Vanderbilt Law Review


Robert M. White

First Page



It is now firmly established that states have the constitutional power to tax multistate businesses on net income reasonably attributable to activity within the taxing state. Within this legal frame-work, limited only by Public Law 86-272, the states have fashioned separate and diverse rules for the taxation of multistate corporations.'The recently formed Multistate Tax Compact provides an efficient alternative to both the present disarray of state statutes and possible federal regulation of interstate taxation. The principal purposes of the Compact are to establish uniform rules for determining state tax liabilities of multistate taxpayers, to eliminate ineffective tax administration and the attendant problems of taxpayer noncompliance, and to eliminate double taxation. Notwithstanding the success of the Multistate Tax Compact where it is in effect, its constitutionality currently is being challenged by multistate corporations subject to its administrative procedures. Although the Supreme Court of Washington recently upheld the constitutionality of the Compact's interstate joint audit provisions in Kinnear v. Hertz Corp.,' the constitutionality of the Compact in its entirety is still open to question. Not only may the Hertz decision be appealed, but litigation pending before a three-judge federal district court in United States Steel Corp. v. Multi-state Tax Commission' could result in a United States Supreme Court ruling on the constitutionality of the entire Compact since the litigants in United States Steel appear determined to appeal to the Supreme Court.' The cases are significant both because of their potential impact on state taxation of multistate businesses and because of the opportunity presented for judicial reexamination of the constitutionality of interstate compacts generally in light of their contemporary application. This Note will examine the constitutional law dealing with interstate compacts and then will discuss whether the Multistate Tax Compact satisfies these constitutional requirements.