Taxing Extraterritorially: Reflections from Supreme Court of United States

Goods and Service Tax Reports, (2018) 58 GSTR (Journal) 1-11

11 Pages Posted: 16 Jan 2019 Last revised: 22 Apr 2022

Date Written: December 17, 2018

Abstract

In the fiscal space there is a frequent clamour that a particular tax is invalid, citing its extraterritorial outreach. The judicial treatment of these contentions is however no so plain. Establishing whether a tax is within the legislative domain is a mixed question of law and facts; wherein the former inter alia requires appraisal of the constitutional stipulations whereas the latter hinges upon exploring the existence of a ‘nexus’ between the levy and the taxable territory.

In a recent decision in Wayfair the Supreme Court of the United States (‘USSC’) the revisited and recalled its earlier decisions which had earlier invalidated State taxes citing extraterritoriality. In Wayfair the USSC has inter alia taken note of the changes in technological and business practices to revisit the ‘nexus’ as the ground-rule for establishing the territorial linkage. This decision resonates very closely with the decisions in GVK Industries-(1) , GVK Industries-(2) and Jindal Stainless in which similar tests had been earlier been propounded by the Indian Supreme Court.

Besides delineating the modern judicial standard for appreciating the argument relating to extraterritoriality these decisions also implore the necessity to treat constitutional space – which forms the primary touchstone to adjudicate the extraterritoriality related challenges – in an ambulatory paradigm. The underlying objective of this article is exactly this i.e. sketch the changing judicial approach to establish the new standard in vogue for adjudicating claims regarding extraterritoriality of taxes.

Keywords: Extraterritorial Tax

JEL Classification: H25, K34

Suggested Citation

Jain, Tarun, Taxing Extraterritorially: Reflections from Supreme Court of United States (December 17, 2018). Goods and Service Tax Reports, (2018) 58 GSTR (Journal) 1-11, Available at SSRN: https://ssrn.com/abstract=3304430

Tarun Jain (Contact Author)

Supreme Court of India ( email )

New Delhi
India

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