Professor Shanske Comments for Tax Analysts on Interstate Commerce Ruling

Professor Darien Shanske commented for Tax Analysts on a San Diego trial court ruling that upheld mandatory requirements for interstate businesses to file combined returns. Judge Joel Pressman of the Superior Court of California assumed the practice was discriminatory and examined whether the state could survive strict scrutiny in showing a legitimate state interest in ‘‘avoiding the ‘disruption of public services that are dependent on (tax) revenue,’’’ ultimately finding a legitimate interest in combined reporting.

‘‘It is not clear to me whether strict scrutiny was the correct rubric and apparently it was not clear to the judge either, which is why he decided the case assuming strict scrutiny was required,’’ Shankse said. ‘‘As for the strict scrutiny analysis, it is short and conclusory, but not implausible. Certainly, I would agree with the judge that permitting interstate firms to elect separate accounting is not a reasonable alternative. To be sure, there might be other alternatives that the judge did not address; no doubt we will hear about them on appeal.’’

Darien Shanske is a Professor of Law at UC Davis. His academic interests include taxation, particularly state and local taxation, local government law, public finance, and political theory, particularly jurisprudence.