WASHINGTON (June 13, 2017) –  The R Street Institute today welcomed the reintroduction of legislation that would codify in statute that states’ taxing authority ends at the border. H.R. 2887, sponsored by Rep. Jim Sensenbrenner, R-Wis., would clarify the requirement that businesses must be physically located in a state before they can be taxed or regulated by that state.

Businesses and individuals historically have been able choose the state tax and regulatory climate that suits their own unique needs and preferences, with the ability to hold their state elected officials accountable. Unfortunately, a worrisome legislative trends at the state level threaten to erode that foundation of federalism by empowering states to exercise power outside their borders.

Alarmingly, bills that dramatically expand authority to collect sales taxes, label restaurant menus and even determine the appropriate size of chicken cages are now imposing undue economic burdens on citizens by government officials who are in no way accountable to them. If unchecked, such efforts could substantially harm interstate commerce.

“The unconstitutional nature of these proposals is cause for alarm,” said R Street Senior Fellow Lori Sanders. “The Supreme Court ruled unequivocally in its 1992 decision, Quill v. North Dakota that a physical presence is required as sufficient nexus to impose sales taxes. In other words, it underscored the common-sense notion that a state is sovereign within its own borders but cannot exercise power outside them.”

R Street commends Rep. Sensenbrenner for defending the Constitution with this important legislation. States must maintain the right to govern their home businesses as they see fit, and to protect them from the reach of other state governments.

R Street is a nonprofit, nonpartisan public policy research organization whose mission is to promote free markets and limited, effective government. It has headquarters in Washington, D.C. and five regional offices across the country. Its website is www.rstreet.org.

Featured Publications