Vanderbilt Law Review


Paul J. Hartman

First Page



There was a time when state and local taxes were perhaps only a minor factor in determining where a new business would locate and were probably not seriously considered in connection with most locational decisions. In recent years, however, because of the need for additional revenue on the part of state and local governments and the resulting increases in varieties and amounts of taxes, business must give more attention to the question of state and local taxes in deciding where to locate and operate. In this discussion of state taxation of corporate income from multi-state operations, we will include taxes involving net income of a corporation as well as taxes involving gross income. Also, this discussion will cover any general tax on corporations that reaches income as a basis for its computation, whether the tax is levied directly on that income or whether the income is used only as a measure for computing the amount of the tax, the legislatively designated subject of the tax being some activity or event having to do with the corporate operations. This latter type of tax would include such exactions as franchise and business taxes measured by corporate income. The limitations upon taxation of corporate income imposed by the commerce and due process clauses will be discussed somewhat fully.There will be a survey of the tax structure of each of the fifty states insofar as their taxes reach corporate net income from multistate business. Some attention will be given to the tax statutes reaching corporate gross income. Our endeavors also will include discussions of the various steps that have been taken to untangle the tangled skein of state taxation of corporate income from multistate operations,as well as other proposals that have been made for that purpose. That the problem of the commerce and due process clause curbs on state taxation of corporate income from multistate operations is of tremendous current importance can easily be shown by the fact that during the last term of the United States Supreme Court, the Court made decisions in connection with no less than six important cases dealing with that subject.