Final answer:
States historically required physical presence to tax businesses but recent legal developments allow taxation without it. State tax laws vary and can be designed flexibly. The Sixteenth Amendment allows Congress to impose federal income taxes.
Step-by-step explanation:
The statement that states may only assess income tax on businesses with a physical presence in the state is not entirely true. Historically, states did generally require a physical presence for a business to be subject to state income tax.
However, recent legal developments, including the Supreme Court's decision in South Dakota v. Wayfair, Inc. (2018), have allowed states to require out-of-state sellers to collect and remit sales tax even without a physical presence. Although this case pertains to sales tax, it indicates a shift in how physical presence is viewed in the context of state taxation.
It's important to note that state tax laws can vary, and they have the flexibility to design their tax systems, including applying different rules for businesses regarding the requirement of physical presence.
Moreover, the Three-Fifths Compromise and other historical contexts indicate evolving views on taxation representation. The national government has historically had restrictions on taxing citizens directly, but this was changed with the Sixteenth Amendment, which allows Congress to impose federal income taxes.