Document: 488 U.S. 252 109 S.Ct. 582 102 L.Ed.2d 607 Jerome F. GOLDBERG and Robert McTigue, Appellants,v.Roger D. SWEET, Director, Illinois Department of Revenue, et al. GTE SPRINT COMMUNICATIONS CORPORATION, Appellants, v. Roger etc., Nos. 87-826, 87-1101. Argued Oct. 12, 1988. Decided Jan. 10, 1989. Syllabus In light recent technological changes creating billions possible electronic paths that an interstate telephone call can take from one point to another, which are often indirect, typically bear no relation state boundaries, virtually impossible trace record, passed its Telecommunications Excise Tax Act (Tax Act), which, inter alia, imposes a 5% tax on the gross charges telecommunications originated or terminated in State charged service address, regardless where particular is billed paid; provides credit any taxpayer upon proof another has taxed same call; requires retailers, like appellant Sprint Communications Corporation (Sprint), collect consumers. The trial court held violates Commerce Clause Federal Constitution class action brought by residents, who were subject paid tax, against appellee Director State's Revenue various long-distance carriers, including Sprint, cross-claimed Director. However, Supreme Court reversed, ruling satisfies four-pronged test set forth Complete Auto Transit, Inc. Brady, 430 274, 97 1076, 51 326, progeny, for determining compliance with Clause. All parties concede this first prong test; i.e., it applied activity having substantial nexus Illinois. Held: does not violate Clause, since final three prongs test. Pp. 259-267. (a) fairly apportioned. It internally consistent, so structured if every impose identical only those phone calls in-state would each such and, accordingly, multiple taxation result. also externally consistent even though assessed activity, reasonably limited business triggers taxable event practical economic effects activity. Because individual consumer, collected retailer, accompanies retail purchase call, tax's effect sales reflects way consumers permissibly be based purchase, simultaneous several States, purely local event. Moreover, risk low, two types States—a taxes address state—have enough call. event, actual precluded Act's provision. Furthermore, apportionment formula mileage some other geographic division produce insurmountable administrative technical barriers, involve intangible movement impulses through vast computerized networks. 260-265. (b) discriminate commerce allocating larger share burden calls, falls rather than out-of-state consumers, since, unlike highways, exact path thousands signals neither traced nor recorded. American Trucking Assns., Scheiner, 483 266, 107 2829, 226, distinguished. 265—266. (c) related services benefit taxpayers. Such provided equipment used during but include ability subscribe own rent at within State, as well police fire protection general services. 266—267. 117 Ill.2d 493, 111 Ill.Dec. 625, 512 N.E.2d 1262, (1987) affirmed. MARSHALL, J., delivered opinion Court, REHNQUIST, C.J., BRENNAN, WHITE, BLACKMUN, KENNEDY, JJ., joined. STEVENS, post, p. 268, O'CONNOR, 270, filed opinions concurring part judgment. SCALIA, judgment, 271. Walter A. Smith, Jr., Washington, D.C., appellants. Andrew L. Frey, appellees. Justice MARSHALL Court. 1 appeal, we must decide whether imposed We hold not. 2 * 3 These cases come us backdrop massive legal industry.1 Years ago, all relayed electric wires transferred human operators working switchboards. Those days past. Today, network transmits per minute complex system microwave radios, fiber optics, satellites, cables. DOJ Report 1.2-1.6, 1.8 (DOJ Report); Brief MCI Amicus Curiae 2. When fully connected, offers another. 1.18. direct full efficiently, computer instantly activates path. Signals may change middle without perceptible interruption. National Conference Legislatures Amici 6. Thus, taken indirect bears boundaries.2 number paths, nature signals, switching make record create 4 explosion new technologies brwrkup AT & T monopoly3 led States revise they industry.4 1985, Ill.Rev.Stat., ch. 120, &Par; 2001-2021 (1987). charge (1) Illinois, ¶ 2004, § (hereinafter 4)5 (2) paid. 2002, §§ 2(a) (b).6 intrastate telecommunications. 2003, 3. order prevent "actual multi-state taxation," triggered tax. 4. To facilitate collection, consumer his address. 2005, 5. B 5 Eight months after was passed, Goldberg residents have their complaint Circuit Cook County, They named defendants J. Thomas Johnson, (Director),7 Sprint. alleged United Constitution.8 seeking declaration unconstitutional under then motion summary judgment carriers. responded Director; turn, both 6 After briefing hearing, declared unconstitutional. found 326 (1977), progeny control litigation. Under Auto, will withstand scrutiny "the taxing apportioned, commerce, State." Id., 279, S.Ct., 1079.9 view court, did satisfy last because: 7 "Illinois attempting entire cost act takes place partially This terms discriminates For these reasons fail." No. 85 CH 8081 (Cook 21, 1986), App. Juris. Statement 24a. 8 1262 (per curiam) despite finding "not apportioned tax" because "applies entirety telecommunication." 501, Ill.Dec., 629, N.E.2d, 1266. reasoned unapportioned "constitutionally suspect" taxation, ibid., decided adequately avoided danger. With respect originating noted could levy calls. 502, As terminating created "a real id., 630, 1267,10 eliminated 4's 503, 1267. 9 discrimination, third test, constitutionally valid Turning fourth prong, explained benefits portion occurring afforded facilitating telecommunication too speculative override extended Illinois." 504, 10 Having satisfied requirements concluded McTigue appealed probable jurisdiction, 484 1057, 108 1010, 98 976 (1988), now affirm. II 11 frequently had occasion consider wavering doctrinal lines our pre-Complete reflect tension between competing concepts: enjoys "free trade" immunity taxation; businesses engaged required pay way. supra, U.S., 278-279, 1078-1079; see 281, 282, nn. 13, 2839-2840, 226 (1987); Commonwealth Edison Co. Montana, 453 609, 645, 101 2946, 2967, 69 884 (1981) (BLACKMUN, dissenting). sought resolve specifically rejecting cannot while time placing limits commerce. 288, 1083; Co., 2967.11 Since decision numerous occasions.12 apply 12 agree reached Act, begin inquiry apportionment, second Appellants argue interpret prior cases, Michigan-Wisconsin Pipe Line Calvert, 347 157, 74 396, L.Ed. 583 (1954), Central Greyhound Lines, Mealey, 334 653, 68 1260, 92 1633 (1948), Western Live Stock Bureau 303 250, 58 546, 82 823 (1938), require fraction miles traveled total traveled. argues apportions carefully limiting type reaches. 13 analyzing contentions, mindful central purpose behind requirement ensure fair transaction. See, e.g., Container Corp. America Franchise Bd., 463 159, 169, 103 2933, 2942, 77 545 (1983). But "we long single [apportionment] States," 164, 2939, therefore declined undertake essentially legislative task establishing "single mandated method taxation." 171, 2943; Moorman Mfg. Bair, 437 267, 278-280, 2340, 2347-2348, 57 197 (1978). Instead, determine examining consistent. 285, 2841; Armco Hardesty, 467 638, 644, 104 2620, 2623, 81 540 (1984); Corp., 169-170,103 2942-2943. 14 2942. internal consistency focuses text challenged statute hypothesizes situation statute. conclude 15 Appellant dictates different standard. contends that, Armco, evaluating compare similar, identical, States. misreads Armco. If comparing slightly validity turn solely shifting complexities codes 49 States." 2624; Moorman, 277, n. 2346, 12. extent statutes reach issue external turn. 16 asks revenues component being taxed. 169-170, thus examine contend unapportioned. McGoldrick Berwind-White Coal Mining 309 33, 58, 60 388, 398, 84 565 (1940) (sales tax); cf. H. Holmes McNamara, 486 24, 31-32, 1619, 1623-1624, 100 21 (1988) (use Tyler Industries, Washington Dept. 232, 251, 2810, 2822, 199 (gross receipts). 17 believe better argument. many characteristics Even McGoldrick, 18 further reaches contrast, raise specter assessing exaggerated creates taxation. doubt call's merely pass sufficient See Air Mahin, 410 623, 631, 93 1186, 1191, 35 (1973) (State airplane flight over State); Northwest Airlines, Minnesota, 322 292, 302-304, 64 950, 955-956, 88 1283 (1944) (Jackson, concurring) (same). termination itself, Bellas Hess, 386 753, 87 1389, 505 (1967) (receipt mail insufficient nexus). 19 consumer's origination State. Ark.Code Ann. 26-52-301(3) (Supp.1987); Wash.Rev.Code 82.04.065(2) 20 recognize billing location taxation.13 possibility however, invalidate statutory scheme. 272-273, 2343-2344. States' pose provision contained operates avoid D.H. Holmes, 31, 1623 ("The . scheme use been States"); Pipe, 245, 2819, 13. should overlooked, moreover, inquiry. previous endorsed formulas bus, train, truck State.14 dealt large physical objects identifiable routes, practicable keep track distance actually Greyhound, 663, 1266 ("There dispute feasibility apportioning tax"); Stock, 257, 549. more An barriers. 296, 2847 (apportionment adopt "pose genuine burdens").15 find significant Illinois' realistic solution technology present-day industry.16 22 sum, Its infeasible. C 23 next prohibits imposing discriminatory irrespective rely stated "[i]n guarantee free trade area among deeper meaning implicated provisions do allocate burdens insiders outsiders manner facially discriminatory." 2839. 24 Pennsylvania's flat operation trucks Pennsylvania highways disproportionate trucks, compared fewer year highways. 286, 2841. differs Scheiner important ways. First, whereas burdened truckers difficulty effecting change, insider presumably able complain about political process. protect taxes. 25 Second, measure activities tallied, reported, favor expense D 26 Finally, namely, presence 32-34, 1624-1625. placed persons Edison, 627, 2958. 27 severely limit focusing located accept view. transaction need incurred account 16, 2958, 16. On contrary, "interstate contribute providing governmental services, arguably receives 'benefit.' " Ibid. (emphasis original). wide range taxpayer, just precise connected issue. Indeed, Term, 32, 1624, taxpayer's receipt protection, public roads mass transit, advantages civilized society taxpayer. 28 foregoing, little concluding received receive III 29 above, hereby 30 Affirmed. 31 32 My expressed Part II-C Court's opinion. Unlike I heavier engage ante, 266 ("It taxes"). fact, holding clear departure precedents. 240-248, 2816-2820, (invalidating manufacturing discriminated manufacturers sold wholesale out state); Bacchus Imports, Ltd. Dias, 468 263, 3049, 200 (1984) exemption locally produced alcoholic beverages case wholesalers); Boston Exchange Comm'n, 429 318, 333-334, 599, 608-609, 50 514 (1977) securities transfer state). Surely 3% shipment goods Clause.1 33 Appellants' discrimination claim best illustrated example: A costs $10 value 5%. Indiana, rate. properly (technically) (say, example, $5). By 50¢ commerce). 34 argument, overlooks true overall incidence Although number, elsewhere. although Illinois-Indiana reciprocal Indiana-Illinois At rate, combined, precisely amount half relevant universe value, achieves result achieve. result, lower effective rate calls,2 accordingly proportional burden.3 exception II-C, join 36 37 Parts I, II-A, II-D, write separately explain why II-B II-C. am still unsure authority applying 303, 2850-2851, (O'CONNOR, application Act. Ante, 261. STEVENS 268 (STEVENS, judgment). Accordingly, statement "[i]t taxes." 266. 38 39 remain negative 254, 2823, (SCALIA, dissenting part); 2850, poses constitutional difficulty. Justice, Geodesic Network: 1987 Competition Telephone Industry Report) (discussing changes); Connecticut General Assembly, Final Task Force, Finance, Bonding Committee (1985) Council Policy Planning Agencies, K. Case, Industry, Challenge Regulatory Policies New (B. Dyer ed. 1986) policies). signal traveling tower never touch anything it. satellite transmission leave caller's building, travel outer space, there until dish building housing receiving party. Tel. 552 F.Supp. 131 (DC 1982), summarily aff'd sub nom. Maryland 460 1001, 1240, 75 472 26-52-301 Fla.Stat. 212.05(1)(e) (Supp.1988); Haw.Rev.Stat. 237-13(6) Minn.Stat. 297A.01 Subd. 3(f) N.M.Stat.Ann. 7-9-56(C) Ohio Rev.Code 5739.01(B)(3)(f) Okla.Stat., Tit. 68, 1354(1)(D) Tex.Tax Code 151.323 82.04.065 Wis.Stat. 77.51(14)(m) (1985-1986). Some municipalities begun Greeley, Colorado, Ordinance, 4, 4.04.005 seq. (1985); Wheat Ridge, Ordinance 630 Los Angeles, California, 162586 Section states part: "A privilege person purchased retailer person." "Gross charge" defined (b), less certain special here. 2(a)(1)-(5). defines broadly "in addition ordinarily popularly ascribed it, limitation, messages information transmitted local, toll service; private line services; channel telegraph teletypewriter; exchange cellular mobile specialized radio; stationary paging form portable one-way two-way communications; similar means, points wire, cable, fiber-optics, laser, microwave, radio, facilities." 2(b). sake simplicity, "call" "telephone call" refer multifarious forms understand term "service address" mean assigned. 2(b) (h). Sweet replaced Johnson Revenue. Due Process Equal Protection Clauses. abandoned claims appeal. 9, 7. conceded before here, example originates terminates overruled Spector Motor Service, O'Connor, 340 602, 71 508, 95 573 (1951), prohibited doing rejected Spector's formalistic approach, stating "[u]nder present law, rule, known, relationship realities." 1079. seek 'establish rational inquiry' 'the tax.' 615, 2952, L.Ed.2d884 (quoting Mobil Oil Commissioner Taxes Vermont, 445 425, 443, 1223, 1234, 63 510 (1980)). Wardair Canada Florida 477 1, 106 2369, 91 (1986) fuel international commerce); supra (severance Louisiana, 451 725, 2114, 576 (1980) (corporate income Association Stevedoring Cos., 435 734, 1388, 55 682 (1978) (business occupation tax). taxpayers split addresses face company's Arkansas headquarters bills subsidiary, made subsidiary head office location. terminate Arkansas, originate Likewise, Noncollect not, captured Arkansas. Many decisions concern instrumentalities transportation. (trucks); Japan Line, County 441 434, 99 1813, 336 (1979) (cargo containers); (motor carriers); (1954) (oil pipelines); (1948) (buses); 549, (1938) (tax receipts train not). alleges "capable, administratively, state's communication." statement, tells Sprint's capable adding consumers' bills. explain, how minute. considered Cooney Mountain 294 384, 477, 79 934 (1935); Union Pennsylvania, 128 39, 6, 345 (1888); Ratterman 127 411, 1127, 229 Pensacola 96 708 (1878) (because industry Congress pre-empts regulation). distantly modern era when itself 11, supra. Perhaps tax-like attributes persuaded dismiss impact residents. 262, 265, assess item added Appellees contended throughout litigation involved here viewed refused characterize instead 498-500, 628-629, 1265-1266 curiam). analysis informed question, ultimately challenge court's characterization rest recharacterization say, response argument advanced appellants, tax—like burden—is nondiscriminatory. premise review applies go responding appellants' contention That is, 5%, 0%; 21/2%. hand, obviated agree, "[w]e call." 263. flows up gap, were, share. Indiana mere jurisdiction.

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