Opinion ID: 2381232
Heading Depth: 1
Heading Rank: 3

Heading: Finding the Rational Relationship

Text: This issue will frequently present a difficult issue for disposition. Basically, if there is a nexus, this part of the due process test comes down to the fairness of the apportionment: whether the state apportionment formula is doing the job it was developed to do. Note, The Unitary Tax Method, 15 Pac. L.J. 109, 135 (1983). In each case the resulting tax liability must not be out of all appropriate proportion to the business transacted in the taxing state itself. Hans Rees', supra, 283 U.S. at 135, 51 S.Ct. at 389, 75 L.Ed. at 908 (attributing 80% of income to North Carolina when only 17% warranted). Such cases frequently raise concern for double taxation when differing states use differing formulas. See Moorman Mfg. Co. v. Bair, 437 U.S. 267, 98 S.Ct. 2340, 57 L.Ed. 2d 197 (1978) (taxpayer failing to meet burden of proving Iowa's single factor apportionment formula, based solely on sales, produced unreasonable results). It should be noted that the taxpayers do not contend that the tax here is discriminatory against interstate businesses or that it is an undue burden on interstate commerce. They did not challenge the allocation formulas as being unfair as applied to an interstate business like their own, and they do not suggest that the result of the New Jersey tax is multiple taxation elsewhere. Indeed, they do not at all attack the amount of taxes determined by the Director, choosing to rely solely upon their unitary business arguments. We must therefore analyze the New Jersey tax at issue and consider whether the taxpayer has presented clear and cogent evidence that the items of income and receipts were not part of its unitary business, and that application of the tax results in extraterritorial values being taxed.