Misalignment of substantive and enforcement tax jurisdiction in a mobile economy: Causes and strategies for realignment

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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 simplifi ed 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.

Original languageEnglish (US)
Pages (from-to)925-944
Number of pages20
JournalNational Tax Journal
Volume63
Issue number4
Publication statusPublished - Dec 2010

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Keywords

  • Jurisdiction
  • Nexus
  • State and local taxation

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

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