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Misalignment of Substantive and Enforcement Tax Jurisdiction in a Mobile Economy: Causes and Strategies for Realignment

21 Pages Posted: 28 Jul 2010  

John A. Swain

University of Arizona - James E. Rogers College of Law

Date Written: July 27, 2010

Abstract

When a state asserts substantive jurisdiction over the subject matter of a tax, the state generally should also have enforcement jurisdiction over a person who can remit the tax. In the American subnational system, transaction costs, tax assignments, and legal barriers are the major causes of misalignment between substantive and enforcement jurisdiction. Strategies for achieving greater jurisdictional alignment include (1) reducing administrative and compliance cost through reform vehicles such as the Streamlined Sales Tax, (2) adopting simplified compliance regimes for foreign taxpayers, (3) repealing the physical-presence test and P.L. 86-272, and (4) “reverse engineering” substantive jurisdiction rules in recognition of existing limits on enforcement capabilities.

Keywords: state and local taxation, nexus, jurisdiction

JEL Classification: H71, H77

Suggested Citation

Swain, John A., Misalignment of Substantive and Enforcement Tax Jurisdiction in a Mobile Economy: Causes and Strategies for Realignment (July 27, 2010). National Tax Journal, Forthcoming ; Arizona Legal Studies Discussion Paper No. 10-23. Available at SSRN: https://ssrn.com/abstract=1649541

John Swain (Contact Author)

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States
(520) 621-7673 (Phone)
(520) 621-9140 (Fax)

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