This is Part 2 of a 6-part series by The John Ellis Company, An Accountancy Corporation — On the evolution of NEXUS under the Commerce Clause and Due Process Clause.
In National Bellas Hess (1967), the Supreme Court addressed whether a mail-order company with no in-state presence could be required to collect and remit use tax.
The company’s only connection to the state was:
- Mail-order solicitations
- Delivery through common carriers
There were no:
- Employees
- Offices
- Inventory
The Court’s Analysis — Two Separate Constitutional Failures
The decision is best understood as a failure under both constitutional tests:
1. Due Process Failure — No Sufficient Connection
Under the Due Process Clause, the issue is whether there is a“definite link or minimum connection” between the taxpayer and the state.
The Court found that:
- Mail-order contacts alone were too limited and indirect
- The company was not meaningfully engaged within the state
- There was not a strong enough connection to justify imposing tax obligations
In practical terms: Selling into a state by mail did not create a constitutionally sufficient relationship.
2. Commerce Clause Failure — Excessive Administrative Burden
The Commerce Clause analysis focused not on connection—but on burden.
The Court emphasized that requiring the company to comply with:
- Numerous state and local tax rates
- Different laws and regulations
- Multiple filing obligations
This would impose an undue administrative burden on interstate commerce.
At the time, these obligations would have been:
- Manual
- Complex
- Disproportionate to the company’s limited connection to the state
The key issue was the mismatch: Minimal connection + high compliance burden = unconstitutional
Key Holding
Physical presence was required. But importantly: Bellas Hess required physical presence—it did not yet establish it as a formal “bright-line” rule.
Practical Insight
Many businesses still rely—incorrectly—on a generalized “physical presence rule” without understanding the constitutional reasoning behind it.
At The John Ellis Company, An Accountancy Corporation, we often see exposure arise from applying outdated interpretations instead of analyzing nexus under both constitutional standards.
If your understanding of nexus is based on legacy rules, exposure may already exist. Schedule a nexus review with The John Ellis Company, An Accountancy Corporation.