For a significant period of time, since 1873 in fact, the Supreme Court has held that the taxing power of the states is limited by the dormant commerce clause. State taxes on interstate activity must be “fairly apportioned,” meaning that if more than one state may legitimately tax the same income, each state may only tax its fair share. This flows from the Commerce Clause’s negative converse, i.e. its restriction prohibiting states from enacting legislation that overly burdens or discriminates against interstate commerce. In many cases dealing with the taxation of multi-state businesses, courts have enforced the requirement that state taxes be fairly apportioned.
What You Need to Know About Deducting State and Local Taxes
Taxpayers that itemize deductions on Schedule A, (and file Form 1040) can deduct the cost of state income taxes on their federal tax return. The ability to deduct the full cost of these taxes has its obvious advantages. Taxpayers may either claim such a deduction from state and local income taxes or state and local sales taxes, but not both. Basically, to be deductible, the tax must be imposed on a taxpayer and must have been paid during the particular tax year. Taxpayers that elect to deduct state and local general sales taxes, may use either their actual expenses or the optional sales tax tables.
Can I Discharge Taxes In Bankruptcy?
The ultimate purpose in filing bankruptcy is to obtain a discharge of most, if not all, of your debts. A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts, i.e., the debtor is no longer legally required to pay those debts that are discharged. The discharge is a permanent order which prohibits the creditors from engaging in any and all forms of collection activity on such debts.