The Evaluator - 10 Significant U.S. Supreme Court Cases Involving State Taxation

This article appeared in the June 2026 edition of The Evaluator.

Authored by: Nicholas Ray

State and local taxation is a critical concern for businesses operating across multiple jurisdictions.  The U.S. Supreme Court has issued a series of landmark decisions that define the limits of state taxing authority, address the balance between state and federal power and protect taxpayers from discriminatory or unfair tax practices.

This article highlights the top 10 most significant U.S. Supreme Court cases involving state taxation.  These decisions have established foundational principles that impact how corporations are taxed, how states apportion income and how property is assessed.  Understanding these cases is essential for any business seeking to minimize risk, ensure compliance and advocate effectively in state tax matters.

General State Tax Matters:

McCulloch v. Maryland
17 U.S. 316 (1819)
Established federal supremacy in taxation, stating that states cannot tax the federal government or its entities.  Chief Justice John Marshall's declaration, "the power to tax involves the power to destroy," has significantly influenced the balance of state and federal taxing authority and the application of federal constitutional protections from overreaching state and local taxation.  Read more

Complete Auto Transit, Inc. v. Brady
430 U.S. 274 (1977)
Established a four-prong test for the constitutionality of state taxes under the Commerce Clause: substantial nexus, fair apportionment, non-discrimination and fair relation to services provided.  Read more

South Dakota v. Wayfair, Inc.
585 U.S. 163 (2018)
Overruled Quill (504 U.S. 298 (1992)) and National Bellas Hess (386 U.S. 753 (1967)) line of cases requiring physical presence for sales and use tax nexus by allowing states to require out-of-state sellers to collect sales tax without physical presence, provided no undue burden on interstate commerce.  Read more

Northwestern States Portland Cement Co. v. Minnesota
358 U.S. 450 (1959)
Upheld state income taxes on net income from interstate commerce if fairly apportioned to business conducted within the state.  Read more

Tyler Pipe Industries, Inc. v. Washington State Department of Revenue
483 U.S. 232 (1987)
Found a state tax on gross receipts of a company engaged in interstate commerce unconstitutional due to discrimination against interstate commerce.  Read more

Hunt-Wesson, Inc. v. Franchise Tax Board of California
528 U.S. 458 (2000)
Ruled that California's method of taxing interest expense deductions violated the Commerce Clause by unfairly burdening interstate commerce.  Read more

South Central Bell Telephone Co. v. Alabama
526 U.S. 160 (1999)
Found Alabama's franchise tax, which discriminated against out-of-state corporations, violated the Commerce Clause.  Read more

Property Tax Specific Cases

Allegheny Pittsburgh Coal Co. v. County Commission
488 U.S. 336 (1989)
Grossly unequal property tax assessments violate the Equal Protection Clause. Allegheny's assessment was 8 to 35 times higher over a 10-year period.  Read more

Nordlinger v. Hahn
505 U.S. 1 (1992)
Upheld California’s Proposition 13 and allowed acquisition-value-based taxation. Distinguished Allegheny Pittsburgh Coal Co.  Read more

DaimlerChrysler Corp. v. Cuno
547 U.S. 332 (2006)
Taxpayers challenging tax incentives for the facility in Toledo, Ohio did not have standing.  They could not definitively show a harm.  Court overruled 6th Circuit decision finding incentives violated the Commerce Clause.  Read more