Tax Commissioner v. MBNA America Bank, N.A.

to define the Legislature failed § 55- used W. Ya.Code “service” as term

7B-6, providing notice I do not believe agent a non-authorized person who is hopes that it will physician can, himself

eventually physician reach satisfy imagination,

by any stretch any definition intent under legislature’s

of service. majority’s deter-

Although I dissent to the proper- that the notice at issue was

mination Johnson, agree I

ly upon Dr. served majority’s regard- discussion

concur with authority respect to legislature’s pre-requisite to of claims as a

pre-suit notice leg- action. The

filing malpractice a medical common law empowered to define

islature is action, including prerequisites

causes of juris- a court’s before must be satisfied triggered. the action is

diction to entertain OF the STATE

TAX COMMISSIONER Virginia, Petitioner

of West

Below, Appellee N.A., BANK,

MBNA AMERICA Below,

Respondent

Appellant.

No. 33049. Appeals

Supreme Court Virginia. Sept.

Submitted Nov.

Decided

Dissenting Opinion of Justice 2, 2007.

Benjamin Jan. Opinion Chief Justice

Concurring 8, 2007. Jan.

Davis McGraw, Jr., General,

Darrell V. Attorney Allen, Barbara H. Managing Deputy Attor- ney General, Schultz, Katherine A. Senior Deputy Attorney General, “Fenway” A.M. Pollack, General, Attorney Assistant Charles- ton, WV, for the Tax Commissioner. Battle, Griffith, G. Thomas Craig Spil- A. man, Battle, Charleston, WV, & Thomas (Pro Vice), Arthur R. Rosen Hac Margaret (Pro Vice), C. Wilson Hac Donald M. Gris- (Pro Vice), McDermott, wold Hac &Will Emery, City, York New for MBNA America Bank.

MAYNARD, Justice: Appellant appeals MBNA America Bank 27, 2005, the June order of the Circuit Court County of Kanawha imposi- ruled that Virginia’s tion of West business franchise tax MBNA, net income tax on Corporation, Delaware years for tax does not violate the Commerce Clause. follow, For the reasons affirm the circuit court.

I.

FACTS Appellant MBNA America Bank is a for- eign corporation principal place has its of business and commercial domicile Wil- mington, During Delaware. years two question, 1998 and MBNA had no real tangible personal property employ- and no Virginia. ees located in principal West business of MBNA at the relevant times issuing this case servicing VISA and MasterCard credit cards. This business in- cluded the extension of unsecured credit to customers who use these credit cards. promoted MBNA its Virgi- business West nia via mail telephone solicitation. above, years As noted the two tax at issue are 1998 and 1999. In gross MBNA’s receipts Virginia attributable to West cus- $8,419,431.00, tomers amounted to and in gross receipts amounted to $10,163,788.00. year 1998, imposed For MBNA on MBNA’s within paid Virginia Business Franchise State. $32,010.00 Tax1 and a West Cor- appealed Tax Commissioner the ALJ’s $168,034.00.

poration Net Income tax2 decision to the Kanawha Circuit paid year For tax MBNA a Business County. court The circuit reversed deci- $42,339.00 Tax in Franchise the amount According sion of ALJ. to the circuit Corporation and a Net Income Tax in the court, physical presence necessary is not in $220,897.00. amount of substantia] pur- order show a nexus for Thereafter, MBNA filed refund claims poses corpora- foreign state taxation of seeking with the State Tax Commissioner Rather, tions. the circuit court found that return corpora- of the business franchise and MBNA’s business in the state is paid tion net income taxes for 1998 and sufficient meet the substantial nexus stan- that Tax the basis Commissioner Therefore, court, dard. concluded the circuit jurisdiction lacked over MBNA. Com- The MBNA had a substantial nexus with West denied missioner the refunds based on its years Virginia during the tax in so finding regularly engaged that MBNA that fran- State’s business Virginia under applica- business West corporate and net chise income taxes on ble statutes.3 MBNA did not violate the Clause. Commerce subsequently appeal MBNA an filed appeals MBNA now the circuit order. court’s the Tax Commissioner’s decision with (hereafter “OTA”). Appeals By Office of Tax II. 22, 2004, decision dated October Chief (hereafter “ALJ”) Judge Administrative Law STANDARD OF REVIEW of the OTA ruled in favor of and MBNA previously recognized The Court has that a authorized refunds to MBNA of its 1998 lower court’s determination of whether 1999 franchise and net income state tax Clause is violates Commerce taxes. The ALJ that reasoned Hartley reviewed de novo. See Marine Clause, Commerce not Mierke, Corp. v. W.Va. activity to a tax that unless has (1996) (explaining of lower review “substantial nexus” the taxing with state. judgment legislation court on whether state The ALJ further reasoned that a substantial with free flow of com interferes interstate requires a finding putative nexus novo). is de merce taxpayer physical tax- has state, ing exploitation and mere economic III.

the market is not sufficient. Because it agreed physical MBNA does have a DISCUSSION Virginia, in West the ALJ conclud- single appeal ed that the State’s raised in is business franchise issue4 this net Virginia’s income taxes could not be whether of West busi- state, twenty persons 1. The is this West Business Franchise Tax or more within 11-23-1, seq. §§ gross receipts found W.Va.Code et Accord- or if the sum the value (1985) § equals to W.Va.Code 11-23-1 the tax is or attributable to sources this state imposed corporations partnerships exceeds one hundred thousand dollars. privilege doing statutory required business this state. West Vir- nexus for the ginia corporation income tax found in net Virginia Corporation 24—7b(d)(1996), 2. The Net Tax Income pro- § W.Va.Code 11— 11-24-1, seq. §§ is found in W.Va.Code et part: vides organization financial commer- A that has its statutory 3. The for the business presumed cial domicile in state is another § tax is found W.Va.Code 11—23— franchise regularly engaging be in business in this state 5a(d) (1996), part: states during any year if obtains or solicits business persons twenty organization or more within this A financial has its commer- gross receipts presumed or if sum of the value of its cial domicile in another state is equals regularly engaging attributable to sources in this state in business in this any year during if it obtains or solicits exceeds one hundred thousand dollars. substantially years, particu- corporation net over the income evolved ness franchise larly limitations on as that Clause concerns MBNA, a business with powers.” Corp. North state taxation v. state, violates the Commerce presence in this Dakota, 298, 309, 504 U.S. United States Constitution.5 Clause of the (citation omit- § 8 of United States Consti- In Article ted). evolution, tracing has tution, expressly granted Congress explained: authority regulate for- Commerce with “[t]o cases, Nations, among early v. eign beginning several Our with Brown 6 L.Ed. 678 Maryland, Wheat. deter- States.”6 The (1827), swept broadly, Leloup and in Clause, in addition mined that the Mobile, 640, 648, S.Ct. Port grant power being positive to Con- 1384, 1380, (1888), 32 311 de L.Ed. prevent regu- to certain state gress, acts also right lay “no to a clared that State has com- lation that interferes with interstate any in form.” tax on interstate commerce Highway State merce. South Carolina See that rule distin We later narrowed and Bros., Inc., 177, Dept. v. 303 U.S. Barnwell guished on inter between direct burdens (1938). 510, 734 This 58 S.Ct. 82 L.Ed. commerce, prohibited, were which prohibition on state action known as burdens, generally indirect were and “negative” or “dormant” Commerce Clause. See, Poe, e.g., not. v. F. 546 69 Sanford (C.A.6 1895), nom., Ex sub. Adams aff'd interpretation Supreme Court’s Auditor, press v. Ohio 165 U.S. Co. State (1897). 194, 220, 305, “has 17 S.Ct. 41 L.Ed. of dormant 683 Court, appeal example Congress’s regulation petition this of inter- In its MBNA 6.An of assignment concerning 381(a) also of error raised § commerce is in 15 U.S.C. found apportionment fair er, of the taxes issue. Howev- that, (2000), provides subsequently assign- this MBNA abandoned State, thereof, political No or subdivision ment of error. power impose, any shall have taxable 5. We that our task herein a diffi are mindful 14, 1959, year ending September after a net cult United one. The States Court has tax on the derived within such income income acknowledged that its dormant Commerce by any person State from commerce interstate something 'quagmire' a Clause law "is of and the if the activities within such State business 'application principles specif of constitutional during by person or on behalf of such such ic leaves much room for state statutes controver both, either, year taxable are or of the follow- way sy precise and and little in the of confusion ing: guides States in the exercise of their indis to the (1) by person, the solicitation of orders such pensable Corp. power of taxation.'" v. representative, 298, 315-316, or in such State for of Dakota, his sales U.S. North 504 112 S.Ct. 1904, (1992) 1915, tangible personal property, which are (quoting orders 119 L.Ed.2d 91 approval rejection, States Cement Co. v. sent outside the State for or Northwestern Portland 457-458, Minnesota, 450, 357, and, U.S. 79 approved, by shipment 358 S.Ct. filled or if are 362, Likewise, (1959)). State; 3 L.Ed.2d 421 this delivery point from outside has characterized this area of law “nebu as by person, the solicitation of orders such best,” Hartley Corp., lous at Marine 196 W.Va. at representative, in the name his such 677, that, 607, 474 S.E.2d and commented prospective of or for benefit of a customer Herculean, task, impossible It would be a if not person, if such of such orders customer myriad to review and harmonize the decisions person to to fill such enable such customer Court of the United States on resulting such solicitation are or- orders exactly of interstate commerce and paragraph ders described constitutionally what incidents thereof case is Of relevance the instant the fact dissenting opinions taxed the States. The years in the last two bills have been introduced many cases of those make clear the task Congress to amend U.S.C. both houses 15 reconciling all the is more decisions difficult to, tangible § apply proper- 381 in addition to than was the task of Theseus as he threaded his services, ty, property, all forms Labyrinth way through the famous Cretan point other transactions fulfilled from outside search the Minotaur. 1956, (April Congress H.R. the State. See 109th Co., 525, Hardesty, Penney J.C. Inc. v. 164 W.Va. 28, 2, 4845, (March 2005); Congress 527, 604, H.R. 109th (1979) (quoting Roy 607 4, 2006). 2006); Messner, Congress (May Corp. S. 109th Stone 377 Pa. Transfer 243-44, (1954)). have not enacted into law. 103 A.2d 705 These bills been

167 Revenue, Bureau question, Western Live Stock v. this we must consider the 256-258, 303 Court’s U.S. decisions National Bellas 549- (1938), Revenue, subsequent L.Ed. 823 Department Inc. v. rejected formal, (1967), categorical decisions over ruled, Quill, analysis adopted “multiple-taxation part, supra,8 and doctrine” that not on whether a pronouncement Court’s most recent on state focused tax ivas “direct” or but jurisdiction. “indirect” rather tax subjected whether a tax com interstate an attempt Bellas Hess involved Illinois multiple merce to a risk How taxation. require a mail-order to collect ever, Hewit, in Freeman v. pay goods use purchased taxes on within 274, 278, L.Ed. (hereinafter the state. National Bellas Hess again we embraced distinction formal “National”) incoiporated in Delaware taxation, betiveen direct and inval indirect principal place and had its of business in idating gross Indiana’s re It employ- Missouri. had neither outlets nor ceipts particidar on a tax transaction be year, ees in Illinois. Twice National mailed “impos[eJ cause that would catalogues company’s customers ” direct interstate sales. Illinois. Orders for merchandise were S.Ct. at mailed to customers National’s Missouri subsequently The Court abandoned formal plant, and the mailed ordered items were to in looking prac- distinctions favor of at the the customers either mail or common taxing tical effects of state In statutes. challenged carrier. National the Illinois use Transit, Complete Auto Inc. v. Brady, 430 alia, against basis, tax levied the inter U.S. 97 S.Ct. 51 326 L.Ed.2d that it created an unconstitutional burden on (1977), the Court set the forth current test interstate commerce. The Court determining for whether state tax violated power impose held that Illinois had recog- the Commerce Clause. This Court use tax on based National. Court its Complete nized Syllabus Auto test in part placed decision on the undue burden Maryland Point 1 Ry. of Western Co. v. by compliance on interstate commerce awith Goodwin, 167 W.Va. 282 S.E.2d 240 regulations governing host of administrative that, where held the collection and of sales use taxes. not be sustained unless provided by isiana, 2114, 2133, note and apportioned; stantial nexus with the A state tax on interstate commerce will added). ^[451] is 68 fairly the State.” U.S. (3) L.Ed.2d related does [725], [754], 576 State; it: Maryland “(1) (1981).7 discriminate; the services (2) has a is v. Lou (Foot fairly sub use tax that Bellas Hess held that a merce Clause.9 ration with offices and warehouses in Quill taxpayer’s state California, In was its Bellas Hess against necessary physical Georgia. Quill challenge presence to sustain a sales was a Delaware holding It sold office under showing in the to the extent reaffirmed the Com- Illinois, taxing equip- corpo- of the solely

The current issue deals and supplies, ment and solicited business prong through catalogs, flyers, “substantial nexus” the Com advertisements plete Specifically, periodicals, Auto test. we are telephone asked national calls. decide whether the substantial stan their nexus Customers received ordered merchan- by showing Quill dard can be met through that dise from mail or common car- putative taxpayer Despite physical Quill has an actual rier. the fact had no answering Dakota, taxing employees in the state. North its Maryland 7. This test is referred v. Louisiana state was neces- Complete generally as the Auto test and known sary constitutionality sustain of a sales and Therefore, by that we refer name. to it as against challenge Due Pro- use tax Complete opinion. Auto test in this cess clause. Quill overruled Bellas Hess extent that showing taxpayer's supra. held Bellas Hess that a 9.See fn. duty a use in North Dakota was “ei- for the of a to collect tangible property nonexistent,” at insignificant tax. ther 1907, Quill 112 S.Ct. at its nexus re- The Commerce Clause and its North a use and sales collect Court, contrast, explained quirement, the state. and remit it to Dakota customers informed much concerns about “are not so imposition of tax on the challenged as fairness the individual defendant Dakota not have the ground that North did about the effects of state structural concerns tax from power compel it to collect a use economy-Ac- regulation the national customers. North Dakota cordingly, ruled that Com- [the we have issue, addressing regulations ... state bars merce] determining Court first indicated unduly burden interstate commerce.” of a use tax on an out-of-state propriety (Citations at 112 S.Ct. at 1913. U.S. requirements corporation “the nexus omitted). “Thus, nexus’ re- ‘the substantial are not Process Commerce Clauses Due quirement limiting is ... a means for at S.Ct. at U.S. identical.” 504 U.S. burdens on interstate conference.” 504 analysis under Due Process 1913.10 The 313, 112 S.Ct. at 1913. The Court, Clause, comparable to explained the ultimately of im- purposes concluded that determining a State can that used whether duty posing on an out-of-state business jurisdiction person. personal over exercise collecting use and sales taxes on in-state definite Specifically, there must “some customers, connection, Auto substantial

link, minimum between some prong best be property, or transaction would determined person, state and 306, 112 S.Ct. at “bright-line, physical-pres- it seeks to tax.” 504 U.S. of a Mary (quoting Miller Brothers Co. requirement.” ence land, 340, 344-345, S.Ct. at (1954)). 539, in order to 98 L.Ed. This is 744 major left open The the Su- duty of a collect a ensure that Quill preme opinion in is the one that Court’s corporation does use tax an out-of-state physical pres- Does the now confronts us: not offend traditional notions of fairness. requirement applicable determining ence Further, the found the minimum Court that constitutionality requiring the of out-of-state is “is connection satisfied where the business in- mail-order houses to collect use taxes on engaged widespread in continuous and solici ex- state sales under Commerce Clause a tation of business within ] [because] Statef types to other of state taxes? MBNA’s tend clearly warning fair [s]uch Quill position is that extends to the business activity may that [its] [it] franchise and net income taxes at foreign sovereign.” jurisdiction 504 posits, on the 308, 112 (internal issue. Tax Commissioner quota S.Ct. at 1911 hand, omitted). not a other that citations tion marks and requirement Due Clause of the substantial nexus stan- Court concluded that the Process require regards in a State dard in to the taxes at does issue.11 [Supreme N.C.App. Court] ... first deci 167 cert. "Quill was the 187 — denied, U.S. -, the Due and Commerce S.Ct. L.Ed.2d sion to bifurcate Process 126 163 Revenue, (2005); analyses juris Secretary, Dep’t used to determine a state's 62 State of Inc., Gap (La.App. (Apparel), diction U.S. Constitution." 886 La. v. So.2d 459 Edson, 2004); Com'n, R. Quill's Christina Juris Geoffrey, Constitutional Inc. v. S.C. 313 Tax Age prudence And Tax Nexus Standards In An 437 13 We find the S.C. S.E.2d Of Lawyer Tax 894 limited, Electronic 49 persuasiveness of these cases to be how (Summer 1996). ever, primary because in each case is issue jurisdiction impose a state whether state has foreign corporations phys income tax on with no The Tax cases to Commissioner cites several position whose intan Quill’s ical but support Court in of its that trademark, gibles, requirement applies only such in the state physical-presence as a are used reason, Lanco, part, including that a licensee. These courts taxes Inc. v. Di sales use Taxation, intangibles N.J.Super. provide A.2d located the state rector Tolson, (2005); Trademark, purposes. for income tax In the A & F Inc. sufficient nexus 95-1, 11 parties’ Evaluation MTC Bulletin After careful consideration of An 1996) authority, (July legal the relevant Tax Notes 179-80 arguments, State Quill, reasoning conclude essentially politi Court’s we (maintaining that Quill’s physical-presence requirement that responding about cal decision to concerns showing a Commerce Clause for substantial practical retroactivity consequences applies to use and sales taxes Hess); overruling T. Fa Bellas Michael corporation net franchise and not to business tale, Mythi Tax and the Jurisdiction There reasons for income taxes. are several “Physical Constitutional cal Presence” First, the Tax agree conclusion. our we Standard, (Fall, Lawyer 54 Tax reading that a Commissioner close 2000) (opining primary basis “[a] that its reaffirmation of the Bellas indicates [Quill holding conclu was the Court’s ] and sales physical-presence Hess test for use industry grown that the mail order had sion ground- under the Commerce Clause is ATess[,] large part reliance on Bellas example, on stare For primarily ed decisis. rule had Bellas Hess [and] [b]ecause “[wjhile Qtiill con- Court in notes that the ‘basic of a sizable become framework’ temporary jurisprudence Commerce Clause (footnotes omitted). Thus, industry”) be might not dictate the result were the same Quill’s physical-presence cause test for sales today, Bellas to arise for first time issue large part based in on the and use taxes was Complete Auto Hess is not inconsistent with industry’s on Bellas mail order reliance Quill, recent cases.” 504 U.S. at and our Quill’s compelled apply are not 311, 112 S.Ct. at Court further 1912. The present physical presence standard to the en- indicated that “the Bellas rule has Hess circumstances. substantia] and has be- gendered reliance part come of the basic framework of sizable Second, appears to industry. stability The interest in and order- Quill’s expressly scope limited to sales have development undergirds ly First, law Quill Court noted and use taxes. of stare therefore coun- the doctrine decisis not, “[although we have in our review Id., precedent.” sels adherence settled taxes, types of the same articulated (internal at 1916 requirement physical-presence that Bellas omitted). Finally, citation quotations and taxes, and use Hess established sales continuing concluded that value of “the imply repudiation does not silence bright-line rule in the doc- this area and Hess rule.” Bellas principles of indicate trine and stare decisis Also, at 1914. the Court com good that the Bellas Hess rule remains law.” “although in our cases subse mented Id. concerning other quent to Bellas Hess and adopted a similar types of taxes we have not reasoning supported by le This several requirement, physical-presence bright-line, Swain, A. gal commentators. See John reasoning compel in those cases does not our Jurispru Tax A Income Jurisdiction: reject the Bellas Hess now rule that that we Policy & Perspective, 45 Wm. dential tax (October in the area of sales and use 2003) established Mary (arguing L.Rev. Id., U.S. at 112 S.Ct. at 1916. es.” Quill Coui't on stare decisis that the relied that a reasonable construction defending We believe than rather Quill clearly ap merits); language implies that Pomp this Richard D. & test on taxes and not McIntyre, plies to sales use J. State Taxation Michael Quill: types of state Computers Sales other taxes.12 Mail-Order After case, jurisprudence the Court MBNA has merce Clause and that there is no claim that instant provide principles decisis intangibles a suffi- motivated of stare in West was purposes. appears flowing the Court cient nexus for tax from Bellas Hess. It intentionally open decisions left itself for future Therefore, legal interpreted these 12. One commentator involving types taxes. other that, opinion portions Quill to mean presence requirement not physical Quill’s deci- apply future tax collection non-use re- the Commerce Clause’s necessarily applicable quirement sions. was Edson, Lawyer types nor sound Com- 49 Tax other tax dictated Third, the Bellas Hess and courts recognized Court likewise part potential their based decisions on the fact that burden on interstate commerce compliance posed by regulations North Dakota’s sales administrative and use taxes. places the collection of sales and use taxes North Dakota’s use tax illustrates well Spe- undue burden on interstate commerce. might unduly a state tax how burden inter- cifically, explained: face, the Bellas Hess state commerce. On its North Dako- imposes duty every ta law a collection uphold power In order to of Illinois vendor who advertises the State three impose use tax burdens on National in Thus, single year. times in a absent the case, repudiate we would have to total- rule, publisher Bellas Hess who included ly sharp ... distinction between mail subscription card in three issues of its outlets, solicitors, order sellers retail magazine, a vendor whose radio advertise- State, property within and those who ments were heard in North Dakota on do no more than communicate with cus- occasions, three and a whose tomers in the State mail or common telephone sales force made three calls into part general carrier as of a interstate busi- State, all would be to the col- distinction, But

ness. this basic which un- duty. significant, lection What is more generally til recognized by now has been obligations might similar imposed by authorities, one, the state ais valid 6,000-plus taxing jurisdic- Nation’s and we decline to obliterate it. tions. ... impose For if can Illinois such bur- Quill, 504 U.S. at 313 fn. 112 S.Ct. at 1913 dens, every State, so, so can other citing fn. Bellas indeed, every can municipality, every (noting 87 S.Ct. at 1393 “many that the varia district, every political school tax, tions in exemptions, rates of in allowable throughout subdivision the Nation with and in administrative and record-keeping re power impose quirements sales and use entangle taxes. The could [a mail-order many tax, variations in rates of a virtual complicated house] allow- welter of obli (additional exemptions, omitted). able gations”) and in administrative and citation record-keeping requirements could entan- In contrast to the sales and use taxes gle National’s interstate a vir- described in Bellas Hess and the fran- complicated tual welter of obligations to chise and income taxes at issue in this case jurisdictions local legitimate with no claim appear do not to cause degree the same impose a fair share of the cost of the compliance above, burdens. As noted government. local collecting task of remitting taxes and them to government knowledge demands of a very purpose of the Commerce multitude of regulations, administrative in- economy ensure a national cluding rates, various deductions and tax as unjustifiable free from such entangle- local well as record-keeping requirements. Also, Constitution, ments. Under the this is a matter, general aas sales and use taxes must domain Congress where pow- alone has the be remitted government to the on a more regulation er of and control. frequent basis than income and franchise Bellas 87 S.Ct. at taxes. For example, in West ven- (internal quotation 1392-1393 marks and charged duty dors are collecting with the omitted). footnotes According Court, to the purchasers from the consumer sales and ser- decided, at the time Bellas Hess was local paying vice tax and the tax to the Tax Com- imposed by 2,300 sales taxes were over locali- monthly missioner on a basis. This entails ties, many of accompanied by tax, them a use making mailing out and to the Commissioner utilizing Id., several different rates. 386 a preceding return for the pre- month on a U.S. at 759 fn. 12 and fn. 87 S.Ct. at 1393 showing scribed form gross pro- the total fn. 12 and fn. 13.13 ceeds of the during vendor’s business that Edson, 6,100 Lawyer In 49 Tax at jurisdictions is noted were over state and local that written, that in imposed when that article using there sales taxes varied tax rates. franchise and and not to state business the vendor’s busi- taxes time, proceeds of gross based, corporation net income taxes. the amount the tax is upon which ness liable, and the vendor of the tax for which physical presence stan Rather than a necessary in the information any further dard, Court believes that this the tax which collection of computation and presence test is a better indicator economic require. See W.Va. the Commissioner nexus exists for Com substantial whether contrast, income In § 11-15-16 Code purposes. legal At least one merce Clause paid are the business franchise taxes suggested such a test and commentator has are entity collection duties itself so no parameters. See degree defined its to some Also, taxes income and franchise involved. Edson, Lawyer According at 943. 49 Tax annually. e.g., paid See W.Va. generally are commentator, a substantial economic this (1996) (persons subject to § Code 11-23-9 “incorporates process due presence standard file an tax make and franchise shall business while ‘purposeful direction’ towards state return) § 11-24-13 and W.Va.Code annual company examining degree to filing corpora- (requiring annual Further, exploited a local market.” Id. return).15 tax tion net income analysis substantial economic “[a] quality an examination of both the involves the Bellas Hess Finally, we believe pres quantity company’s economic test, articulated physical-presence Id., Finally, 49 Tax Law. at 944. ence.” today’s world. makes little sense test, to “[pjurposeful direction forty years, prac- business previous almost analyzed as it is for Due a state is wards dramatically. When Bel- changed have tices purposes,” and the Com Process Clause decided, generally neces- it was las Hess was analysis requires the additional merce Clause sary entity an have a frequency, quantity and of “the examination warehouse, office, sort, as a of some such systematic taxpayer’s of a economic nature generate in a in order to salesperson, state Id., Tax a state.” Law. contacts with in that state. This is substantial persuasive rationale find this We prolifera- development longer true. determining apply it in the constitution will exhibited, technology tion of communication ality of the taxes issue. com- example, growth electronic however, First, we must address several entity possible for an makes it merce now appli- objections proffered MBNA to presence in a significant economic have any physical than standard other cation any physical presence there. absent Initially, that a MBNA contends presence. reason, that the mechani- we believe For this applied requirement should greater nexus physical-presence stan- application of cal taxes such as those imposition of direct to the poor income taxes is franchise and dard to actually more taxes are because such at issue entity’s true nexus measuring of an stick sales and use This is because burdensome. a state. entity merely an to collect require money the United now hold that Accordingly, we and remit the tax from consumers suffering determination the admin- government, Court’s thus States Dakota, but complications and inconvenience Corp. v. North istrative contrast, 1904, 119 sharp L.Ed.2d of the tax. not the cost MBNA, taxes not in a is re and income entity’s says franchise but also must prong compliance burdens nexus” have quired to meet the “substantial entity’s pocket. For Transit, Brady, own paid 430 be Auto Inc. Geographic support, MBNA cites National L.Ed.2d 326 Equalization, Bd. Society (1977), only and use applies to state sales California course, regulations note, however, involved administrative taxpayers whose lia- 15. Of that 14. We likely any payment type of tax most specified bility a amount these taxes exceeds today to the com- due would not be a concern charged paying for the with estimated taxes are availability computers and the quarterly W.Va. mon use year basis. See on a taxable specialized software. § 11-23-13 Code greater market must be degree than un- (1977), Supreme the distin- der the Due Process standard so that guished a tax and a between use direct tax presence economic can be characterized as implied higher a that Commerce Clause significant sum, or although substantial. In required support standard would be the a substantial economic standard is imposition of a tax.16 direct by bright-line nature more elastic than the test, physical presence we are agree do not convinced that argument We with MBNA’s Notably, Supreme properly applied, greater on this issue. a Court’s nexus is Geographic comment Society National the substantial economic necessary was dicta in that it standard that under the minimum contrast, decision in that case. the Bellas analysis. contacts Quill placed Hess and Courts Finally, MBNA avers that case weight on the fact that there are substantial foreign jurisdiction from a factually that is compliance burdens attached to the collection point instant Penney case is J.C. Therefore, reject sales and use taxes. we (Tenn. Johnson, Nat’l Bank v. 19 S.W.3d 831 that imposition MBNA’s claim of direct Ct.App.1999), in which appel the Tennessee greater duty burden than the applied late court physical-presence test Hess/Quill collect taxes so that the Bellas attempted imposition Tennessee’s of in physical-presence apply test should also come taxes on an out-of-state credit card imposition of the direct taxes at issue.17 company. While acknowledge that J.G. argues adoption MBNA any also Penney factually point and addresses requirement substantial nexus short show- us, the same issue as the one before for the physical presence actual simply is in fact reasons reject set forth above we the reason applying a Due Process minimum contacts ing in Penney, J.G. apply and decline to it to expressly standard violation of the instant case.18 held that the Due Process and Commerce analyses separate. Clause are disagree. We We now turn our attention to the requires The Due Process merely Clause facts of the instant case to determine some minimum wheth connection between a state er MBNA had a substantial person, property and the nexus with or transaction contrast, during period question. seeks to tax. time substantial nex- The record us under the Commerce shows that MBNA requires continuously entity’s systematically an taxing engaged contacts with the state be in direct mail frequent systematic more telephone promotion nature. solicitation and Additionally, entity’s exploitation Further, Virginia. the West year1 1998, in tax Specifically, Geographic process questions Court National of nexus and state benefits.” that, Society reasoned present This statement does not inform our anal- First, ysis for several reasons. it is dicta. Sec- validity case for ond, prior Supreme it was Court's bifur- upon enjoying the out-of-state seller such ser- cation of Due Process and Commerce Clause duty vices of to collect a use tax is even analyses. Finally, prior it was to the distinction stronger. The out-of-state seller runs no risk made Court between the test to be of double taxation. The consumer’s identifica- determining used in constitutionality of sales tion as a resident of the State is self- types and use taxes versus other of state taxes. evident. The out-of-state seller becomes liable only by failing refusing for the tax to collect argues physical presence 18.MBNA also Thus, tire tax from that resident consumer. every been a base-line fact in tax nexus case imposed upon the sole burden the out-of-state decided Court since seller [imposing statutes tax] a use is the words, MBNA, says Auto. In other collecting administrative one of it. upheld finding any Court has never of nexus in (citations 430 U.S. at omitted). involving case putative state tax where the taxpayer true, however, presence. had equally no in-state It is Maryland Ry. MBNA notes that Commissioner, in Western as noted Goodwin, Co. v. 167 W.Va. n. applied Court decision has S.E.2d quoted 253 n. 3 this Court requirement Bellas Hess ato approval party's Thus, proposition brief for the persuaded by state income tax. we are not that "the form argument. of the tax is irrelevant due MBNA’s significant gross receipts MBNA leaving had attrib- with the click aof mouse without Virginia recognition utable to in home. staggering West customers This of the $8,419,431.00, year amount of in tax evolution in commerce from the Framers’ 1999, significant gross had receipts today MBNA up through suggests time to this Court Virginia to its West in attributable customers in applying the Commerce Clause we $10,163,788.00. light the amount of In rigid legal must eschew and mechanical for- facts, these this Court no trouble has con- mulas in favor of fresh of Com- systematic cluding that MBNA’s and continu- principles merce tempered Clause ous in produced this State healthy doses of fairness and common sense. significant gross receipts attributable to its This attempted is what we have to do herein. Virginia West customers which indicate a economic sufficient to IV. meet the prong substantial nexus of Com- Auto,19

plete CONCLUSION conclusion, for the reasons set forth Finally, concluding, prior simply above, 2005, 27, we affirm the June order of acknowledge great challenge wish to in County the Circuit Court of Kanawha applying the Commerce ever- Virginia’s imposition conclude that West evolving practices marketplace. coiporation its business franchise and net Madison, Benjamin Franklin, James and the years income taxes on MBNA tax for the Framers the Constitutional Conven- 1998 and did not violate the Commerce adopted tion who the Commerce Clause lived Clause. impossible in a people world that is living today imagine. concept The Framers’ Affirmed. goods transported commerce consisted of horse-drawn, wagons wooden-wheeled or Justice, BENJAMIN, dissenting: ships They with sails. lived in a world with (Filed 2007) January electricity, no no plumbing, indoor no auto- mobiles, roads, paved airplanes, opinion finding liability no no no In its for an telephones, televisions, computers, no presence, no out-of-state corporation with no cards, plastic music, tangible intangible,1 credit no recorded West Likewise, no iPods. have im- corpora would been income realized out-of-state possible imagine out-of-state, for the kept Framers our tion from accounts the ma they world. jority, boldly When opinion, goes fashioned where no Clause, they so, possibly doing could not have court gone foreseen has before. complex ways majority and varied that commerce relies not on bedrock constitutional today, especially is conducted principles legal precedent, via the internet or on established thinly electronic commerce. It would be non- but legal rather on commentaries suggest they sense to state-favoring agendas, foresee or veiled could person’s fathom a telephone reading time which a strained and inaccurate of the Unit call to her company his or local credit card ed States Court’s decision Dakota, routinely person would be Corp. answered North India, Bombay, or that a consumer could and a purchase virtually any product on computer important poli- unilateral of the restatement judgment.” 19. MBNA asserts that also the circuit court con- the lower court as the basis for its prong fused the first of the Auto Syllabus Wolfolk, test Barnett v. 149 W.Va. Point prong determining validity with the fourth 140 S.E.2d 466 issue. We not decide need analysis issue because this tirely Court’s based en- Majority Opinion, page 1. See 220 W.Va. prong on the "substantial nexus” Com- ("... page 640 S.E.2d MBNA had no plete may, Auto. It is axiomatic that '‘[t]his personal tangible property ... real or in West appeal, judgment affirm the lower court Virginia.”) page Note appears judgment when it that such is correct on case, (In record, pgs. any legal ground 231-32 the instant there is no regard- disclosed theory assigned ground, intangibles Virgi- less of the reason or claim that MBNA 174 requirements fundamentally the re- led to inclusion differ

cy [and] considerations which concerns.”). flect different constitutional Clause within United of the Commerce because, according Process and the Though both Due Clause Constitution States possi- require not an out-of-state majority opinion, the framers could Commerce Clause meaningful majority taxpayer to have the future. established bly have foreseen given proper taxing to a state to be the gives legal sanction state nexus with opinion state, in- impermissibly burdens the of taxation of that of scheme which taxpayer may I a tax an meet of nation. therefore on out-of-state terstate commerce stringent requirements of the less nexus dissent. Clause, yet Due fail meet Process support precedential There is no whatsoev requirements of the more substantial by majori reached er for conclusions (“[WJliile a State Commerce Clause. Id. at the state ty decision. None. None level. Clause, may, with the Due Process consistent Ignoring level. that our None at the federal authority particular taxpay- have the to tax a effect here should be the of the consideration er, imposition may of the tax nonetheless commerce, tax in on interstate rath Clause.”) the Commerce violate is, none type than the of tax it er opinion by majority Among precepts ex the most fundamental rhetoric raised per- why imposition of a tax an from a plains on state taxation Commerce state’s presence, spective be corporation is there must a “substantial out-of-state with activity sought tangible intangible, income nexus” between the interstate or realized taxing Complete an does ad to be taxed and the State. out-of-state account Transit, versely Brady, interstate 274 affect nation’s com Auto Inc. v. 430 U.S. 97 (1977). merce, 51 326 analysis an identified United S.Ct. L.Ed.2d Under Auto, Supreme Complete permitted tax is un- States Court as the cornerstone state (1) Id.; applied jurisprudence. der the Clause if is constitutional Allied- Commerce Director, Taxation, Signal, Inc. v. Div. an with a substantial nexus (3) (2) fairly S.Ct. 119 apportioned, 504 U.S. 112 L.Ed.2d 533 against state com- court does not discriminate interstate decision merce, specific fairly point with the credit card related to the services issues provided by 430 at raised herein determined that State of state. U.S. 97 taxing jurisdiction agree my in S.Ct. I col- Tennessee exceeded 1076.2 While leagues prong an that the attempting to collect taxes from out-of- “substantial nexus” generated by ripe on income test is for clarification the United Court, Penney Supreme disagree I out-of-state credit accounts. J.C. with them States Johnson, majority opinion National Bank v. 19 S.W.3d 831 to the extent that the finds denied, guidance existing jurispru- (Tenn.Ct.App.1999), cert. 531 U.S. insufficient (2000); 245 148 L.Ed.2d dence of the United States Court to attempt present conclude that the State’s engaged in companies State taxation of levy tax on income realized outside the comport commerce must with the interstate an out-of-state with no Due Clauses of the Process Commerce presence, tangible intangible, in the State Quill, United States Constitution. Clause. violates emphasized United States Auto, analyses years deciding separate re- Three after constitutional are evaluating validity Corp. noted in quired in tax- Mobil Oil Taxes, Quill, provision. U.S. es under each Commissioner of (“The two constitutional S.Ct. that for an provide "pass[ing] pur- have the nia "that a sufficient nexus effect unfair poses.”) the tax onto share of burden interstate com- merce.” effect, overlap practical multiple There is often the consideration the exercise taxa- requirements. apportionment these four The "substantial nex- tion several states under the against requirement protect apportionment is said to undue us” standard lead to issues ap- while likewise under the burdens on interstate commerce fair should considered guard against portionment is understood to "substantial nexus” standard. jurisdiction tax taxing jurisdiction of state to be under the “substantial” Clause, constitutional under the Due Process Clause, nexus test of ma- (1) jority there must be: nexus or some minimal opinion simply question reaches the of taxing connection between the state and the Virginia may whether the State of West seek derived; from which the income is to tax corporation. MBNA as an out-of-state relationship and a rational between the opinion The majority completely to con- fails taxing income attributed to the state and the sider the effect of the tax on com- interstate enterprise. interstate values of the 445 U.S. merce. On this question second of a whether 100 S.Ct. 1223. These constitution- impose state can generated on income requirements al subsequently con- were out-of-state, majority opinion likewise McNamara, firmed in D.H. Holmes Co. v. Here, fails. there is no but 486 U.S. 100 L.Ed.2d 21 credit give card rise accounts which to (1988), Quill. Allied-Signal, MBNA’s income are located outside West Virginia.

Reading Complete Auto and Oil Mobil to gether, aspects one discerns two to the con I being intrigued by must admit First, sideration of nexus. there must be an majority opinion’s description of nexus its adequate taxing connection between the state requirement “significant pres as a economic and the out-of-state upon which a vagueness ence test” as much for its as for i.e., assessed; being “presence” tax is con its embodiment as the antithesis of the Second, sideration. there be an must also “bright line” forth standards set the Unit adequate taxing connection between the ed States and Na gives the event which rise to the claimed tional Department Hess v. Bellas Revenue of tax; i.e., a “transaction” consideration. Illinois, 386 U.S. Prior to the United States overruled, L.Ed.2d part, by Allied-Signal Court’s decisions in Quill. reality by endorsing is that argued merging some for a Due Pro- permits nexus standard which West cess and Commerce Clause nexus consider- assess a tax on an out-of-state through application ations of a so-called “eco- property, with no tangible intangible, exploitation” nomic nexus consideration. this state on income realized from credit that, establishes for Commerce Clause accounts maintained and serviced another purposes, higher presence nexus is re- majority require merges the nexus quired than the minimal nexus connection ments of Due Process Clause and the required purposes. for Due Process effectively Commerce Clause and returns to words, corporation’s “presence” may suffice the merged jurisprudence nexus jurisdiction taxing for under the minimal Due Bellas albeit with the minimal due test, fail Process nexus but to meet the “sub- process requirements carrying day now higher presence required stantial” nexus test for nexus rather determination by the Commerce Clause. physical presence requirement of Bellas

We must may assume that United States Hess. MBNA meet While the minimal carefully its requirement chose words to be on from for it notice setting prong Complete forth the process may first due basis it be test, taxation, in question sought Auto that the tax is majority opinion fails show taxing to be applied account, “to an how the out-of-state credit activity” taxed, sought substantial nexus with the basis for income to be majority opinion requirements state. Even if meets the substantial nexus correct, not, Quill. Indeed, might which I believe was one Auto seriously question process MBNA’s interstate activities constitute a suf- for the due basis ficiently high showing permit Virginia’s attempted herein.3 actions Constitution, not, might argue 3. One well that the State West Clauses of the a State case, tax, Virginia, attempt- imposing the facts of this an income-based ‘tax value ” engage Corp. extraterritorial taxation. “Un- earned outside its borders.’ Container Bd., 159, 164, der both the Due and the Commerce Process America v. Franchise Tax ately foundation can attempts mightily to clear doctrinal majority opinion taxes, such as distinguish distinguishing forms of use tax between sales and observed hand, on the one and use taxes sales from in- collection on sales between states on the other franchise taxes income and sought from out- to be collected come hand, disregard attempting defend companies for income of-state realized nexus standards the substantial intangible simply be- out-of-state accounts argument appears Quill. majority’s The corporation it- the out-of-state availed cause the case concerns that instant to be because other self the United States mails and by an income realized out-of- the taxation of communication.5 forms of interstate corporation from accounts Delaware state Quill instead use and because involved reality is jurisprudential that the Unit by purchas- purchases made taxes from sales Supreme has held in ed States never delivery taxing the state with ers within any require tax that the state case nexus state, taxing the goods to occur also within be satis ments of the Commerce Clause can liberty disregard at to those this Court is a taxpayer’s fied in the absence of Quill disagrees. it This parts of taxing principles in the state. The disregard- In so argument persuasive. is not decisis are no less relevant to state stare requirements of ing the nexus substantial they general, than are to sales and taxes Quill use involved and sales because particularly, Congress use taxes when taxes, majority opin- interesting that the it is power prescribe appropri the ultimate to fully prece- embraces the ion nevertheless See, Quill, ate in this area. 504 U.S. at law dent of United States 112 S.Ct. 1904. decided Cases Auto, case also involved be United States Court both taxes. income Per- use and sales taxes —not made fore and after have it clear dichotomy may haps the here not be real imposi nexus substantial for the taxes, with the and income between sales any corpo tion of state tax on out-of-state being question is a tax not a relevant See, 778, Allied-Signal, ration. 504 U.S. tax, set forth in the but the limitations how (“The question 112 2251 S.Ct. constitutional can be avoided to United States Constitution Quill Corp. in a as case such is whether the opportunity provide the with a better State authority to tax State has taxing opportunities. expand to all.”); v. Mon Commonwealth Edison Co. reality is that United States Su- 2946, tana, 609, 626, 101 453 U.S. 69 generally not preme Court has treated the (1981) (“Under L.Ed.2d 884 this threshold authority question of to tax interstate state test, the interstate business must have a turning specific type on the commerce as any nexus before substantial State Rather, United Su- tax involved. States it.”) tax be levied on It would on preme Court has focused instead the ef- strange constitutional doctrine would taxing fect of the tax which seeks commerce, one nexus for regardless countenance standard sales levy on interstate Indeed, Clause, type of there is no immedi- and use taxes under the Commerce tax.4 2939, 545, Quill, 2933, noting 77 L.Ed.2d 552 In Court while 103 S.Ct. taxes, (quoting Inc. 307, types v. Idaho State Tax ASARCO "in our review of had not Comm'n, U.S. 102 S.Ct. 458 physical presence require- articulated the same (1982)). 794 L.Ed.2d ment that Bellas Hess established for sales and taxes,” imply stated that "silence not use does Tyler Washington Pipe Industries repudiation of Hess the Bellas rule.” Revenue, Department Hess, U.S. at S.Ct. 1904. Bellas (1986), question the tax Scripto, Supreme Court described its decision occupation was a tax. The Court Carson, Inc. v. whether activi framed as involving corpora- L.Ed.2d 660 a case performed taxing ties behalf of present physically taxing as tion Tyler Pipe significantly Tyler associated with Court's "furthest constitutional reach to date” of Pipe's ability to establish and maintain market taxing. subjecting a to state Bellas for its sales. This case involved the 87 S.Ct. 1389. tax, a direct income tax at issue similar herein. demonstrates, speculation for cor- and a more relaxed nexus standard endeavor the same porate majority net income and other state taxes.6 employs attempt which the differentiate “substantial nexus” standards appear place, In the first it does not types alternatively on tax could be based the differences the use tax collection between applied any ways number of not so attrac- obligation liability for income taxation precedential Absent tive states. justify are so as to different rules support differentiating for “substantial nex- certainly under the It is Commerce Clause. upon types, us” standards based give difficult to see distinctions that effect to Court should resist the State’s invitation for necessary as a element and, speculate in- us based on semantics “substantial nexus” some taxes and stead, Arguably, for others. the collection of use focus the effect which the state tax complexity here, no more attempt- sales involves has on interstate commerce— than the determination of individual state levy an income tax on an out-of-state liability corpora- income tax for a multistate property, tangible no or in- tion in involved interstate commerce where tangible, the income West where taxing separate each state has laws and generated from credit ac- seeks to maximize the definition of that counts held outside of this state. each such state contends be taxed which majority opinion also claims that a Arguably, from out-of-state.7 if taxes should variety changes changes of which it claims — differently be treated under the Commerce type not of a which could be foreseen were taxing Clause based on what claims by the of the framers United States Consti- impact to tax rather than on actual the tax’s support their extension state tax commerce, might interstate ar- tution — one well jurisdiction by into a realm all considered gue something process more than a due Initially, others to be unconstitutional. I minimal nexus standard be should considered foreboding anytime note some measure of a for non-transactional taxes such as income “foreseeability court invokes the argument, might taxes. Under such an one ” framers’ as a basis for a decision—fear tempted argue be that the minimum nexus not because the rale of is stare decisis process for due standard considerations court, by about be followed but rath- eases such as which involved transac- engage er because the court is about to tangible tions which had connection with a legislative some form of given apply not activism which were intended also only political, legal.8 taxing sought support income taxes which Here, apply generated by majority’s to income accounts the rationale for the “eco- exploitation” approach, nomic located outside state. As this nexus month, electronically Contrary apparent contempt by to the held the end of the customer "bright some for the line” rules which pays portion benefits of his credit account balance from avoid undue burdens on interstate commerce place employment using funds he has in his the demarcation of a discrete realm of commer- Pittsburgh, Pennsylvania bank account. his taxation, cial free from interstate scenario, fully inter- such a involves the might expecta- one consider not the settled today’s economy, how should the state nature of taxpayers, tions of but also the benefit to the Delaware bank maintain its records for determi- economy "bright national that such lines” have nation of income taxes? development economy been in the of that over Surely the last several decades. interstate com- the rather 8.I must admit to some disdain for worthy protection improper merce is as "foreseeability elite of the framers” nature income and other taxes as it is from sales and arguments. Frequently, such invocations serve See, Quill, 315, 112 use taxes. attempt purpose than an to excuse no times, legislating Other such from the bench. argument simply serve as the of last invocations 7. Assume for the moment that a Delaware bank searching legal basis to resort courts credit maintains a Weirton, account for a customer with a justify decision-making. Caution result-based Virginia mailing address. Assume by necessity any Steubenville, should be the watchword further that that customer travels to and, account, power expand court seeks to using credit makes a Ohio his "foreseeability of the framers" purchase the basis of the intent of sizeable electronic with the argument. purchase paying months. At for his over several ability argument the State’s accurately be termed a “tax it us which favors might more it, generated out- even if it is earned to reach out and tax income you if can follow approach, rings re- of-state an out-of-state another state” markably arguments tangible intangible, set forth in in West presence, like the sage Fortas’ dissent Bellas Hess. of Jus- Virginia, Justice I believe the reminder case, Kennedy the 1967 Justice Fortas (joined his Justices dissent tice Scalia Thomas) exploitation for an “economic nex- advocated a reminder of should serve as taxing jurisdiction. for state Bellas us” test duty considering this ease: our at 87 S.Ct. 1389. 386 U.S. recently courts that We have told lower argued that Bellas Hess Justice Fortas precedent Court has direct “[i]f taxing jurisdiction should case, yet appears in a to rest on sys- “large-scale, of its because Illinois rejected in some other line of deci reasons tematic, exploita- continuous solicitation sions, [they] should follow the case which Id., Illinois consumer market.” tion of the controls, directly leaving to this Court the Furthermore, 87 S.Ct. 1389. Justice overruling prerogative of its own deci enjoyed argued that Bellas Hess Fortas Rodriguez Quijas sions.” de v. Shear of, profits “... from the the benefits Inc., Express, son/American by, the State of as facilities nurtured Illinois 1917, 1921, fully or main- as if it were retail store Id., therein.” tained salesmen Quill, 504 U.S. at 112 S.Ct. 1904. We I find it that our S.Ct. 1389. remarkable precedent do that is would well follow position Court endorses this same now —a applicable attempt herein and to antici- position Supreme the United States pate overruling by Supreme an the United rejected. Court has prior jurisprudence. of its The taxes Court Yet our Court has not been the court are unconstitutional. arguments. to embrace Justice Fortas’ So DAVIS, Justice, concurring: Chief Court, Supreme too did the North Dakota 2007) (Filed 8, January Quill. Therein, its decision case, MBNA, In credit this out-of-state court, claiming supreme changes also in soci- company disputed card the economy, ety stated that “... the and within and net in- business franchise contemporary society context of and com- profits1 generated come taxes on its practice, mercial we conclude that the con- Virginia years in the residents cept encompasses more than mere of nexus majority opinion, applying 1999. The and state, physical presence the and that within analysis, legal sound determined that the the determination of nexus should take into application of did not the the taxes violate consideration all connections between the Commerce Clause because MBNA’s business state, and out-of-state seller the all benefits in this State constituted a provided by State, opportunities economic sufficient to meet the sub- economic rather than should stress realities fully I stantial nexus standard. concur By artificial benchmarks.” majority analysis. decision and its I have Through Heitkamp Corp., separately emphasize chosen to write (N.D.1991), rev’d, N.W.2d legal analysis correctness of the articulated (1992). and, further, majority in the decision to re- Quill demonstrates, given As spond misconceptions several contained again chance to consider the “economic ex- dissenting opinion. argument, ploitation” nexus the United Supreme again States Court once declined. dissenting opinion, my In the col- lone majority league chastises the and states that majority apparently While the herein be- lieves, precedential support is no whatsoev- “[t]here as did the North Dakota Quill, by majori- may disregard it er for the conclusions reached Court ty actual nexus decisions of the United States decision. None. None the state level. Dissenting favor of a theoretical nex- None at the federal level.” See 164-65, gross profits Majority opinion, pgs. In MBNA had See 640 S.E.2d $8,419,431.00 from its West customers. pgs. 227-28. $10,163,788.00. gross profits were ty p. pgs. opinion, p. 236-37. 640 S.E.2d its opinion, pgs. majority opinion interpretation point critical the dissent fails The correctly recognized legal differences be- acknowledge that there is no established way, tween the Due Process Clause and the Com- precedent, either from the United Clause, decision on merce as well as the even finer dis- Supreme Court. The sole States Court of tinctions between the of sales and topic this is from the Tennessee Penney Appeals. generally opposed J.C. Nat’l use taxes as to business franchise See (Tenn.Ct. Johnson, net income taxes. The ma- Bank v. 19 S.W.3d 831 jority long opinion appreciates articulates and App.1999). “[i]n It has been held distinctions; constitutionality considering deciding dissenting opinion these by imposed and collected does not. of a tax provision light of a of the Constitution Further, dissenting opinion, in its dis- States, by this Court is bound United regarding com- cussion applicable decisions of the ponent prong, strays of the substantial nexus Syl. part, pt. the United States[.]” from the issue before this Court discuss- Sons, Bailey v. B.D. & State ex rel Battle length the minimum contacts (1965). Inc., 150 W.Va. 146 S.E.2d 686 doing, under the Due In so Process Clause. However, requirement no such exists as dissenting opinion majority accuses the decisions rendered other state courts. merging Due Process and Commerce Moreover, expressly left to each state to However, requirements. Clause nexus borders, regulate within commerce inside majority opinion correctly ar- addresses this the confines of constitutional directives. MBNA, gument, was first raised recognizing requirements the contact majority opinion performed a critical majority opinion both doctrines. The con- analysis Supreme Court of the United States “although cludes that economic substantial Dakota, Quill Corp. decision in v. North by nature more elastic standard is 119 L.Ed.2d test, bright-line physical presence than the Quill opinion considered the properly applied, are convinced when Commerce Clause in connection with use and greater a under the nexus is sub- taxes, at types sale not the of taxes issue presence [than] stantial economic standard Therefore, Quill present case. while analysis.” under the minimum contacts See instructive, exactly on opinion is it is not Majority opinion, p. p. judice. majority The

point the case sub with succinctly opinion interpreted Moreover, deci- dissenting opinion’s lengthy sion, physical pres- that a which determined discussion of the Due Process Clause is un prior imposing in-state prone ence was needed to create confusion. warranted taxes on an out-of-state mail-order The of the Due Process Clause is sales presented In its for resolution in this house under the Commerce Clause. not the issue any analysis, correctly play case nor does it role the decision majority of this Court majority a of the Court. The physical presence is not re- reached observed brought question that was for our review quirement of the substantial nexus standard was, solely, application of West Vir regard to the taxes at issue herein. “whether today’s ginia’s franchise and net Taking into account the realism of business MBNA, world, astutely with no majority recognized that income taxes to Quill’s physical presence physical presence requirement in this violates States Con showing under the Com- Commerce Clause of the United a substantial nexus Majority opinion, p. applies only use and sales stitution.” merce Clause (footnote omitted). Significant p. S.E.2d taxes and not to business franchise and cor- taxes, ly, recognized by majority opinion, the are the as poration net income satisfying Due Process present requirements an taxes at issue in the case. Such differ Clause and the Commerce Clause are interpretation invited Majority opinion, p. S.E.2d adopted bright ent. See it noted that it has not (“In issue, line, addressing the Su requirement any p. physical presence Majori- preme that in determin- except See Court first indicated area sales and use taxes. Virginia’s economy, an propriety of a state use tax on out- lars from West would requirements exempt simply ‘the nexus it of-state from such taxes because Clauses of the Due Process and Commerce physical has no here. As the ma- ” (internal omit- out, world, not identical.’ citation jority shrewdly today’s are points ted)). Due Process Clause is concerned necessarily need a business does fairness, notions of while the presence anywhere. MBNA’s regula- Clause is aimed at effects economic meets the this State Thus, economy. national tion on the standard; thus, substantial nexus it should analysis under the Due Process dissenter’s exempt not be from state taxation. wholly inapplicable Clause is irrelevant majority correctly Because addressed to the issue before the Court this case. case, and resolved the issues in this I re- point final I wish to address is the spectfully opinion of concur with the rigid unexplained and adherence to dissent’s Court. requirement types for all dissenting opinion argues that of taxes. The impermissibly scheme issue commerce, yet it

burdens interstate fails to explain impermissible how such scheme 640 S.E.2d 243 3, Battle, Syl. pt. occurs. See 150 W.Va. Virginia of West ex R.E. STATE rel. (“A imposed pursuant tax 146 S.E.2d 686 HAMRICK, Jr., M.D., Petitioner legislature an act of the of this state will not be held to contravene the commerce clause of STUCKY, Judge The Honorable James C. I, of the Article Section 8 Constitution of the of the Circuit Court of Kanawha Coun United States unless the ty, Center, Charleston Area Medical against imposes or an un- discriminates Virginia Corporation, David Ram due burden on interstate commerce. Such a sey, Individually Capacity and in His as tax will not be held to violate the commerce CAMC, President and CEO of Glenn merely clause because it relates to or affects Crotty, M.D., Individually and in His indirect, interstate commerce some inci- Capacity Operating as Chief Officer of manner.”). inconsequential dental and When CAMC, Spangler, M.D., Elizabeth L. In in-state, company, whether out-of-state dividually Capacity and in Her as Vice directly earns millions of dollars2 aas result CAMC, President of Medical Affairs customers, dealings of its with West Fragale, Jr., Discovery and Franklin S. compelled pay should not be taxes?3 If Commissioner, Respondents. not, companies then all would deal with out-of-state customers so as to avoid all busi- No. 33195. ness franchise net income Appeals Court of perverse, especially taxes. Such a result is Virginia. considering today’s the climate of busi- Submitted Nov. 2006. technology ness world where new has made possible span globe. for businesses to Decided Nov. 2006. why I pop” see no reason “mom small Dissenting Opinion of Justice Virginia, store the State of West Starcher Dec. 2006. gross thousands, receipts in the should be Concurring Dissenting Opinion compelled pay business franchise and cor- Benjamin Justice Dec. poration net income taxes due to its State, large corpora- while a tion, MBNA, like who makes millions of dol- $168,034.00. supra. 2. See note ration net income tax of required pay MBNA was franchise $42,339.00 gross profits,

3. On its multimillion dollar see note tax of and a net income $220,897.00. supra, pay, Majority opinion, p. MBNA was tax of See $32,010.00 corpo- p. business franchise tax and a

Case Details

Case Name: Tax Commissioner v. MBNA America Bank, N.A.

Court Name: West Virginia Supreme Court

Date Published: Jan 8, 2007

Citation: 640 S.E.2d 226

Docket Number: 33049

Court Abbreviation: W. Va.