No formula ever settled how states could apportion interstate business for taxation

Evidence

How much taxation of “commerce” across state lines was actually valid? How could the property of some giant firm, sprawled across the states like a Gulliver among Lilliputians, be sliced into rational pieces and taxed? There was no uniform plan. In 1899, railroads in some parts of the country paid 17 percent of net earnings; in others, only 8.4 percent. Fundamental questions of constitutional law, and of conflicts of law, were often at issue. But the real issue was politics. The solutions made for very intricate law. Even though legislatures, state courts, and federal courts, all dealt with the problem, and tried to solve it, no definitive answer emerged: no one definite limit to the taxes a state could lawfully impose on an interstate tiger with one paw in the taxing situs. Formulas, of more or less sophistication, determined what part of the tiger “belonged” (for tax purposes) to Rhode Island or Texas or Washington State. Massachusetts, for example, taxed railroads and telegraph companies on that portion of their capital that bore the same ratio to total capital as tracks and lines inside the state bore to total tracks and lines. The Supreme Court, in a test case (1888), held that this method was fair. But taxation of multistate commerce was one of the high court’s most persistent and bothersome issues. — Lawrence M. Friedman, A History of American Law, 3247

Categorization

• XREF: Directly relevant to constitutional-law threads in the polyad about federalism and the reach of state power over commerce. — connects to: Free interstate mobility turned American states into competing sellers of laws — Lawrence M. Friedman, A History of American Law, 2374