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Court watches as state tax collectors dip into Capital One’s wallet

June 22, 2009

Watch out businesses, out-of-state state tax collectors just got a boost from the country's high court.

The U.S. Supreme Court today decided against hearing an appeal from out-of-state companies that Massachusetts officials say owe it taxes.

As I mentioned about a month ago in Money-hungry states, cities tax trolling, Bay State tax collectors set their sites on credit-card giant Capital One Financial.

Massachusetts officials said that since the Virginia-base company made beaucoups money from cardholders who live in their state, Cap One should fork over more than $2 million in taxes to the Massachusetts treasury.

The Department of Revenue was emboldened by a Massachusetts Supreme
Court ruling that the state could tax out-of-state corporations if
the businesses have a "substantial nexus" in the state.

Also involved in the case is Geoffrey, Inc., a subsidiary of Toys R Us. The Associated Press
notes that Capital One offers credit cards that are used
by Massachusetts residents and hires state-based collection agencies to go after delinquent accounts there. Geoffrey, Inc., licenses the use of
Toys R Us trademarks for its stores in Massachusetts.

The two companies asked the U.S. Supreme Court to hear their argument that the Commerce Clause of the Constitution prohibits state officials from
taxing out-of-state companies that do not have a physical presence in
that state.

The Justices said no, not specifically to their complaint, but to hearing it in the first place.

So Massachusetts tax collectors should be knocking on Cap One and Geoffrey, Inc doors right about now.

As I noted in my earlier post, this isn't the first instance of states looking for tax dollars from cross-border sources. But you can be sure that many more revenue-starved states will now follow Massachusetts' lead.

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TAX-SAVVY WAYS 
TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

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