s analysis.

The Pike test first asks whether a state statute enacted in furtherance of a legitimate state interest operates evenhandedly regarding interstate commerce. If the statute passes this test, the Court will uphold the law unless the burden imposed on interstate commerce is clearly excessive in relation to the putative local benefits. The extent of the burden tolerated will depend in part on the nature of the local interest and partially on whether the state could promote that interest equally well while imposing less of a burden on interstate commerce.²²

The solicitor general argues that the Pike test is appropriate because sales tax collection statutes do not impose a tax on vendors — but rather the requirement that they collect consumers’ tax payments on behalf of the state. The burden — at least in the first instance²³ — is the compliance burden of collection.

This analysis makes sense. Once the state has established (due process) nexus with a vendor, the analysis would pose the correct questions: Is there discrimination? If not, does the state’s tax collection scheme impose an undue burden on interstate commerce because of its complexity or some other feature? This leads the Court to correctly examine the specific characteristics of the sales tax statute being challenged, unlike the Court in Bellas Hess.²⁴

The favorable acknowledgment of Pike came as a surprise to many. The Pike test appeared to be waning in influence, the target of criticism from those who denied the legitimacy of the dormant commerce clause as a whole. Pike, they argued, placed the Court in the role of balancing the virtues of a state statute against the federal interest in protecting interstate commerce, a clear legislative function. They also questioned judges’ capacity to effectively conduct the balancing required by Pike.²⁵

Despite its critics, Kennedy’s prominent mention of Pike — and his strong endorsement of undue burden as one of the two central animating principles of commerce clause jurisprudence — imply that the Court may have significant plans for Pike or some variation in ruling on sales tax collection statutes and perhaps beyond.

One concern with expanding the use of Pike into areas of tax compliance is a potential flood of challenges to state tax statutes on the basis that one or another provision of a state’s tax code is so complex that compliance imposes a burden on interstate commerce. I do not think this is likely.

Sales and use tax collection statutes are clearly the strongest candidates for review by the Court. Sales tax collection is done by vendors as agents of the state on a transaction-by-transaction basis at the point of sale, with an immediate determination required whether sales tax is due or not. The seller will have no other realistic opportunity to collect the tax from the consumer beyond this point. If the vendor undercollects, it is liable for the tax owed by the consumers, with interest and perhaps penalties. One mistake in an interpretation of the law compounded over a three-year audit cycle can result in a crushing liability.

The burden of filing an annual corporate tax return is qualitatively different. The rules for combined reporting or market sourcing of receipts may be complicated, but a return is required only once a year, the work can be done by professionals on a schedule they can control, and if the calculation is wrong, the tax owed is and always was the corporation’s tax — not someone else’s. The cost of filing incorrectly is limited to interest, with a penalty unlikely if the taxpayer acted in good faith. The Court is not likely to see burdens of this magnitude as raising constitutional concerns.

B. Undue Burden as Discrimination

The Court offers an intriguing one-liner in the context of its discussion of other aspects of commerce clause doctrine that might be used to protect interstate commerce from undue burdens: “Complex state tax systems could have the effect of discriminating against interstate commerce” as a “consequence of their complexity.”²⁶ This proposal appears to be generated by the Court itself, floated in the opinion as a trial balloon rather than announced as new doctrine.

The Court should not go down this road. The link between complexity and undue burden is obvious, and a commerce clause claim based on imposing undue burdens on interstate commerce already exists — it is the second half of the Pike test. If complexity can result in discrimination as well as undue burden, the two parts of the Pike test blur, raising questions regarding the evidentiary showings needed to prove each of the two. Is greater complexity required to prove discrimination than undue burden? It would be better to keep the two components separate, with claims of facial discrimination relying on the statutory language and claims of undue burden requiring an evidentiary showing.

C. Commerce Clause Nexus

When Quill was issued, constitutional scholars were surprised to learn that there were and always had been two different nexus standards, one under the due process clause and another under the commerce clause. With Quill now overruled, does its holding of dual nexus standards survive?

That question was not directly before the Court in Wayfair, and the opinion speaks to the issue only briefly, noting in passing that “Due Process and Commerce Clause standards may not be identical or coterminous, but there are significant parallels.”²⁷ Though less than a ringing endorsement, that statement could be read to say that dual nexus standards have survived. Then again, the phrase “may not be identical or coterminous” can be fairly restated as “may or may not be identical and coterminous,” which leaves the question unresolved. I read the remark as purposely inconclusive.

The Court had good reason to be vague and noncommittal in discussing dual nexus standards. The assumption in state tax cases before Quill was that due process nexus and commerce clause nexus were the same. Quill’s unexpected holding that two different nexus standards had always existed had been met with significant criticism. The decision made sense to many of those critics only as a means of paving the way for Congress to act by removing due process concerns as an issue.

Congress never did act, and Quill was problematic as ongoing precedent. Given that the Court typically refrains from ruling on issues not directly before it, it was convenient for the Wayfair Court to sidestep the issue of a dual nexus standard.

The Court also understood that nexus would likely fade as a prominent constitutional issue in state tax cases once its decision in Wayfair was translated into legislation by the states. Economic presence would be sufficient for commerce clause nexus, and the states could establish reasonable de minimis thresholds based on sales or transactions in the state — following in South Dakota’s footsteps. Litigation would likely focus on other issues, including undue burden.²⁸ Wayfair leaves the Court the opportunity to rule either way on the issue of dual nexus standards in the future or, more likely, to continue to dodge the question until it is caught up in a larger reconsideration of the Complete Auto test.

V. The Next Decision of the Court

A. Asserting Undue Burden

The most pressing issue post-Wayfair is how the Court will address claims of undue burden. While the physical presence rule was in place, it took on the role of determining undue burden, albeit in its own highly arbitrary way. Sellers with a physical presence in the state had nexus and were required to bear any burden; sellers with no physical presence had no nexus and no burden to bear. Wayfair makes clear that the issue of undue burdens on interstate commerce in state tax cases will no longer be determined within the narrow context of the nexus determination. The challenge for the Court is how to resolve the need to provide a meaningful avenue to contest state tax laws under an undue burden test given that the long-standing Complete Auto test fails to do so. The next decision that comes down from the Court will need to resolve this issue.

Based on the positive attention paid to the solicitor general’s amicus brief, the resolution is likely to be the emergence of the Pike test in challenges to sales and use tax collection statutes. The Court is unlikely to replace Complete Auto just yet.²⁹ Instead, the Court will have Pike work alongside it, used by the Court rather than Complete Auto in this instance because the statute is more akin to a state regulatory measure.

The alternative resolution of the undue burden issue would be to find the undue burden inherent in a state tax structure with dozens of counties each with its own tax and tax administration not just burdensome but actually discriminatory, a theory suggested by the Court itself in Wayfair.

B. Nexus Standard(s)

States have protected themselves from nexus challenges by following the Wayfair roadmap and adopting minimum sales volumes or number of transactions that a vendor must exceed before the responsibility to collect attaches. That means nexus will generally not be in controversy, which in turn means the Court will not be required to rule on the issue of dual nexus standards and will likely offer nothing new on the topic.³⁰

VI. The Future — The Limited Domain of the Dormant Commerce Clause

A. Overview

The dormant commerce clause holds a relatively modest place in the constitutional hierarchy (if it exists at all). It occupies a niche; its purpose is to prohibit state laws that discriminate against or impose an undue burden on interstate commerce. The due process clause, in contrast, is at the heart of the aspirational Constitution adopted in the wake of the Civil War.³¹ For constitutional concerns regarding issues of basic fairness, the due process clause is the established source of the protections provided in the Constitution.

The Court should accept and enforce this limited role for the commerce clause. Doing so provides the basis for a coherent, steadfast dormant commerce clause doctrine in sync with its underlying principles. The intent of the proposal is not to precisely divide the work between the two clauses, but to clearly circumscribe the domain of the commerce clause. The due process clause would not be similarly restrained. The boundary that would keep the commerce clause within its domain would not keep the due process clause out.

That is not, of course, how the Court has dealt with the two clauses historically. The Complete Auto test is the antithesis of the proposed doctrine. In Bellas Hess, which predated Complete Auto, the company argued that the Illinois sales tax collection statute violated the due process clause of the 14th Amendment and created an unconstitutional burden on interstate commerce. In its decision, the Court noted that these two claims were “closely related.” It went on to say that “the test for whether a particular state exaction is such as to invade the exclusive authority of Congress to regulate trade between the states, and the test for a state’s compliance with the requirements of due process in this area are similar.”³²

Complete Auto, decided 10 years after Bellas Hess in 1977, marked a major, welcomed shift in the Court’s interpretation of states’ rights to tax interstate commerce from one based on formalism to a more practical approach. For purposes of this discussion, however, the Complete Auto four-part test — which evolved over time from the Complete Auto decision — embodied and perpetuated the undisciplined thinking that obscured the boundary defining the constitutional authority of the dormant commerce clause.

The four tests of Complete Auto first appear in the Complete Auto decision as a list of challenges the company chose not to plead in its complaint.³³ With no reference to one clause or another, the four claims were a menu of potential constitutional challenges available under one or both the due process and commerce clauses. Of the four, only discrimination reflects an animating principle of the dormant commerce clause. The others are all rooted in the due process clause. Nonetheless, as the language of Complete Auto was transformed into the four-part test, the commerce clause took on the mantle as the source of all four of the constitutional requirements enumerated in the Complete Auto decision. This case of mistaken identity has now survived almost as long as the physical presence test did. The four-part Complete Auto test expanded the domain of the dormant commerce clause far beyond its intended scope and placed it in potential conflict with the due process clause.

Quill illustrates the point. The Quill Court ruled that the commerce clause nexus in the Complete Auto four-part test was not the same nexus as due process nexus. Constitutional scholars were surprised, but this reaction was perhaps unfounded. Prior Court decisions linking the two clauses used language such as “the claims are closely related” or the “requirements are similar.” Quill likewise concluded that constitutional nexus standards of the two clauses were also similar — but not the same. Though rarely viewed in this light, Quill sounded a warning regarding the unintended consequences that can result when the dormant commerce clause infringes on the domain of the due process clause.

As noted, the Complete Auto test is in direct conflict with the constitutional doctrine proposed here. Like the physical presence test, it has been flawed from its beginning. Its expansive view of the role of the dormant commerce clause in protecting principles of fundamental fairness is misguided. This has resulted in uncertainty, confusion, occasional conflict between the dormant commerce and due process clauses, and bad public policy.³⁴

Wayfair began the process of properly sorting out the constitutional roles by recognizing that two key principles — discrimination and undue burden — are the forces that drive commerce clause jurisprudence.³⁵ The logical complement to this clear-eyed vision of the dormant commerce clause doctrine is that the due process clause is the provider of the other constitutional protections that arise in state tax cases.

Complete Auto survived Wayfair, but the Wayfair opinion supports the four-part test only reluctantly — referring to it as the “now-accepted” test used by the Court to rule on the validity of state tax measures.³⁶ I read the “now-accepted” qualifier to mean “accepted for now,” and I read that acceptance as waning.

VII. Dismantling Complete Auto

The Complete Auto four-pronged test would not so much be eliminated under this proposal as it would be dismantled, determining which aspects of the test would remain within the domain of the dormant commerce clause. This exercise is for the most part straightforward.

A. Nexus (Prong #1)

Nexus, the first prong of Complete Auto, is a common topic in the due process world frequently litigated outside the tax area. As noted, the Court recently left open the question whether the commerce clause has its own nexus standard separate from the due process standard. If dormant commerce clause jurisprudence were revamped as outlined here, the answer would be self-evident. The responsibility for establishing nexus rules would belong exclusively to the due process clause.

B. Fair Apportionment (Prong #2)

Fair apportionment issues present the most significant challenge in delineating the appropriate boundaries of the dormant commerce clause. The internal consistency test, now firmly established as an important feature of commerce clause jurisprudence, provides a ready response to the challenge.

1. Discrimination

The second prong of Complete Auto requires fair apportionment. For purposes of establishing boundaries, fair apportionment would be divided into two distinct constitutional requirements. The first forbids apportionment laws that discriminate against interstate commerce. In this realm, the internal consistency test has gained a strong foothold as an objective test of whether interstate commerce is being taxed more heavily than commerce carried on in a single state. Apply the test: If every state had the same statute as the one under challenge, would that theoretical legal landscape result in higher taxation for taxpayers engaged in interstate commerce than in state commerce? If the answer is yes, the statute discriminates against interstate commerce.³⁷ Fair apportionment challenges based on the internal consistency test are thus discrimination claims within the domain of the dormant commerce clause and are appropriately reviewable under Pike or its equivalent.

2. Due Process Concerns — The Taxation of Extraterritorial Values

The second basis for asserting that an apportionment method is unconstitutional is that it results in the taxation of extraterritorial values. Stated differently, the claim is the state lacks nexus with the income-producing activity or property interest.

A state statute may tax extraterritorial value without discriminating against or imposing an undue burden on interstate commerce. Take, for example, the corporate tax issue regarding the distinction between apportionable business income and non-apportionable investment (nonbusiness) income. The constitutional question is whether a state has the right to tax a multistate corporation doing business in the state on its income from investments in a portfolio of stocks managed outside the state held solely for the purpose of long-term gain. The Court has held it is unconstitutional for the state to tax that income in those circumstances because the state does not have sufficient nexus with the income-producing activity, a matter within the domain of the due process clause.³⁸ Neither discrimination nor undue burden was an issue.

C. Discrimination (Prong #3)

Discrimination is the one prong that would remain assigned to the dormant commerce clause. It would be accompanied by undue burden as the two grounds for declaring statutes unconstitutional under the dormant commerce clause. The use of Pike or a Pike-like test to address discrimination and undue burden would be consistent with the principles of the new doctrine.

D. Fairly Related to the Services Provided by the State (Prong #4)

The fourth prong, which requires that a tax be “fairly related to the services provided by the state,” was rendered toothless by the Court just a few years after the Complete Auto test was established. In Commonwealth Edison,³⁹ the Court made clear it had no interest in undertaking the exercise of actually comparing the burden of a tax imposition by a state with the services received by the taxpayer from the state. In the same vein, the Court was not going to judge whether a specific rate of tax was so high it violated the fourth prong.

The fourth prong, the Court held, “required only that the measure of the tax be reasonably related to the extent of the taxpayer’s contact with the state.”⁴⁰ The fourth prong is rarely invoked, and in practice the Complete Auto test has been a three-pronged test for the last 40-plus years. Under the proposed doctrine, it would be recharacterized as a due process requirement and subsumed under the category of fair apportionment.

VIII. The New Dormant Commerce Clause Jurisprudence in a Nutshell

A. Out With the Old

• Bellas Hess, Quill, and the physical presence test are now part of the Court’s rich commerce clause history, joining the ranks of other “failed dormant commerce clause doctrines of the past.”⁴¹

• The Quill holding of dual nexus standards is rejected.

• The Complete Auto four-part test for judging the constitutionality of state tax statutes under the commerce clause is abandoned.

B. Going Forward

• The dormant commerce clause would exercise authority over two constitutional issues: discrimination and undue burden.

• The Pike test, including consideration of the availability of less burdensome alternatives, would be used by the Court to rule on state tax challenges asserted under the commerce clause based on discrimination or undue burden.

• Nexus determinations would be made under the due process clause.

• The existing commerce clause constitutional requirement of fair apportionment would be divided into two distinct claims:

  • a commerce clause claim of discrimination evidenced by applying the internal consistency test; and

  • a claim under the due process clause asserting a state is attempting to exercise its taxing power beyond its legal reach.

• A remote vendor encountering an unduly complex state and local sales tax structure could sustain a claim under the commerce clause that the defendant state’s sales and use tax imposed an undue burden on interstate commerce.

• The fourth prong of Complete Auto, to the extent it can sustain a constitutional claim, is grounded in due process concerns and would be adjudicated as a due process issue.

IX. An Open Question

One likely effect of the new doctrine is that more cases would be decided under the due process clause and fewer under the commerce clause, an outcome with potential consequences that should be the subject of further discussion. It is well established that Congress can in effect overturn decisions of the Court made under the commerce clause. The opposite is generally thought to be true regarding Court rulings made on due process grounds. I wonder, however, if Congress could approve legislation that overcomes a Court decision based on due process grounds if the statute includes an alternative means of providing taxpayers with fundamental fairness.

Take the following example: As mentioned earlier, under current Supreme Court case law, there are two kinds of income, business income and nonbusiness income. A state cannot tax nonbusiness income using the same formulary apportionment rules it uses to tax business income. Nonbusiness income would include gains from a portfolio of stocks managed outside the state and kept solely for investment. Under these facts, a state with nexus over the core unitary business cannot tax the investment income because the investment activity is not part of the unitary business, and the state has insufficient ties to the investment activity generating the investment income. This doctrine was upheld in the face of a direct challenge arguing that all the income earned by a multistate unitary business should be treated as business income.⁴²

Could Congress impose specific rules on state taxation of multistate unitary businesses — for example, by saying that portfolio income as described above must be treated as apportionable business income — and cite as its reasoning that treating all income as business income would be rational, avoid double taxation, and simplify tax administration for taxpayers and the states?

Presumably, if the constitutional flaw is not the risk of double taxation but the lack of nexus with the income, the congressional statute should be unable to “fix” the constitutional problem — the treatment of the income as business income under the federal statute would violate due process. I question whether striking down the law would be the right result, and I question whether the Court would in fact find such a statute unconstitutional.⁴³

X. Conclusion

Louisiana voters recently rejected a constitutional amendment centralizing sales tax collection in place of the current structure operated at the parish level. That vote has led to a suit asserting that the current structure imposes an undue burden on interstate commerce and violates the commerce and due process clauses.⁴⁴

With any luck, Halstead will find its way to the Supreme Court, giving the Court an early opportunity to build on Wayfair to set the course for a fundamentally sound dormant commerce clause doctrine. Given the opportunity, as signaled in Wayfair, the Court might choose to apply Pike rather than Complete Auto, find no discrimination, and proceed to engage in a Pike-like balancing test to determine whether the Louisiana tax structure imposed an undue burden on interstate commerce.⁴⁵ The balancing test would consider evidence of the availability of less burdensome means by which the state could achieve its legislative goal. The Court might explain why it was not applying Complete Auto, simply fail to mention Complete Auto, or best yet but least likely, be more direct and officially retire the four-part test before it turns 50.

Whatever the outcome of the next case, I am hopeful that Wayfair — already responsible for lifting the curse of Bellas Hess — will also prove to be the decision that subtly charts the course of dormant commerce clause doctrine back to fundamental principles.