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Single-Sales-Factor Formula Unconstitutional, Tax Atty Says

Law360 Tax Authority

Single-sales-factor apportionment is bad policy and unconstitutional because its U.S. Supreme Court underpinnings use an antiquated analysis that doesn't hold up to a modern commerce clause thinking, a tax attorney said Thursday.

Single-sales-factor formulas tests for apportionment discriminates against interstate commerce by failing at least one of three tests laid out in the 1984 Supreme Court case of Bacchus Imports Ltd. v. Dias, according to Don Griswold of Just SALT Policy LLC. He was speaking on a panel at a conference in Nashville, Tennessee, hosted by the Paul J. Hartman State and Local Tax Forum.


Craig Fields, a partner at Blank Rome LLP, said the Supreme Court on several occasions has held that it isn't going to declare a single-factor formula to be unconstitutional. Fields said he's had success showing a single-sales factor doesn't work for a particular business, and it's been shown a single-property factor can also be untenable. But he didn't think the justices would say the formula doesn't work for everyone, even if some consider it to be bad policy.

"Unless Don gets on the Supreme Court and convinces four others to join him, I don't think the Supreme Court is going to rule that a single-sales factor or a single-factor formula is unconstitutional," Fields said.

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“Single-Sales-Factor Formula Unconstitutional, Tax Atty Says,” by James Nani was published in Law360 Tax Authority on October 28, 2021.