The state of Arizona (specifically, Arizona Attorney General Mark Brnovich) is not happy with California’s policy of coming after any Arizona business that is even remotely doing business in California (passive or not) to collect the $800 minimum California franchise tax. Arizona tried to do something about it: The Grand Canyon State asked the US Supreme Court for leave to sue California over the policy. On Monday, the Supreme Court said that Arizona couldn’t sue.
That said, I suspect one day someone will get legal assistance from a foundation and try to stop the process in federal court. The Southeastern Legal Foundation and the Cato Institute filed a joint Amicus Curiae brief in favor of Arizona. Sooner or later California’s extraterritorial grabbing of money will be stopped.
Unfortunately, the problem with individual businesses doing anything about it is the cost. California’s tax is $800 per year. The cost of filing a federal court lawsuit is probably in the tens of thousands of dollars. This case isn’t “sexy”; it’s about routine commerce. Now, if it could be a class action case (I’m not an attorney so I can’t speak to whether that’s possible or not) then there would be a good shot of that happening. Until then, I suspect California will successfully extort millions of dollars, $800 at a time.
As to the title of the post, the reason it’s seven to two is because two Supreme Court justices thought the case should be heard and dissented. It takes four justices for a case to be heard, so Arizona lost.