Territoriality of taxation

A state may not tax property lying outside its borders or lay an excise or privilege tax upon the exercise or enjoyment of a right or privilege derived from the laws of another state and therein exercise and enjoyed. (51 Am.Jur. 87-88). The reasons for this are:

[1] Tax laws do not operate beyond a country’s territorial limits; and
[2] Property which is wholly and exclusively within the jurisdiction of another state receives none of the protection for which a tax is supposed to be a compensation.

Territoriality principle is the term used to connote the principle of levying tax only within the territorial jurisdiction of a sovereign tax authority or country, which is adopted by some countries. definitions.uslegal.com.