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Asking the U.S. Supreme Court to Settle Tax Nexus Issue: FIA Card Services, N.A., fka MBNA America Bank, N.A., v. Tax Commissioner of the State of West Virginia

2 min readBy: Kyle O. Sollie, Chris Atkins

Download Brief of Amicus Curiae in Support of Petitioners?FIA Card Services, N.A., fka MBNA America Bank, N.A., v. Tax Commissioner of the State of West Virginia

U.S. Supreme Court No. 06-1228
Amicus Curiae Brief In Support of Petition for Certiorari
Filed May 9, 2007
Certiorari Denied on June 18, 2007


The TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Foundation filed a brief asking the U.S. Supreme Court to hear the case FIA Cards Services, N.A. fka MBNA America Bank, N.A. v. Tax Commissioner of the State of West Virginia, to clarify that businesses do not have to pay direct taxA direct tax is levied on individuals and organizations and cannot be shifted to another payer. Often with a direct tax, such as the personal income tax, tax rates increase as the taxpayer’s ability to pay increases, resulting in what’s called a progressive tax. es in states where they have no personnel or property.

In the case, the state of West Virginia levied direct taxes, corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. and franchise tax on the financial services firm because it had distributed credit cards to West Virginia residents. The firm has no property or personnel in the state.

In general terms, the state’s position is known as “economic presence”—that is, a firm is liable for tax if it has customers in a state. The firm’s position, supported by the Tax Foundation brief, is that physical presence is a better standard: if a firm has personnel or property in a state, it is subject to direct taxation.

The Tax Foundation brief, written by Chris Atkins of the Tax Foundation and Kyle Sollie of Reed Smith LLP of Philadelphia, contends that an agreed-upon standard for nexus, the power to tax, is important to our nation’s economy, especially to our financial system and money system.

Atkins and Sollie chronicle the deleterious economic results if the Court does not hear this case, economic damage that the Court can prevent by re-affirming the physical presence standard.

“Confusion over nexus rules entices States to export their tax burden to nonresidents and may lead to retaliation by other States, creating a drag on the economy,” said Atkins.

Congressional committees and the Federal Reserve Board agree this is an important question that should be resolved, but Congress has determined to leave the question to the courts.

“The courts have stepped into the void,” points out Sollie, “and the Supreme Court in Quill correctly favored the physical presence standard.”

In Quill the Supreme Court reaffirmed that under the Commerce Clause, a State may require a business to collect sales and use tax only if the business has a physical presence in the State.

A decision by the Court is necessary to reduce uncertainty and administrative waste.

Blog Posts:

State Nexus Debate Enters New Phase, by Chris Atkins, July 12, 2007

Does the Commerce Clause Protect Commerce or State Coffers?, by Chris Atkins, December 12, 2006


Arthur Rosen on the Commerce Clause, Nexus, and State Taxation of Business, February 13, 2007 (transcript here)