TEI urges Supreme Court to clarify nexus standard: argues in MBNA case for clear-cut physical presence standard.

• Position: Tax Executives Institute

Tax Executives Institute has filed a brief amicus curiae with the Supreme Court of the United States in a case involving whether states may constitutionally impose income and franchise taxes on companies that have no physical presence in their jurisdiction (FIA Card Services, N.A., fka MBNA America Bank, N.A. v. Tax Commissioner of the State of West Virginia). The Institute supported a request by credit card issuer MBNA that the high court review a West Virginia decision holding that taxation of an out-of-state corporation having no physical presence within the State does not violate the Commerce Clause of the U.S. Constitution.

In its May 8 brief, TEI argued that it is time that the physical presence standard--confirmed by the U.S. Supreme Court's 1992 decision in Quill Corp. v. North Dakota--be applied to all tax types, including income and franchise taxes. The Institute argued that the absence of a bright-line rule burdens interstate commerce, exacerbates existing compliance burdens, and potentially impairs the quality and accuracy of financial statements issued by corporations subject to the reporting and disclosure requirements of the Financial Accounting Standards Board.

TEI President David L. Bernard noted that "the proliferation of so-called standards governing when a State can tax out-of-state corporations has made it increasingly difficult and expensive for companies to understand and fulfill their compliance responsibilities."

Corporate taxpayers want to comply with the rules, but they need to know with certainty what those rules are, he added. Mr. Bernard expressed a hope that the Supreme Court will recognize the potential adverse effect this uncertainty will have on taxpayers, and accept the case for review.

MBNA is a nationally chartered bank with its principal place of business and commercial domicile in Wilmington, Delaware. The company is engaged in the business of issuing and servicing VISA and MasterCard credit cards for cardholder customers nationwide. During the years in dispute (1998 and 1999), MBNA had no employees, real property, tangible property, or representatives in West Virginia. Its nationwide credit card business was conducted solely by U.S. mail and telephone solicitations, including direct mail and telephone solicitations (originating outside of West Virginia) to residents of the...