[*] Associate, Winthrop, Stimson, Putnam & Roberts, New York, N.Y. B.S., New York University, 1990; J.D., Hofstra University, 1993. The author thanks Lori Hoberman and Bill Burke for their insightful comments on earlier drafts of this Article. Return to text.

[1] See JILL H. ELLSWORTH & MATTHEW V. ELLSWORTH, MARKETING ON THE INTERNET: MULTIMEDIA STRATEGIES FOR THE WORLDWIDE WEB 4 (1995). Return to text.

[2] See Ilana DeBare, Cyber-Shopping Costly for Counties, SACRAMENTO BEE, Aug. 17, 1995, at F1. Return to text.

[3] Note that this Article does not discuss the taxation of Internet service providers (ISPs). Several states have proposed, or have already begun, the taxing of ISPs. A discussion of the taxation of ISPs on their gross receipts is beyond the scope of this Article. Return to text.

[4] See Robin Gareiss, The Online Corporation: Choosing the Right Internet Service Provider, DATA COMMUNICATIONS, Nov. 21, 1995, available in LEXIS, Cmpcom Library, Data File. Return to text.

[5] See World Wide Web User Statistics (visited Feb. 7, 1997) <http://www.why-not.com/company/stats.htm>; Rosalind Resnick, A Network to End All Networks, PC NOVICE GUIDE TO GOING ONLINE, Dec. 1995, at 114, 114. Return to text.

[6] Alan Phelps, How the Internet Works, PC NOVICE GUIDE TO THE INTERNET, June 1996, at 12, 12. Return to text.

[7] See Faces of the Net, PC NOVICE GUIDE TO THE INTERNET, June 1996, at 10, 10. Return to text.

[8] See Rosalind Resnick, Tooling Through the Internet, PC NOVICE GUIDE TO GOING ONLINE, Dec. 1995, at 116, 116. Return to text.

[9] See id. at 121. Return to text.

[10] See id. Return to text.

[11] See, e.g., Pete Loshin, Internet Commerce: The Gold Rush of the New Millennium, PC NOVICE GUIDE TO THE INTERNET, June 1996, at 86. Return to text.

[12] See Reid Goldsborough, Reaching the Masses, PC NOVICE GUIDE TO THE INTERNET, June 1996, at 92, 92. Return to text.

[13] See Resnick, supra note 8, at 121. Return to text.

[14] See Loshin, supra note 11, at 87-88. Return to text.

[15] See id. at 86. Return to text.

[16] See Richard Egan, Step into the Internet Through On-Line Services, PC NOVICE GUIDE TO THE INTERNET, June 1996, at 32, 32. Return to text.

[17] Another important aspect of commercial on-line services is that in addition to the information services they provide, they can provide access to the Internet. See id. at 32. Return to text.

[18] See Tracy LeBlanc, Shop 'Til You Drop, PC NOVICE GUIDE TO GOING ONLINE, Dec. 1995, at 145, 145. Return to text.

[19] See id. Return to text.

[20] See Egan, supra note 16, at 32-33. Return to text.

[21] A user may obtain a direct connection or access to the Internet by paying an ISP. Alternatively, the user can subscribe to a commercial on-line service to access the Internet. In contrast to ISPs, Internet access is not the only service, or even the main service, that commercial on-line services provide. Rather, commercial on-line services provide organized databases of other information, such as sports, news magazines, weather, and home shopping. See id. at 32. Return to text.

[22] See id. Return to text.

[23] Mitch Betts & Ellis Booker, Internet Renews Tax Battles; Murky On-Line Tax Jurisdictions Cause Trouble, COMPUTERWORLD, June 19, 1995 (quoting technology consultant Samuel E. Blecker), available in LEXIS, Market Library, Promt File. Return to text.

[24] See Loshin, supra note 11, at 86. Return to text.

[25] See id. Return to text.

[26] See id. Return to text.

[27] See Goldsborough, supra note 12, at 92. Return to text.

[28] See Loshin, supra note 11. Return to text.

[29] See World Wide Web User Statistics, supra note 5. Return to text.

[30] See Loshin, supra note 11, at 87-88. Return to text.

[31] See id. Return to text.

[32] See Goldsborough, supra note 12, at 92. Return to text.

[33] Nathan Newman, Proposition 13 Meets the Internet: How State and Local Government Finances Are Becoming Roadkill on the Information Superhighway, 95 STATE TAX NOTES 186-49, Sept. 26, 1995, available in LEXIS, Sttax Library, Stn File. Return to text.

[34] See Elizabeth Weise, What a Tangled Web We Weave, Associated Press, Dec. 29, 1995, available in LEXIS, News Library, AP File. Even more astounding, by other estimates, the volume of sales generated by the Web in 1995 was $436 million, and is predicted to rise to $46 billion in 1998. See World Wide Web User Statistics, supra note 5. Return to text.

[35] See DeBare, supra note 2. Return to text.

[36] See id. Return to text.

[37] See Newman, supra note 33. Return to text.

[38] Id. Return to text.

[39] See id. Return to text.

[40] Id. Return to text.

[41] See id. Return to text.

[42] Id. Return to text.

[43] See Catherine Yang, New Tolls on the Info Highway?, BUS. WK., Feb. 12, 1996 at 96, 96 (quoting Multistate Tax Commission General Counsel Paull Mines). Return to text.

[44] Id. at 97. Return to text.

[45] See KPMG Peat Marwick, Electronic Commerce: Taxation Without Clarification (visited Feb. 7, 1997) <http://usserve.us.kpmg.com/salt/archive/july96/story1.html>. Return to text.

[46] See id. Return to text.

[47] See id. Return to text.

[48] See id. Return to text.

[49] See id. Return to text.

[50] See Stacey Singer, Tax Collectors View Sales on Internet with Distress, CHI. TRIB., May 15, 1996, at 1. Return to text.

[51] For example, the California Legislature, worried that business transactions on the Web escape taxation by states as well as local jurisdictions, has created the California Internet Review Commission to look into applying sales taxes to the Internet. See David Hipschman, Get Ready, They're Trying to Tax Commerce on the Internet, THE LEDGER, Mar. 17, 1996, at D11. Similarly, The Illinois Department of Revenue has established a new study group to tackle the problems. See Singer, supra note 50. Return to text.

[52] See Yang, supra note 43. Return to text.

[53] See, e.g., Arthur R. Rosen & Walter Nagel, Sales and Use Taxes: General Principles, Tax Mgmt. Multistate Tax Portfolios (BNA) No. 1300, Dec. 22, 1995, at 2. Return to text.

[54] See id. Return to text.

[55] See COMMITTEE ON MULTISTATE TAX ISSUES, NEW YORK STATE BAR ASS'N, REQUEST ON GUIDANCE ON THE APPLICATION OF NEW YORK'S SALES AND USE TAXES TO OUT-OF- STATE VENDORS 6 [hereinafter NYSBA], reproduced in 96 STATE TAX NOTES 47-47, Mar. 8, 1996, available in LEXIS, Sttax Library, Stn File. The use tax is generally equal to the rate of sales tax in the purchaser's state of residence minus the sales tax, if any, paid at the time of sale. See id. Return to text.

[56] See infra Part III.B for discussion of the "physical presence" requirement. Return to text.

[57] See NYSBA, supra note 55, 7. Return to text.

[58] See id. Return to text.

[59] See discussion infra Part III.B. Return to text.

[60] See discussion infra Part III.B.1. Return to text.

[61] "The Congress shall have Power to . . . regulate Commerce with foreign Nations, and among the several States . . . ." U.S. CONST. art. I, 8, cl. 3. Return to text.

[62] "No State shall . . . deprive any person of life, liberty, or property, without due process of law . . . ." U.S. CONST. amend. XIV, 1. Return to text.

[63] See Quill Corp. v. North Dakota, 504 U.S. 298, 307-08 (1992); National Bellas Hess, Inc. v. Illinois Dep't of Revenue, 386 U.S. 753, 756-60 (1967). Return to text.

[64] 386 U.S. 753 (1967). Return to text.

[65] 504 U.S. 298 (1992). Return to text.

[66] See 386 U.S. at 753; 504 U.S. at 298. Return to text.

[67] See 386 U.S. at 753-54. Return to text.

[68] See id. at 754. Return to text.

[69] See id. Return to text.

[70] See id. at 755. Return to text.

[71] See id. Return to text.

[72] Id. (quoting ILL. REV. STAT. ch. 120, 439.2 (1965)). Return to text.

[73] Id. at 756-60. Return to text.

[74] Id. at 756 (quoting Freeman v. Hewit, 329 U.S. 249, 253 (1946)). Return to text.

[75] See id. Return to text.

[76] Id. at 756 (quoting Wisconsin v. J.C. Penney Co., 311 U.S. 435, 444 (1940)). Return to text.

[77] Id. (quoting Miller Bros. Co. v. Maryland, 347 U.S. 340, 344-45 (1954)). Return to text.

[78] Id. at 758. Return to text.

[79] See id. Return to text.

[80] The Court also made note of the heavy record-keeping or administrative burden that would be imposed on vendors if they were forced to collect the sales or use tax. The Court stated:

[I]f the power of Illinois to impose use tax burdens upon National were upheld, the resulting impediments upon the free conduct of its interstate business would be neither imaginary nor remote. For if Illinois can impose such burdens, so can every other State, and so, indeed, can every municipality, every school district, and every other political subdivision throughout the Nation with power to impose sales and use taxes. The many variations in rates of tax, in allowable exemptions, and in administrative and record-keeping requirements could entangle National's interstate business in a virtual welter of complicated obligations to local jurisdictions with no legitimate claim to impose "a fair share of the cost of the local government."
Id. at 759-60 (footnotes omitted). Return to text.

[81] 504 U.S. 298 (1992). Return to text.

[82] Id. at 302. Return to text.

[83] See id. Return to text.

[84] See id. Return to text.

[85] See id. (quoting N.D. CENT. CODE 57-40.2-07 (Supp. 1991)). Return to text.

[86] Id. at 302-03 (quoting N.D. CENT. CODE 57-40.2-01(6) (Supp. 1991)). Return to text.

[87] See id. at 303. Return to text.

[88] See id. Return to text.

[89] See id. at 318. Return to text.

[90] See id. at 305. Return to text.

[91] See id. at 307. Return to text.

[92] Id. at 308 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476 (1985)). Return to text.

[93] Id. at 307. Return to text.

[94] See id. at 308. Return to text.

[95] See id. at 309. Return to text.

[96] See id. at 312. Return to text.

[97] See id. Return to text.

[98] See id. at 314-18. The Court said:

North Dakota's use tax illustrates well how a state tax might unduly burden interstate commerce. On its face, North Dakota law imposes a collection duty on every vendor who advertises in the State three times in a single year. Thus, absent the Bellas Hess rule, a publisher who included a subscription card in three issues of its magazine, a vendor whose radio advertisements were heard in North Dakota on three occasions, and a corporation whose telephone sales force made three calls into the State, all would be subject to the collection duty. What is more significant, similar obligations might be imposed by the Nation's 6,000 plus taxing jurisdictions. [Further,] "the many variations in rates of tax, in allowable exemptions, and in administrative and record-keeping requirements could entangle [a mail-order house] in a virtual welter of complicated obligations" . . . .
Id. at 313 n.6 (second alteration in original) (quoting Bellas Hess, 383 U.S. at 759-60). Return to text.

[99] See id. at 313. Return to text.

[100] See Maryann B. Gall & Laura A. Kulwicki, Limitations on States' Jurisdiction to Impose Sales and Use Taxes, Tax Mgmt. Multistate Tax Portfolios (BNA) No. 1420, Jan. 26, 1996, at 15-16. Return to text.

[101] Id. Return to text.

[102] See U.S. CONST. art. I, 8, cl. 3. Return to text.

[103] See Quill, 504 U.S. at 318. Return to text.

[104] Compare U.S. CONST. art I., 8, cl. 3 ("Congress shall have power To . . . regulate Commerce . . . among the several States, . . . .") with id. amend. XIV, 1 ("No state shall . . . deprive any person of life, liberty, or property, without due process of law . . . ."). Unlike the Commerce Clause, the Due Process Clause does not grant Congress any affirmative power. Thus, the Supreme Court, rather than Congress, has the final say as to whether it has been violated. Congress does not have the power to authorize a violation of the Due Process Clause. See Quill, 504 U.S. at 305. Return to text.

[105] See 504 U.S. at 318. Return to text.

[106] Id. (citations omitted). Return to text.

[107] See infra notes 109, 111. Return to text.

[108] See, e.g., Betts & Booker, supra note 23. Return to text.

[109] Introduced during the late 1980s, prior to the Quill decision, the following legislative proposals would have authorized states to tax outside vendors:

The Main Street Fair Competition Act of 1988, S. 2368, 100th Cong., would have authorized states to collect taxes with respect to sales of tangible personal property by nonresident persons who solicit such sales. Senate Bill 2368 set forth a three-prong jurisdictional standard that must have been satisfied before a state could require an out-of-state seller to collect and remit tax on mail-order sales: (1) the destination of the sale must have been within the taxing state; (2) the out-of-state retailer must have been engaged in regular or systematic solicitation of sales within the taxing state; and (3) the out-of-state retailer's annual sales must have exceeded $15 million in the United States, or $750,000 in the taxing state alone. See id. 3.

The Interstate Sales Tax Collection Act of 1987, H.R. 1242, 99th Cong., would have authorized states to require a retailer engaged in business in-state to collect state and local sales and use taxes on the sale or use of tangible personal property shipped or delivered into the state. The bill defined a "retailer engaged in business in that state" to include: "Any retailer soliciting orders for tangible personal property by mail if the solicitations are substantial and recurring and if the retailer benefits from any banking, financing, debt collection, telecommunications, or marketing activities occurring in that State or benefits from the location in that State of authorized installation, servicing . . . facilities." Id. The proposal exempted retailers whose annual nationwide gross sales of tangible personal property did not exceed $5 million. See id.

For similar legislation, see the Equity in Interstate Competition Act, H.R. 2230, 101st Cong. (1989); S. 480, 101st Cong. (1989); H.R. 3521, 100th Cong. (1987); H.R. 3549, 99th Cong. (1985); S. 983, 96th Cong. (1979). Return to text.

[110] See Bellas Hess, 386 U.S. at 756-60. Return to text.

[111] In February of 1994, Senator Dale Bumpers of Arkansas (a long-time proponent of federal legislation in this context) introduced the Tax Fairness for Main Street Business Act of 1994, S. 1825, 103d Cong., the first post-Quill bill dealing with taxation of interstate mail-order sellers. See id. The bill authorized states to require out-of-state sellers to collect and remit a state sales tax if the destination of the tangible personal property was in the state, and if the seller's gross receipts from sales of such tangible personal property exceeded $3 million in the United States, or exceeded $100,000 in the state. See id. 3. On April 13, 1994, the Senate Small Business Committee heard testimony from business representatives who had a stake in the fate of Senate Bill 1825. See Amy Hamilton, House Small Business Panel Hears Testimony on Interstate Sales Tax Collection, TAX NOTES TODAY, Sept. 28, 1994, available in LEXIS, Fedtax Library, Tnt File:

The House Small Business Subcommittee on Procurement, Taxation and Tourism heard testimony on September 27[, 1994,] on the impact and fairness of giving states the power to collect from mail-order catalog firms the sales taxes incurred from purchases made by out-of-state mail-order customers. Panel chairman James H. Bilbray deemed the hearing a precursor to the 104th Congress, when the House was likely to introduce a bill comparable to S. 1825.
At the time the bill was being considered by the subcommittees, it was said that the current administration was more favorably inclined to this legislation than past administrations because President Clinton had supported such legislation when he was governor of Arkansas. See id. The bill, however, was never enacted.

On March 13, 1995, Senator Bumpers introduced a nearly identical bill, the Consumer and Main Street Protection Act of 1995, S. 545, 104th Cong. On April 5, 1995, the New York State Bar Association Tax Section submitted a report on Senate Bill 545, generally supporting, although with some reservations, the expansion of sales tax collection responsibilities of out-of-state vendors. See NYSBA Reports on Bill to Require Out-of-State Vendors to Collect Sales Tax, TAX NOTES TODAY, April 17, 1995, available in LEXIS, Fedtax Library, Tnt File. The last action date on the bill was October 27, 1995.

The Independence for Families Act, H.R. 4414, 103d Cong. (1994), also contained provisions addressing taxation of out-of-state sellers. It authorized state and local governments to require certain out-of-state businesses to collect sales taxes with respect to tangible personal property where the destination of the tangible personal property was in the state. See id. 744. The bill exempted out-of-state sellers with gross receipts from sales of such tangible personal property in the United States exceeding $3 million, or in the state exceeding $100,000. See id. The bill was never enacted. Return to text.

[112] For example, at the time Senate Bill 1825 was under consideration, a May 1994 report by the U.S. Advisory Commission on Intergovernmental Relations estimated that total potential revenue from taxation of interstate mail-order sales for 1994 was $4.57 billion. See Taxation of Interstate Mail Order Sales: 1994 Revenue Estimates,GOV'T., Oct. 1994, at 23, 26. However, Senate Bill 1825 never moved beyond subcommittee hearings. Return to text.

[113] See supra note 111. Return to text.

[114] See Harriet Hanlon, MTC Examines Making (Tax) Money on the Internet, 95 STATE TAX NOTES 150-26, Aug. 4, 1995 (discussing remarks of Stewart Baker, former general counsel for the National Security Agency, currently practicing with an international and technology law firm in Washington, D.C.), available in LEXIS, Sttax Library, Stn File. Return to text.

[115] Id. Return to text.

[116] See id. Return to text.

[117] Id. Return to text.

[118] See Amy Hamilton, Netscape Installing Software That Will Calculate, Track Sales Taxes on Online Sales, 95 STATE TAX NOTES 218-40, Nov. 13, 1995, available in LEXIS, Sttax Library, Stn File; AVP Tax Software Available with Netscape Internet Applications, PR Newswire, Nov. 8, 1995, available in LEXIS, News Library, Busdtl File. Return to text.

[119] See Hamilton, supra note 118. Return to text.

[120] See id. Return to text.

[121] See R. Scot Grierson, Constitutional Limitations on State Taxation: States and Use Tax Nexus on the Information Highway, 96 STATE TAX NOTES 35-38, Feb. 21, 1996, available in LEXIS, Sttax Library, Stn File. Return to text.

[122] See e.g., Tyler Pipe Indus., Inc. v. Washington State Dep't of Revenue, 483 U.S. 232, 251 (1987) (holding the existence of in-state representatives created a nexus allowing states to tax). Return to text.

[123] 483 U.S. 232 (1987). Return to text.

[124] Washington imposed a business and occupation tax on "the act or privilege of engaging in business activities in the State." Id. at 234-35 (quoting WASH. REV. CODE 82.04.240 (1985)). The tax applied "to the activities of extracting raw materials in the State, manufacturing in the State, making wholesale sales in the State, and making retail sales in the State. The measure of the selling tax is the 'gross proceeds of sales.' " Id. at 236 (footnotes omitted). Return to text.

[125] See id. at 249. Although Tyler Pipe concerned the imposition of the business and occupation tax, rather than a sales or use tax, it appears that the nexus requirements for both types of taxes are the same. This conclusion is based upon the fact that the two cases the Tyler Pipe Court cited as supporting its holding, Scripto, Inc. v. Carson, Sheriff, 362 U.S. 207 (1960), and National Geographic Society v. California Board of Equalization, 430 U.S. 551 (1977), concerned use taxes. See 483 U.S. at 250. Return to text.

[126] See Tyler Pipe, 483 U.S. at 251. Return to text.

[127] Id. at 250 (quoting Tyler Pipe Indus. v. Dep't. of Revenue, 715 P.2d 123, 126 (Wash. 1986)). Return to text.

[128] See id. at 249. Return to text.

[129] See id. Return to text.

[130] Id. at 250 (quoting Tyler Pipe, 715 P.2d at 127). Return to text.

[131] 362 U.S. 207 (1960). Return to text.

[132] Id. at 209. Return to text.

[133] See id. Return to text.

[134] See id. at 211. Return to text.

[135] 419 U.S. 560 (1975). Return to text.

[136] See id. at 562. Return to text.

[137] See id. at 561. Return to text.

[138] See id. Return to text.

[139] For similar facts and holdings, see General Trading Co. v. State Tax Commission of the State of Iowa, 322 U.S. 335 (1944), and Felt & Tarrant Manufacturing Co. v. Gallagher, 306 U.S. 62 (1939). Return to text.

[140] Grierson, supra note 121 (making argument with respect to nexus for commercial on-line service providers). Return to text.

[141] Commercial on-line services have a "physical presence" in almost every state because they have a mainframe, in which they store their data, in almost every state. See id. Return to text.

[142] It is important to note that this argument only attempts to establish jurisdiction over sellers registered with the commercial on-line service, and not over sellers selling over the Internet. Return to text.

[143] See Hanlon, supra note 114. Return to text.

[144] Grierson, supra note 121 (making argument with respect to sellers of information as opposed to tangible goods) (quoting Tyler Pipe Indus., Inc. v. Washington State Dep't of Revenue, 483 U.S. 232, 250 (1981)). Return to text.

[145] See id. Return to text.

[146] Robert Levering, senior vice president of the Direct Marketing Association in Washington, notes that the retailer only has an arm's-length contract to use the on-line service as a communications carrier. See Betts & Booker, supra note 23, at 64. Return to text.

[147] See id. Return to text.

[148] 483 U.S. at 250. Return to text.

[149] See id. at 251. Return to text.

[150] See id. at 249. Return to text.

[151] See id. at 250. Return to text.

[152] See 362 U.S. at 209. Return to text.

[153] See 419 U.S. at 561. Return to text.

[154] It is noteworthy that National Geographic Society v. California Board of Equalization, 430 U.S. 551 (1977), also has been cited as a case supporting the agency/representative theory of nexus. See Grierson, supra note 121. Specifically, it is cited to suggest that the agency/representative theory of nexus establishes jurisdiction over an out-of-state seller regardless of the nature of the activities the agent performs on behalf of the seller. See id. This is somewhat misleading. In the case, National Geographic, a nonprofit corporation with headquarters in the District of Columbia, maintained two offices in California that solicited advertising copy for National Geographic's monthly magazine. See 430 U.S. at 552. The two offices performed no activities related to National Geographic's operation of a separate line of business-its mail-order business for the sale of maps, atlases, globes, and books. See id. Orders for these items were mailed from California directly to National Geographic's Washington, D.C., members and magazine subscribers, or on order forms contained in the magazine. See id. Deliveries were made by mail from National Geographic's Washington, D.C., or Maryland offices. See id. National Geographic challenged the constitutionality of California's use tax, as applied to its mail-order activities in California.

The Court found that the requisite nexus for the imposition of the use-tax-collection obligation. See id. at 556. It found that National Geographic was "present" in California based on its maintenance of two offices in California. See id. In so finding, the Court was not troubled by the fact that the activities carried on by the two offices in California were wholly unrelated to National Geographic's mail-order business, and explained that

the relevant constitutional test to establish the requisite nexus for requiring an out-of-state seller to collect and pay the use tax is not whether the duty to collect the use tax relates to the seller's activities carried on within the State, but simply whether the facts demonstrate "some definite link, some minimum connection, between [the State and] the person . . . it seeks to tax."
Id. at 561 (alteration in original) (quoting Miller Bros. v. Maryland, 347 U.S. 340, 344-345 (1954)).

It is important to note that the requisite nexus was based on National Geographic's actual physical presence in the state, not the presence of National Geographic's agents or representatives in-state. See id. at 556. The two offices located in California were not acting as agents of National Geographic, or owned or run by entitities separate from National Geographic; they were owned and run by National Geographic. Thus, the language of National Geographic to the effect that nexus may be found without regard to the nature of the activity carried on within the state is not relevant for determining whether nexus based on an agency/representative theory exists. See id. at 560. Return to text.

[155] Where the vendor is selling digitized versions of traditionally tangible personal property (such as books or music), and the commercial on-line service actually helps deliver the digitized information, the assertion is made that the commercial on-line service, which is delivering the product being sold, is acting as an in-state representative of the seller because it is directly "associated with the taxpayer's ability to establish and maintain a market in the state for the sales." Grierson, supra note 121 (quoting Tyler Pipe, 483 U.S. at 250). However, the commercial on-line service is acting no differently from the U.S. Postal Service when it delivers shopping catalogs, as well as ordered merchandise, to an in-state customer. Thus, it is difficult to see why the agency/representative argument has any more force when the product being sold by the out-of-state seller is digitized information delivered by the commercial on-line service rather than a tangible good. Return to text.

[156] See id. Return to text.

[157] See id. Return to text.

[158] See id. Return to text.

[159] See id. It is noteworthy that R. Scot Grierson makes the agency/nexus argument in the context of obtaining jurisdiction over sellers of digitized information. See id. His theory is that the relationship between the telecommunications and the digitized information seller is singularly important because delivery of the information is impossible without the telecommunications vehicle. See id. He reasons that the "unequivocal physical presence of the in-state telecommunications equipment inures to the [benefit of the] information seller, thereby creating the requisite substantial nexus." Id. Return to text.

[160] To connect to the Internet, users must obtain access to the Internet. They can obtain a direct connection by paying a fee to an ISP, such as SprintLink or AT&T EasyLink. Alternatively, they can obtain a connection by paying a commercial on-line monthly fee. Return to text.

[161] See 483 U.S. at 249-50.

[I]t often is said that "no one" owns the Internet. In fact, the 'Net is owned by many someones who all control their own pieces of it. When a network is connected to the Internet, it is generally understood that some of the resulting traffic will have nothing to do with local computers. System operators let this data flow by on its way to other destinations. . . . The present Internet is a loose collection of huge networks run largely by giant phone companies such as MCI and Sprint, connected at several major points with many smaller regional net[w]orks.
Alan Phelps, Ready, Set, Click: The Internet Races into the Mainstream, PC NOVICE GUIDE TO THE INTERNET, June 1996, at 6, 7-8.
On the regional level, smaller state-wide or multi-state backbones carry data to local servers where users dial in or connect via special dedicated lines. . . . High-speed lines connect larger cities while small conduits fan out to local access points. The system is connected to the larger Internet at several points. . . . [At the national level,] [i]n the United States, Internet traffic is carried through a variety of networks. . . . Two of the largest systems are run by telephone giants Sprint and MCI. Their backbones carry much of the long-distance Internet communications across the continent. Regional networks wire into the larger systems and each other at many places, producing a system that can easily route round local malfunctions. Four main Network Access Points (NAPs) located around the country offer high-speed switching between the biggest networks.
Phelps, supra note 6, at 13. Return to text.

[163] See ELLSWORTH & ELLSWORTH, supra note 1, at 36-37. Return to text.

[164] See David Brunori, ABA Tax Section Meeting: State Panel Debates Future of Internet Taxation, UDITPA, 96 STATE TAX NOTES 94-24, May 14, 1996, available in LEXIS, Sttax Library, Stn File. Return to text.

[165] See Hanlon, supra note 114 (statement of Stewart Baker). Return to text.

[166] See 483 U.S. at 249-50. Return to text.

[167] The current MTC Guidelines state:

Physical Presence: An out-of-state business is, or is deemed to be, physically present in the taxing state for possible application of that state's sales or use tax when the business engages in one or more of the following activities beyond a de minimis level:
. . . . (7) maintains in the taxing State by private contract, and not by purchase from a common carrier in the common carrier's status as common carrier, telecommunications linkage that permits, the out-of-state business to establish and maintain a market in the taxing State . . . . MULTISTATE TAX COMM 'N, NEXUS GUIDELINE FOR APPLICATION OF A TAXING STATE'S SALES AND USE TAX TO A REMOTE SELLER II.C.7 (draft of Oct. 25, 1994). The examples in the guidelines of nexus include:
(a) Activities of a contract carrier that is the actual in-state deliverer (service provider) of the very transaction that is the actual object of what is being sold.
(b) Advertising directed at in-state persons through local newspapers or periodicals or local television, radio, or other local means of electronic transmission. (c) Maintenance of a dedicated or virtual telecommunications network that facilitates or promotes the market of the out-of-state business in the taxing State. . . . . (f) Regular use of a financial network, such as a credit or debit card system, that facilitates or promotes the market of the out-of-state business in the taxing State. Id. III.A.4. Return to text.

[168] See Betts & Booker, supra note 23. Return to text.

[169] See id. Return to text.

[170] See Loshin, supra note at 11, 86-88. Return to text.

[171] See ELLSWORTH & ELLSWORTH, supra note 1, at 292. Return to text.

[172] See id. Return to text.

[173] See Quill, 504 U.S. at 314-18 (finding that the Commerce Clause requires an out-of-state seller to have physical presence in a state before the state may impose a use tax on the seller). Return to text.

[174] See id.; see also 386 U.S. at 756-60 (finding it unconstitutional for states to impose a use tax on an out-of-state seller with no physical presence in the state). Return to text.