The Commonwealth Beats Back Rampaging Visigoths

And by "rampaging Visigoths", we mean Capital One Bank. The case is Capital One Bank v. Commissioner of Revenue, SJC No. 10105.

The essence of the bank's argument was that it shouldn't have to pay excise taxes in Massachusetts because it doesn't have a physical presence or any employees here. The bank argued that in the absence of a physical presence in Massachusetts, imposing the tax would violate the commerce clause of the U.S. Constitution. The commerce clause constrains state regulation of interstate commerce, while at the same time giving Congress insanely broad powers.*

Capital One did not persuade the Court. In a unanimous opinion, the SJC swept aside seemingly pertinent U.S. Supreme Court precedent because sales and use taxes differ from the excise taxes the Commonwealth sought to impose here. The main difference, says the Court, is that the bank only has to pay the excise tax once a year. But that argument, explored in footnote 17 is a bit tough to follow.

What's really going on here? The Court found it compelling that about 450,000 people had Capital One cards as of 1998, at which point Capital One derived about $60 million in income (fees, interest and penalties) from Massachusetts residents. That was enough for the Court to conclude that Capital One's activities had a "substantial nexus" with Massachusetts.

There appears to be about $2 million for the Commonwealth's coffers at stake here. Think we might be able to use that money for something?

*Though not as broad as, say, thirty years ago.