Source: https://supreme.justia.com/cases/federal/us/483/232/
Timestamp: 2019-04-20 16:16:15+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 483 › Tyler Pipe v. Wash. Dept. of Rev.
Washington imposes a business and occupation (B & O) tax on the privilege of engaging in business activities in the State, including manufacturing in the State and making wholesale sales in the State. The measure of the wholesale tax is the gross proceeds of sales, and the measure of the manufacturing tax is the value of the manufactured product. However, under the B & O tax's "multiple activities exemption," local manufacturers are exempted from the manufacturing tax for the portion of their output that is subject to the wholesale tax. Application of the exemption results in local manufacturers' paying the wholesale tax on local sales, local manufacturers' paying only the manufacturing tax on their out-of-state sales, and out-of-state manufacturers' paying the wholesale tax on their sales in Washington. The same tax rate is applicable to both wholesaling and manufacturing activities. In both of the cases under review, which originated as state court tax refund suits by appellants, local manufacturers who sold their goods outside Washington and out-of-state manufacturers who sold their goods in Washington, the trial court held that the multiple activities exemption did not discriminate against interstate commerce in violation of the Commerce Clause. In No. 85-1963, appellant Tyler Pipe Industries, Inc. (Tyler) -- an out-of-state manufacturer who sold its products in Washington but had no property or employees in Washington, and whose solicitation of business in Washington was conducted by an independent contractor located in Washington -- also asserted that its business did not have a sufficient nexus with Washington to justify the collection of the tax on its wholesale sales there. The trial court upheld the B & O tax. The Washington Supreme Court affirmed in both cases.
within the State has the same facially discriminatory consequences as the West Virginia tax exemption that was invalidated in Armco Inc. v. Hardesty, 467 U. S. 638, and the reasons for invalidating the tax in that case also apply to the Washington tax. The facial unconstitutionality of Washington's tax cannot be alleviated by examining the effect of other States' tax legislation to determine whether specific interstate transactions are subject to multiple taxation. Nor can Washington's imposition of the manufacturing tax on local goods sold outside the State be saved as a valid "compensating tax." Manufacturing and wholesaling are not "substantially equivalent events," id. at 467 U. S. 643, such that taxing the manufacture of goods sold outside the State can be said to compensate for the State's inability to impose a wholesale tax on such goods. Henneford v. Silas Mason Co., 300 U. S. 577, distinguished. To the extent that the ruling here is inconsistent with the ruling in General Motors Corp. v. Washington, 377 U. S. 436 -- where the B & O tax was upheld as against claims that it unconstitutionally taxed unapportioned gross receipts and did not bear a reasonable relation to the taxpayer's in-state activities -- that case is overruled. Pp. 483 U. S. 239-248.
2. The activities of Tyler's sales representative in Washington adequately support the State's jurisdiction to tax Tyler's wholesale sales to in-state customers. The showing of a sufficient nexus cannot be defeated by the argument that the taxpayer's representative was properly characterized as an independent contractor, rather than an agent. Cf. Scripto, Inc. v. Carson, 362 U. S. 207. Nor is there any merit to Tyler's contention that the B & O tax does not fairly apportion the tax burden between its activities in Washington and its activities in other States. Such contention rests on the erroneous assumption that, through the B & O tax, Washington is taxing the unitary activity of manufacturing and wholesaling. The manufacturing tax and the wholesaling tax are not compensating taxes for substantially equivalent events, and, thus, the activity of wholesaling -- whether by an in-state or an out-of-state manufacturer -- must be viewed as a separate activity conducted wholly within Washington that no other State has jurisdiction to tax. Pp. 483 U. S. 248-251.
3. Appellee's argument against retroactive application of any adverse decision here should be considered, in the first instance, by the Washington Supreme Court on remand. Cf. Bacchus Imports, Ltd. v. Dias, 468 U. S. 263. Pp. 483 U. S. 251-253.
105 Wash.2d 318, 715 P.2d 123, and 105 Wash.2d 327, 715 P.2d 128, vacated and remanded.
IV of which SCALIA, J., joined. O'CONNOR, J., filed a concurring opinion, post p. 483 U. S. 253. SCALIA, J., filed an opinion concurring in part and dissenting in part, in Part I of which REHNQUIST, C.J., joined, post p. 483 U. S. 254. POWELL, J., took no part in the consideration or decision of the cases.
In Armco Inc. v. Hardesty, 467 U. S. 638 (1984), we held that West Virginia's gross receipts tax on the business of selling tangible property at wholesale discriminated against interstate commerce because it exempted local manufacturers. The principal question in these consolidated appeals is whether Washington's manufacturing tax similarly violates the Commerce Clause of the Constitution because it is assessed only on those products manufactured within Washington that are sold to out-of-state purchasers. We conclude that our reasons for invalidating the West Virginia tax in Armco also apply to the Washington tax challenged here.
in business activities" in the State. Wash.Rev.Code § 82.04.220 (1985). The tax applies to the activities of extracting raw materials in the State, [Footnote 1] manufacturing in the State, [Footnote 2] making wholesale sales in the State, [Footnote 3] and making retail sales in the State. [Footnote 4] The State has typically applied the same tax rates to these different activities. The measure of the selling tax is the "gross proceeds of sales," and the measure of the manufacturing tax is the value of the manufactured products. §§ 82.04.220, 82.04.240.
"[T]he situation obtaining in another state is immaterial. We must interpret the statute as passed by the legislature. In our opinion, the statute marks a discrimination against interstate commerce in levying a tax upon wholesale activities of those engaged in interstate commerce, which tax is, because of the exemption contained in § 8370-6, not levied upon those who perform the same taxable act, but who manufacture in the state of Washington."
Id. at 664, 192 P.2d at 979.
"amended provision would seem to have essentially the same economic effect on interstate sales, but has the advantage of appearing nondiscriminatory."
Id. at 377 U. S. 460. Today we squarely address the claim that this provision discriminates against interstate commerce.
Two appeals are before us. In the first case (No. 852006), 71 commercial enterprises filed 53 separate actions for refunds of B & O taxes paid to the State. The Thurston County Superior Court joined the actions, found that the multiple activities exemption did not violate the Commerce Clause, and granted the State Department of Revenue's motion for summary judgment. In the second case (No. 851963), Tyler Pipe Industries, Inc. (Tyler), sought a refund of B & O taxes paid during the years 1976 through 1980 for its wholesaling activities in Washington. Again, the Superior Court upheld the B & O tax. The Washington Supreme Court affirmed in both cases. 105 Wash.2d 327, 732 P.2d 134 (1986); 105 Wash.2d 318, 715 P.2d 123 (1986).
"'what might be called internal consistency -- that is, the [tax] must be such that, if applied by every jurisdiction,' there would be no impermissible interference with free trade,"
Armco, 467 U.S. at 467 U. S. 644, was not dispositive because it merely relieved the taxpayer of the burden of proving that a tax already demonstrated to be facially discriminatory had, in fact, resulted in multiple taxation. The Washington Supreme Court also rejected the taxpayers' arguments that the B & O tax is not fairly apportioned to reflect the amount of business conducted in the State, and is not fairly related to the services rendered by Washington.
We noted probable jurisdiction of the taxpayers' appeals, 479 U.S. 810 (1986), and now reverse in part and affirm in part. We first consider the claims of the taxpayers that have manufacturing facilities in Washington and market their products in other States; their challenge is directed to the fact that the manufacturing tax is levied only on those goods manufactured in Washington that are sold outside the State. We then consider Tyler's claims that its activities in the State of Washington are not sufficient to subject it to the State's taxing jurisdiction, and that the B & O tax is not fairly apportioned.
a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State." 467 U.S. at 467 U. S. 642.
"The tax provides that two companies selling tangible property at wholesale in West Virginia will be treated differently depending on whether the taxpayer conducts manufacturing in the State or out of it. Thus, if the property was manufactured in the State, no tax on the sale is imposed. If the property was manufactured out of the State and imported for sale, a tax of 0.27% is imposed on the sale price. See General Motors Corp. v. Washington, 377 U. S. 436, 377 U. S. 459 (1964) (Goldberg, J., dissenting) (similar provision in Washington, 'on its face, discriminated against interstate wholesale sales to Washington purchasers for it exempted the intrastate sales of locally made products while taxing the competing sales of interstate sellers'); Columbia Steel Co. v. State, 30 Wash.2d 658, 664, 192 P.2d 976, 979 (1948) (invalidating Washington tax)."
467 U.S. at 467 U. S. 642.
Our square reliance in Armco on Justice Goldberg's earlier dissenting opinion is especially significant because that dissent dooms appellee's efforts to limit the reasoning of Armco to the precise statutory structure at issue in that case. Justice Goldberg expressly rejected the distinction appellee attempts to draw between an exemption from a wholesaling tax -- as was present in Armco -- and the exemption from a manufacturing tax which was present in General Motors and is again present in these cases. See 377 U.S. at 377 U. S. 459-460. Our holding in Armco requires that we now agree with Justice Goldberg's conclusion that the exemption before us is the practical equivalent of the exemption that the Washington Supreme Court invalidated in 1948.
"not demonstrated what definite burden, in a constitutional sense [the tax imposed by other States] places on the identical shipments by which Washington measures its tax."
for which the manufacturing tax exemption is arguably compensatory is the State's imposition of a wholesale tax on the local sales of local manufacturers; absent the exemption, a local manufacturer might be at an economic disadvantage because it would pay both a manufacturing and a wholesale tax, while the manufacturer from afar would pay only the wholesale tax. The State's justification for thus taxing the manufacture of goods in interstate commerce, however, fails under our precedents. The local sales of out-of-state manufacturers are also subject to Washington's wholesale tax, but the multiple activities exemption does not extend its ostensible compensatory benefit to those manufacturers. The exemption thus does not merely erase a tax incentive to engage in interstate commerce instead of intrastate commerce; it affirmatively places interstate commerce at a disadvantage.
for the exchanges in New York and a discriminatory burden on commerce to its sister States."
429 U.S. at 429 U. S. 331.
"The gross sales tax imposed on Armco cannot be deemed a 'compensating tax' for the manufacturing tax imposed on its West Virginia competitors. . . . Here, too, manufacturing and wholesaling are not 'substantially equivalent events' such that the heavy tax on in-state manufacturers can be said to compensate for the admittedly lighter burden placed on wholesalers from out of State. Manufacturing frequently entails selling in the State, but we cannot say which portion of the manufacturing tax is attributable to manufacturing, and which portion to sales."
"The conclusion is inescapable: equal treatment for in-state and out-of-state taxpayers similarly situated is the condition precedent for a valid use tax on goods imported from out-of-state."
the State. Washington's B & O tax scheme is therefore inconsistent with our precedents holding that a tax violates the Commerce Clause "when it unfairly burdens commerce by exacting more than a just share from the interstate activity." Washington Dept. of Revenue v. Association of Washington Stevedoring Cos., 435 U. S. 734, 435 U. S. 748 (1978).
"Appellee suggests that we should require Armco to prove actual discriminatory impact on it by pointing to a State that imposes a manufacturing tax that results in a total burden higher than that imposed on Armco's competitors in West Virginia. This is not the test. In Container Corp. of America v. Franchise Tax Board, 463 U. S. 159, 463 U. S. 169 (1983), the Court noted that a tax must have 'what might be called internal consistency -- that is, the [tax] must be such that, if applied by every jurisdiction,' there would be no impermissible interference with free trade. In that case, the Court was discussing the requirement that a tax be fairly apportioned to reflect the business conducted in the State. A similar rule applies where the allegation is that a tax on its face discriminates against interstate commerce. A tax that unfairly apportions income from other States is a form of discrimination against interstate commerce. See also id. at 463 U. S. 170-171. Any other rule would mean that the constitutionality of West Virginia's tax laws would depend on the shifting complexities of the tax codes of 49 other States, and that the validity of the taxes imposed on each taxpayer would depend on the particular other States in which it operated."
with our holding on the discrimination issue, however, would not necessarily preclude the continued assessment of a wholesaling tax. Either a repeal of the manufacturing tax or an expansion of the multiple activities exemption to provide out-of-state manufacturers with a credit for manufacturing taxes paid to other States would presumably cure the discrimination. We must therefore also consider the alternative challenge to the wholesale tax advanced by Tyler and the other appellants that manufacture products outside of Washington for sale in the State.
Tyler seeks a refund of wholesale taxes it paid on sales to customers in Washington for the period from January 1, 1976, through September 30, 1980. These products were manufactured outside of Washington. Tyler argues that its business does not have a sufficient nexus with the State of Washington to justify the collection of a gross receipts tax on its sales. Tyler sells a large volume of cast iron, pressure and plastic pipe and fittings, and drainage products in Washington, but all of those products are manufactured in other States. Tyler maintains no office, owns no property, and has no employees residing in the State of Washington. Its solicitation of business in Washington is directed by executives who maintain their offices out-of-state, and by an independent contractor located in Seattle.
"The sales representatives acted daily on behalf of Tyler Pipe in calling on its customers and soliciting orders. They have long-established and valuable relationships with Tyler Pipe's customers. Through sales contacts, the representatives maintain and improve the name recognition, market share, goodwill, and individual customer relations of Tyler Pipe. "
"Tyler Pipe sells in a very competitive market in Washington. The sales representatives provide Tyler Pipe with virtually all their information regarding the Washington market, including: product performance; competing products; pricing, market conditions and trends; existing and upcoming construction products; customer financial liability; and other critical information of a local nature concerning Tyler Pipe's Washington market. The sales representatives in Washington have helped Tyler Pipe, and have a special relationship to that corporation. The activities of Tyler Pipe's agents in Washington have been substantial."
105 Wash.2d at 325, 715 P.2d at 127.
As a matter of law, the Washington Supreme Court concluded that this showing of a sufficient nexus could not be defeated by the argument that the taxpayer's representative was properly characterized as an independent contractor, instead of as an agent. We agree with this analysis. In Scripto, Inc. v. Carson, 362 U. S. 207 (1960), Scripto, a Georgia corporation, had no office or regular employees in Florida, but it employed wholesalers or jobbers to solicit sales of its products in Florida. We held that Florida may require these solicitors to collect a use tax from Florida customers. Although the "salesmen" were not employees of Scripto, we determined that "such a fine distinction is without constitutional significance." Id. at 362 U. S. 211. This conclusion is consistent with our more recent cases. See National Geographic Society v. California Equalization Board, 430 U. S. 551, 430 U. S. 556-558 (1977).
"the crucial factor governing nexus is whether the activities performed in this state on behalf of the taxpayer are significantly associated with the taxpayer's ability to establish and maintain a market in this state for the sales."
satisfied because Tyler's "sales representatives perform any local activities necessary for maintenance of Tyler Pipe's market and protection of its interests. . . ." Id. at 321, 715 P.2d at 125. We agree that the activities of Tyler's sales representatives adequately support the State's jurisdiction to impose its wholesale tax on Tyler.
Tyler also asserts that the B & O tax does not fairly apportion the tax burden between its activities in Washington and its activities in other States. See Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 430 U. S. 285 (1977). Washington taxes the full value of receipts from in-state wholesaling or manufacturing; thus, an out-of-state manufacturer selling in Washington is subject to an unapportioned wholesale tax even though the value of the wholesale transaction is partly attributable to manufacturing activity carried on in another State that plainly has jurisdiction to tax that activity. This apportionment argument rests on the erroneous assumption that, through the B & O tax, Washington is taxing the unitary activity of manufacturing and wholesaling. We have already determined, however, that the manufacturing tax and wholesaling tax are not compensating taxes for substantially equivalent events in invalidating the multiple activities exemption. Thus, the activity of wholesaling -- whether by an in-state or an out-of-state manufacturer -- must be viewed as a separate activity conducted wholly within Washington that no other State has jurisdiction to tax. See Moorman Mfg. Co. v. Bair, 437 U.S. at 437 U. S. 280-281 (gross receipts tax on sales to customers within State would be "plainly valid"); Standard Pressed Steel Co. v. Washington Revenue Dept., 419 U.S. at 419 U. S. 564 (selling tax measured by gross proceeds of sales is "apportioned exactly to the activities taxed").
"These refund issues, which are essentially issues of remedy for the imposition of a tax that unconstitutionally discriminated against interstate commerce, were not addressed by the state courts. Also, the federal constitutional issues involved may well be intertwined with, or their consideration obviated by, issues of state law. Also, resolution of those issues, if required at all, may necessitate more of a record than so far has been made in this case. We are reluctant, therefore, to address them in the first instance. Accordingly, we reverse the judgment of the Supreme Court of Hawaii and remand for further proceedings not inconsistent with this opinion."
Id. at 468 U. S. 277 (footnote omitted).
"in light of the fact that the action was dismissed on the pleadings, and given the possible relevance of state law, see Bacchus Imports, Ltd. v. Dias, 468 U. S. 263, 468 U. S. 277 (1984). . . ."
that it is likewise appropriate for the Supreme Court of Washington to address in the first instance the refund issues raised by our rulings in these cases.
* Together with No. 85-2006, National Can Corp. et al. v. Washington State Department of Revenue, also on appeal from the same court.
"'Every person engaging in activities which are within the purview of the provisions of two or more paragraphs (a), (b), (c), (d), (e), (f) and (g) of section 4 [§ 8370-4], shall be taxable under each paragraph applicable to the activities engaged in: Provided, however, That persons taxable under paragraphs (a) or (b) of said section shall not be taxable under paragraphs (c) or (e) of said section with respect to making sales at retail or wholesale of products extracted or manufactured within this state by such persons. (Italics ours).'"
See Columbia Steel Co. v. State, 30 Wash.2d 658, 661, 192 P.2d 976, 977-978 (1948).
"'The immunities implicit in the Commerce Clause and the potential taxing power of a State can hardly be made to depend, in the world of practical affairs, on the shifting incidence of the varying tax laws of the various States at a particular moment. Courts are not possessed of instruments of determination so delicate as to enable them to weigh the various factors in a complicated economic setting which, as to an isolated application of a State tax, might mitigate the obvious burden generally created by a direct tax on commerce.'"
Id. at 663, 192 P.2d at 978 (quoting Freeman v. Hewit, 329 U. S. 249, 329 U. S. 256 (1946)).
The Washington Supreme Court upheld this revised scheme against constitutional challenge in B. F. Goodrich Co. v. State, 38 Wash.2d 663, 231 P.2d 325, cert. denied, 342 U.S. 876 (1951).
"(1) [E]very person engaged in activities which are within the purview of the provisions of two or more of sections RCW 82.04.230 to 82.04.290, inclusive, shall be taxable under each paragraph applicable to the activities engaged in."
"(2) Persons taxable under RCW 82.04.250 [tax on retailers] or 82.04.270 [tax on wholesalers and distributors] shall not be taxable under RCW 82.04.230 [tax on extractors], 82.04.240 [tax on manufacturers] or subsection (2), (3), (4), (5), or (7) of RCW 82.04.260 [tax on certain food processing activities] with respect to extracting or manufacturing of the products so sold."
"(3) Persons taxable under RCW 82.04.240 or RCW 82.04.260 subsection (4) shall not be taxable under RCW 82.04.230 with respect to extracting the ingredients of the products so manufactured."
See, e.g., B. F. Goodrich Co. v. State, supra; General Motors Corp. v. Washington, 377 U. S. 436 (1964); Standard Pressed Steel Co. v. Washington Dept. of Revenue, 419 U. S. 560 (1975); Chicago Bridge & Iron Co. v. Washington Dept. of Revenue, 98 Wash.2d 814, 659 P.2d 463, appeal dism'd, 464 U.S. 1013 (1983).
"The burden on interstate commerce and the dangers of multiple taxation are made apparent by considering Washington's tax provisions. The Washington provision here involved -- the 'tax on wholesalers' -- provides that every person 'engaging within this state in the business of making sales at wholesale' shall pay a tax on such business 'equal to the gross proceeds of sales of such business multiplied by the rate of one-quarter of one per cent.' Rev.Code Wash. 82.04.270; Wash. Laws 1949, c. 228, § 1 (e). In the same chapter, Washington imposes a 'tax on manufacturers' which similarly provides that every person 'engaging within this state in business as a manufacturer' shall pay a tax on such business 'equal to the value of the products . . . manufactured, multiplied by the rate of one-quarter of one per cent.' Rev.Code Wash. 82.04.240; Wash.Laws 1949, c. 228, § 1 (b). Then, in a provision entitled 'Persons taxable on multiple activities,' the statute endeavors to insure that local Washington products will not be subjected both to the 'tax on manufacturers' and to the 'tax on wholesalers.' Rev.Code Wash. 82.04.440; Wash.Laws 1949, c. 228, § 2-A. Prior to its amendment in 1950, the exemptive terms of this 'multiple activities' provision were designed so that a Washington manufacturer-wholesaler would pay the manufacturing tax and be exempt from the wholesale tax. This provision, on its face, discriminated against interstate wholesale sales to Washington purchasers, for it exempted the intrastate sales of locally made products while taxing the competing sales of interstate sellers. In 1950, however, the 'multiple activities' provision was amended, reversing the tax and the exemption, so that a Washington manufacturer-wholesaler would first be subjected to the wholesale tax and then, to the extent that he is taxed thereunder, exempted from the manufacturing tax. Rev.Code Wash. 82.04.440; Wash.Laws 1950 (special session), c. 5, § 2. See McDonnell & McDonnell v. State, 62 Wash.2d 553, 557, 383 P.2d 905, 908. This amended provision would seem to have essentially the same economic effect on interstate sales, but has the advantage of appearing nondiscriminatory."
General Motors Corp. v. Washington, 377 U.S. at 377 U. S. 459-460 (dissenting opinion).
"The immunities implicit in the Commerce Clause and the potential taxing power of a State can hardly be made to depend, in the world of practical affairs, on the shifting incidence of the varying tax laws of the various States at a particular moment."
See 467 U.S. at 467 U. S. 645, n. 8. The Washington Supreme Court also relied on Freeman v. Hewit in Columbia Steel Co. v. State, 30 Wash.2d at 663, 192 P.2d at 978.
Nor may the tax be justified as an attempt to compensate the State for its inability to impose a similar burden on out-of-state manufacturers whose goods are sold in Washington, for Washington subjects those sales to wholesale tax.
Many States provide tax credits that alleviate or eliminate the potential multiple taxation that results when two or more sovereigns have jurisdiction to tax parts of the same chain of commercial events. For example, the District of Columbia and all but three States with sales and use taxes provide a credit against their own use taxes for sales taxes paid to another State, although reciprocity may be required. See CCH State Tax Guide 6013-6014 (1986); Williams v. Vermont, 472 U. S. 14, 472 U. S. 22 (1985). See also Halliburton Oil Well Cementing Co. v. Reilly 373 U. S. 64, 373 U. S. 74-75 (1963).
"Equality is the theme that runs through all the sections of the statute. There shall be a tax upon the use, but subject to an offset if another use or sales tax has been paid for the same thing. This is true where the offsetting tax became payable to Washington by reason of purchase or use within the state. It is true in exactly the same measure where the offsetting tax has been paid to another state by reason of use or purchase there. No one who uses property in Washington after buying it at retail is to be exempt from a tax upon the privilege of enjoyment except to the extent that he has paid a use or sales tax somewhere. Everyone who has paid a use or sales tax anywhere, or, more accurately, in any state, is to that extent to be exempt from the payment of another tax in Washington."
"When the account is made up, the stranger from afar is subject to no greater burdens as a consequence of ownership than the dweller within the gates. The one pays upon one activity or incident, and the other upon another, but the sum is the same when the reckoning is closed."
300 U.S. at 300 U. S. 583-584 (emphasis added).
"It is plain that West Virginia's tax would be unconstitutionally discriminatory if it levied no tax on manufacturing or taxed manufacturing at a lower rate than wholesaling, for then the out-of-state wholesaler would be paying a higher tax than the in-state manufacturer-wholesaler."
467 U.S. at 467 U. S. 646 (REHNQUIST, J., dissenting).
Instead, the dissent argued that West Virginia's taxing scheme, taken in its entirety, did not discriminate against out-of-state manufacturers, because the manufacturing tax paid by a local manufacturer-wholesaler was much higher than the wholesale tax exacted from an out-of-state manufacturer.
In view of our holding on the discrimination issue, we need not reach the claim of local state manufacturers selling to interstate markets that the tax scheme does not fairly apportion tax liabilities between Washington and other States.
I join the Court's opinion holding that, "[i]n light of the facially discriminatory nature of the multiple activities exemption," ante at 483 U. S. 244, see Maryland v. Louisiana, 451 U. S. 725, 451 U. S. 756-757 (1981), the Washington taxpayers need not prove actual discriminatory impact "by an examination of the tax burdens imposed by other States." Ante at 483 U. S. 247. I do not read the Court's decision as extending the "internal consistency" test described in Armco Inc. v. Hardesty, 467 U. S. 638, 467 U. S. 644-645 (1984), to taxes that are not facially discriminatory, contra, post at 483 U. S. 257-258 (SCALIA, J., concurring in part and dissenting in part), nor would I agree with such a result in these cases. See American Trucking Assns., Inc. v. Scheiner, post p. 483 U. S. 298 (O'CONNOR, J., dissenting).
as conflicting with decades of precedents upholding internally inconsistent state taxes, it seems to me that Armco, rather than those numerous other precedents, ought to be overruled.
Prior to Armco, the internal consistency test was applied only in cases involving apportionment of the net income of businesses that more than one State sought to tax. That was the issue in Container Corp., see 463 U.S. at 463 U. S. 169-171, the only case cited by Armco in support of an internal consistency rule, see 467 U.S. at 467 U. S. 644-645, and there is no reason automatically to require internal consistency in other contexts. A business can, of course, earn net income in more than one State, but the total amount of income is a unitary figure. Hence, when more than one State has taxing jurisdiction over a multistate enterprise, an inconsistent apportionment scheme could result in taxation of more than 100% of that firm's net income. Where, however, tax is assessed not on unitary income but on discrete events such as sale, manufacture, and delivery, which can occur in a single State or in different States, that apportionment principle is not applicable; there is simply no unitary figure or event to apportion. That we have not traditionally applied the internal consistency test outside the apportionment context is amply demonstrated by the lengthy list of cases that the Court has (openly or tacitly) had to overrule here and in Scheiner.
"[t]he tax provides that two companies selling tangible property at wholesale in West Virginia will be treated differently depending on whether the taxpayer conducts manufacturing in the State or out of it."
"actual discriminatory impact on it by pointing to a State that imposes a manufacturing tax that results in a total burden higher than that imposed on Armco's competitors in West Virginia."
Id. at 467 U. S. 644. After reciting the internal consistency principle applicable in apportionment cases, we said that "[a] similar rule applies where the allegation is that a tax on its face discriminates against interstate commerce," ibid., regardless of "the shifting complexities of the tax codes of 49 other States. . . ." Id. at 467 U. S. 645. The holding of Armco thus establishes only that a facially discriminatory taxing scheme that is not internally consistent will not be saved by the claim that, in fact, no adverse impact on interstate commerce has occurred. To expand that brief discussion into a holding that internal consistency is always required, and thereby to revolutionize the law of state taxation, is remarkable.
manufacturing in the former State but selling in the latter State would pay two taxes. When this very objection was raised in Armco, we replied that, unlike the situation in Armco itself, "such a result would not arise from impermissible discrimination against interstate commerce. . . ." 467 U.S. at 467 U. S. 645. That response was possible there because the West Virginia tax was facially discriminatory; it is not possible here, because the Washington B & O tax is not.
It seems to me that we should adhere to our long tradition of judging state taxes on their own terms, and that there is even less justification for striking them down on the basis of assumptions as to what other States might do than there is for striking them down on the basis of what other States in fact do. Washington's B & O tax is plainly lawful on its own. It may well be that other States will impose similar taxes that will increase the burden on businesses operating interstate -- just as it may well be that they will impose dissimilar taxes that have the same effect. That is why the Framers gave Congress the power to regulate interstate commerce. Evaluating each State's taxing scheme on its own gives this Court the power to eliminate evident discrimination, while at the same time leaving the States an appropriate degree of freedom to structure their revenue measures. Finer tuning than this is for the Congress.
"Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."
of course, if the grant of power to Congress to regulate interstate commerce were exclusive, as Charles Pinckney's draft constitution would have provided, see Abel, The Commerce Clause in the Constitutional Convention and in Contemporary Comment, 25 Minn.L.Rev. 432, 434 (1941), and as John Marshall at one point seemed to believe it was. See Gibbons v. Ogden, supra, at 22 U. S. 209. However, unlike the District Clause, which empowers Congress "To exercise exclusive Legislation," Art. I, § 8, cl. 17, the language of the Commerce Clause gives no indication of exclusivity. See License Cases, 5 How. 504, 46 U. S. 579 (1847) (opinion of Taney, C.J.). Nor can one assume generally that Congress' Article I powers are exclusive; many of them plainly coexist with concurrent authority in the States. See Kewanee Oil Co. v. Bicron Corp., 416 U. S. 470, 416 U. S. 479 (1974) (patent power); Goldstein v. California, 412 U. S. 546, 412 U. S. 560 (1973) (copyright power); Houston v. Moore, 5 Wheat. 1, 18 U. S. 25 (1820) (court-martial jurisdiction over the militia); Sturges v. Crowninshield, 4 Wheat. 122, 17 U. S. 193-196 (1819) (bankruptcy power). Furthermore, there is no correlative denial of power over commerce to the States in Art. I, § 10, as there is, for example, with the power to coin money or make treaties. And both the States and Congress assumed from the date of ratification that at least some state laws regulating commerce were valid. See License Cases, supra, at 46 U. S. 580-581. The exclusivity rationale is infinitely less attractive today than it was in 1847. Now that we know interstate commerce embraces such activities as growing wheat for home consumption, Wickard v. Filburn, 317 U. S. 111 (1942), and local loan sharking, Perez v. United States, 402 U. S. 146 (1971), it is more difficult to imagine what state activity would survive an exclusive Commerce Clause than to imagine what would be precluded.
nature national, or admit only of one uniform system, or plan of regulation, may justly be said to be of such a nature as to require exclusive legislation by Congress."
That would perhaps be a wise rule to adopt (though it is hard to see why judges, rather than legislators, are fit to determine what areas of commerce "in their nature" require national regulation), but it has the misfortune of finding no conceivable basis in the text of the Commerce Clause, which treats "Commerce . . . among the several States" as a unitary subject. And attempting to limit the Clause's preemptive effect to state laws intended to regulate commerce (as opposed to those intended, for example, to promote health), see Gibbons v. Ogden, supra, at 22 U. S. 203, while perhaps a textually possible construction of the phrase "regulate Commerce," is a most unlikely one. Distinguishing between laws with the purpose of regulating commerce and "police power" statutes with that effect is, as Taney demonstrated in the License Cases, supra, at 46 U. S. 582-583, more interesting as a metaphysical exercise than useful as a practical technique for marking out the powers of separate sovereigns.
"Whether the States are now restrained from laying tonnage duties depends on the extent of the power 'to regulate commerce.' These terms are vague, but seem to exclude this power of the States."
of exclusivity of the federal commerce power was ill-considered, and not generally shared.
"the doctrine that state authority must be subject to such limitations as the Court finds it necessary to apply for the protection of the national community . . . [is] an audacious doctrine, which, one may be sure, would hardly have been publicly avowed in support of the adoption of the Constitution."
In sum, to the extent that we have gone beyond guarding against rank discrimination against citizens of other States -- which is regulated not by the Commerce Clause but by the Privileges and Immunities Clause, U.S.Const., Art. IV, § 2, cl. 1 ("The Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States") -- the Court for over a century has engaged in an enterprise that it has been unable to justify by textual support or even coherent nontextual theory, that it was almost certainly not intended to undertake, and that it has not undertaken very well. It is astonishing that we should be expanding our beachhead in this impoverished territory, rather than being satisfied with what we have already acquired by a sort of intellectual adverse possession.
"excludes similarly situated manufacturers and wholesalers which conduct one of those activities within Washington and the other activity outside the State."
Ante at 483 U. S. 246-247. That exclusion, however, can only be deemed facially discriminatory if one assumes that every State's taxing scheme is identical to Washington's.
The New York statute taxed, inter alia, both the sale and delivery of securities if either event occurred in New York, 429 U.S. at 429 U. S. 321, but imposed only one tax if both events occurred in that State. While the Court invalidated as discriminatory an amendment to that law reducing the tax for in-state sales by nonresidents and placing a cap on the tax payable on transactions involving in-state sales, it also declared that the statute prior to the amendment "was neutral as to in-state and out-of-state sales." Id. at 429 U. S. 330. That is plainly not true if internal consistency is a requirement of neutrality: assuming that all States had New York's pre-1968 scheme, if sale and delivery both took place in New York, there would be a single tax, while if sale took place in New York and delivery in New Jersey, there would be double taxation.
"Taken by itself, Cooley \[v. Board of Wardens, 12 How. 299 (1852),] may appear arbitrary, conclusory, and irreconcilable with the constitutional text. Nevertheless, anyone who has slogged through the Augean agglomeration preceding Curtis's labors must find them scarcely less impressive than those of the old stable-cleaner himself."
"It is a relief that, with the Bowman decision [Bowman v. Chicago Northwestern R. Co., 125 U. S. 465 (1888),] we have reached the end of the commerce clause decisions of the Waite period, for they do not make elevating reading."
Id. at 416 (footnote omitted). Future commentators are not likely to treat recent eras much more tenderly.
"If the States were divested of the power to legislate on this subject by the grant of the commercial power to Congress, it is plain this Act could not confer upon them power thus to legislate. If the Constitution excluded the States from making any law regulating commerce, certainly Congress cannot regrant, or in any manner reconvey to the States that power."
Id. at 53 U. S. 318.

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