Opinion ID: 2381232
Heading Depth: 1
Heading Rank: 2

Heading: Finding the Nexus or Minimal Connection

Text: In the classic context, let us say, of an oil company, refining its product in New Jersey and selling it in Pennsylvania, there is little difficulty in finding the nexus. But in the more complex business organizations of today that may engage in multiple lines of endeavor, as, for example, an oil company that also sells office products and motion pictures, finding the nexus is less clear. But one thing remains constant. If the business is unitary, the taxing authority is not constitutionally required to unravel the conglomerate structure. All that the Constitution requires is: (1) that a State not tax a purported unitary business unless at least some part of it is conducted in the State   ; (2) that there be some bond of ownership or control uniting the purported unitary business; [and] (3) that the out-of-State activities of the purported unitary business be related in some concrete way to the in-State activities   . (The functional meaning of this requirement is that there be some sharing or exchange of value not capable of precise identification or measurement  beyond the mere flow of funds arising out of a passive investment or a distinct business operation  which renders formula apportionment a reasonable method of taxation.) [ Container, supra, 463 U.S. at 165, 103 S.Ct. at 2940, 77 L.Ed. 2d at 553-54 (emphasis, numeration and parentheses added).] In the highly complex series of cases that preceded Container, dealing largely with taxation of income from worldwide operations of overseas subsidiaries of corporations doing some instate business, the Court disagreed on the application of the principles that determine whether a unitary business has been found. See, e.g., ASARCO, supra, 458 U.S. 307, 102 S.Ct. 3103, 73 L.Ed. 2d 787; F.W. Woolworth Co. v. Taxation and Revenue Dep't of New Mexico, 458 U.S. 354, 102 S.Ct. 3128, 73 L.Ed. 2d 819 (1982); Exxon Corp. v. Wisconsin Dep't of Revenue, 447 U.S. 207, 100 S.Ct. 2109, 65 L.Ed. 2d 66 (1980). Notwithstanding repeated invitations, Congress, with the one exception of the Interstate Income Act, Pub.L.No. 86-272, has declined to step in to resolve the problems of federalism under its Commerce Clause powers. [1] In Container, supra, the Court appeared resolved to take itself out of the business of being a tax commission and made it clear that the taxpayer has the distinct burden of showing by `clear and cogent evidence' that [the state tax] results in extraterritorial values being taxed ...., 463 U.S. at 164, 103 S.Ct. at 2939, 77 L.Ed. 2d at 552 (quoting Exxon Corp., supra, 447 U.S. at 221, 100 S.Ct. at 2119, 65 L.Ed. 2d at 80), and that the only restraints that it will impose are to determine whether the state court applied the correct standards to the case; and if it did, whether its judgment was `within the realm of a permissible judgment'. 463 U.S. at 176, 103 S.Ct. at 2946, 77 L.Ed. 2d at 560.