Bank of America has a rare chance to check runaway government taxation and slap down a nutty decision by the West Virginia Supreme Court. That court recently ruled that the state of West Virginia could hit MBNA with the state’s 9 percent corporate income tax merely because MBNA issued credit cards to state residents. (BofA, of course, purchased MBNA after this case started.)
This ruling, if allowed to stand, would take America back to days of the Articles of Confederation by allowing states to reach across borders to tax “foreign” companies. The long-accepted test of for owing state tax was some sort of nexus in that state — an office or facility of some kind. It is an imprecise standard, but still somewhat predictable. Just doing business in a jurisdiction did not automatically open you up to taxation on your entire operation by that jurisdiction.
Yet that is just what the West Virginia ruling does. And you can bet that other states are looking at it closely. Afterall, taxing people who cannot vote you out of office is a politician’s dream.
So how about it, Bank of America? Step up and argue this thing all the way to the Supreme Court. It could be both profitable and proper.
