Source: https://www.legalcrystal.com/case/105634/bacchus-imports-ltd-vs-dias
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Matched Legal Cases: ['§ 244', '§ 244', '§ 237', '§ 40', '§ 2', '§ 8', '§ 2', '§ 2', '§ 2', '§ 2']

Bacchus Imports Ltd Vs Dias - Citation 105634 - Court Judgment | LegalCrystal
Bacchus Imports, Ltd. Vs. Dias - Court Judgment
LegalCrystal Citation legalcrystal.com/105634
Case Number 468 U.S. 263
Appellant Bacchus Imports, Ltd.
Respondent Dias
bacchus imports, ltd. v. dias - 468 u.s. 263 (1984) u.s. supreme court bacchus imports, ltd. v. dias, 468 u.s. 263 (1984) bacchus imports, ltd. v. dias no. 82-1565 argued january 11, 1984 decided june 29, 1984 468 u.s. 263 appeal from the supreme court of hawaii syllabus hawaii imposes a 20% excise tax on sales of liquor at wholesale. but to encourage the development of the hawaiian liquor industry, okolehao, a brandy distilled from the root of an indigenous shrub of hawaii, and fruit wine manufactured in the state are exempted from the tax. appellant liquor wholesalers, who sell to retailers at the wholesale price plus the tax, brought an action in the hawaii tax appeal court seeking a refund of taxes paid under protest.....
Bacchus Imports, Ltd. v. Dias - 468 U.S. 263 (1984)
U.S. Supreme Court Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984)
1. Appellants have standing to challenge the tax in this Court. Although they may pass the tax on to their customers, they are liable for it, and must return it to the State whether or not their customers pay their bills. Moreover, even if the tax is passed on, it increases the price as compared to the exempted beverages, and appellants are entitled to litigate whether the tax has had an adverse competitive impact on their business. P. 468 U. S. 267 .
2. The tax exemption for okolehao and fruit wine violates the Commerce Clause, because it has both the purpose and effect of discriminating in favor of local products. Pp. 468 U. S. 268 -273.
(a) Neither the fact that sales of the exempted beverages constitute only a small part of the total liquor sales in Hawaii nor the fact that the exempted beverages do not present a "competitive threat" to other liquors is dispositive of the question whether competition exists between the exempt beverages and foreign beverages, but only goes to the extent of such competition. On the facts, it cannot be said that no competition exists. Pp. 468 U. S. 268 -269.
improper discrimination against interstate commerce merely because the burden of the tax was borne by consumers in Hawaii. Nor does the propriety of economic protectionism hinge upon characterizing the industry in question as "thriving" or "struggling." And it is irrelevant to the Commerce Clause inquiry that the legislature's motivation was the desire to aid the makers of the locally produced beverages, rather than to harm out-of-state producers. Pp. 468 U. S. 270 -273.
3. The tax exemption is not saved by the Twenty-first Amendment. The exemption violates a central tenet of the Commerce Clause, but is not supported by any clear concern of that Amendment in combating the evils of an unrestricted traffic in liquor. The central purpose of the Amendment was not to empower States to favor local liquor industry by erecting barriers to competition. Pp. 468 U. S. 274 -276.
4. This Court will not address the issues of whether, despite the unconstitutionality of the tax, appellants are entitled to tax refunds because the economic burden of the tax was passed on to their customers. These issues were not addressed by the state courts, federal constitutional issues may be intertwined with issues of state law, and resolution of the issues may necessitate more of a record than so far has been made. Pp. 468 U. S. 276 -277.
WHITE, J., delivered the opinion of the Court, in which BURGER, C.J., and MARSHALL, BLACKMUN, and POWELL, JJ., joined. STEVENS, J., filed a dissenting opinion, in which REHNQUIST and O'CONNOR, JJ., joined, post, p. 468 U. S. 278 . BRENNAN, J., took no part in the consideration or decision of the case.
The Hawaii liquor tax was originally enacted in 1939 to defray the costs of police and other governmental services that the Hawaii Legislature concluded had been increased due to the consumption of liquor. At its inception the statute contained no exemptions. However, because the legislature sought to encourage development of the Hawaiian liquor industry, it enacted an exemption for okolehao from May 17, 1971, until June 20, 1981, and an exemption for fruit wine from May 17, 1976, until June 30, 1981. [ Footnote 1 ] Haw. Rev.Stat. §§ 244-4(6), (7) (Supp.1983). Okolehao is a brandy distilled from the root of the ti plant, an indigenous shrub of Hawaii. In re Bacchus Imports, Ltd., supra, at 569, n. 7, 656 P.2d at 727, n. 7. The only fruit wine manufactured in Hawaii during the relevant time was pineapple wine. Id. at 570, n. 8, 656 P.2d at 727, n. 8. Locally produced sake and fruit liqueurs are not exempted from the tax.
Appellants -- Bacchus Imports, Ltd., and Eagle Distributors, Inc. -- are liquor wholesalers who sell to licensed retailers. [ Footnote 2 ] They sell the liquor at their wholesale price plus the 20% excise tax imposed by § 244-4, plus a one-half percent tax imposed by Haw. Rev.Stat. § 237-13 (Supp.1983). Pursuant to Haw. Rev.Stat. § 40-35 (Supp.1983), which authorizes a taxpayer to pay taxes under protest and to commence an action in the Tax Appeal Court for the recovery of disputed sums, the wholesalers initiated protest proceedings and sought refunds of all taxes paid. [ Footnote 3 ] Their complaint alleged that the Hawaii liquor tax was unconstitutional because it violates both the Import-Export Clause [ Footnote 4 ] and the Commerce Clause [ Footnote 5 ] of the United States Constitution. The wholesalers sought a refund of approximately $45 million, representing all of the liquor tax paid by them for the years in question. [ Footnote 6 ]
The State presents a claim, not made below, that the wholesalers have no standing to challenge the tax, because they have shown no economic injury from the claimed discriminatory tax. The wholesalers are, however, liable for the tax. Although they may pass it on to their customers, and attempt to do so, they must return the tax to the State whether or not their customers pay their bills. Furthermore, even if the tax is completely and successfully passed on, it increases the price of their products as compared to the exempted beverages, and the wholesalers are surely entitled to litigate whether the discriminatory tax has had an adverse competitive impact on their business. The wholesalers plainly have standing to challenge the tax in this Court. [ Footnote 7 ]
Boston Stock Exchange v. State Tax Comm'n, 429 U. S. 318 , 429 U. S. 329 (1977) (quoting Northwestern States Portland Cement Co. v. Minnesota, 358 U. S. 450 , 358 U. S. 458 (1959)). Despite the fact that the tax exemption here at issue seems clearly to discriminate on its face against interstate commerce by bestowing a commercial advantage on okolehao and pineapple wine, the State argues -- and the Hawaii Supreme Court held -- that there is no improper discrimination.
Much of the State's argument centers on its contention that okolehao and pineapple wine do not compete with the other products sold by the wholesalers. [ Footnote 8 ] The State relies in part on statistics showing that, for the years in question, sales of okolehao and pineapple wine constituted well under one percent of the total liquor sales in Hawaii. [ Footnote 9 ] It also relies on the
In re Bacchus Imports, Ltd., 65 Haw., at 582, n. 21, 656 P.2d at 735, n. 21, as well as the court's comment that it had "good reason to believe neither okolehao nor pineapple wine is produced elsewhere." Id. at 582, n. 20, 656 P.2d at 735, n. 20. However, neither the small volume of sales of exempted liquor nor the fact that the exempted liquors do not constitute a present "competitive threat" to other liquors is dispositive of the question whether competition exists between the locally produced beverages and foreign beverages; [ Footnote 10 ] instead, they go only to the extent of such competition. It is well settled that "[w]e need not know how unequal the Tax is before concluding that it unconstitutionally discriminates." Maryland v. Louisiana, 451 U. S. 725 , 451 U. S. 760 (1981).
The State contends that a more flexible approach, taking into account the practical effect and relative burden on commerce, must be employed in this case because (1) legitimate state objectives are credibly advanced, (2) there is no patent discrimination against interstate trade, and (3) the effect on interstate commerce is incidental. See Philadelphia v. New Jersey, 437 U. S. 617 , 437 U. S. 624 (1978). On the other hand, it acknowledges that, where simple economic protectionism is effected by state legislation, a stricter rule of invalidity has been erected. Ibid. See also Minnesota v. Clover Leaf Creamery Co., 449 U. S. 456 , 449 U. S. 471 (1981); Lewis v. BT Investment Managers, Inc., 447 U. S. 27 , 447 U. S. 36 -37 (1980).
A finding that state legislation constitutes "economic protectionism" may be made on the basis of either discriminatory purpose, see Hunt v. Washington Apple Advertising Comm'n, 432 U. S. 333 , 432 U. S. 352 -353 (1977), or discriminatory effect, see Philadelphia v. New Jersey, supra. See also Minnesota v. Clover Leaf Creamery Co., supra, at 449 U. S. 471 , n. 15. Examination of the State's purpose in this case is sufficient to demonstrate the State's lack of entitlement to a more flexible approach permitting inquiry into the balance between local benefits and the burden on interstate commerce. See Pike v. Bruce Church, Inc., 397 U. S. 137 , 397 U. S. 142 (1970). The Hawaii Supreme Court described the legislature's motivation in enacting the exemptions as follows:
No one disputes that a State may enact laws pursuant to its police powers that have the purpose and effect of encouraging domestic industry. However, the Commerce Clause stands as a limitation on the means by which a State can constitutionally seek to achieve that goal. One of the fundamental purposes of the Clause "was to insure . . . against discriminating State legislation." Welton v. Missouri, 91 U. S. 275 , 91 U. S. 280 (1876). In Welton, the Court struck down a Missouri statute that
Id. at 91 U. S. 277 . Similarly, in Walling v. Michigan, 116 U. S. 446 , 116 U. S. 455 (1886), the Court struck down a law imposing a tax on the sale of alcoholic beverages produced outside the State, declaring:
Id. at 3 429 U. S. 37 . It is therefore apparent that the Hawaii Supreme Court erred in concluding that there was no improper discrimination against interstate commerce merely because the burden of the tax was borne by consumers in Hawaii.
The State attempts to put aside this Court's cases that have invalidated discriminatory state statutes enacted for protectionist purposes. See Minnesota v. Clover Leaf Creamery Co., supra, at 449 U. S. 471 ; Lewis v. BT Investment Managers, Inc., supra, at 447 U. S. 36 -37. The State would distinguish these cases because they all involved attempts "to enhance thriving and substantial business enterprises at the expense of any foreign competitors." Brief for Appellee Dias 30. Hawaii's attempt, on the other hand, was "to subsidize nonexistent (pineapple wine) and financially troubled (okolehao) liquor industries peculiar to Hawaii." Id. at 33. However, we perceive no principle of Commerce Clause jurisprudence supporting a distinction between thriving and struggling enterprises under these circumstances, and the State cites no authority for its proposed distinction. In either event, the legislation constitutes "economic protectionism" in every sense of the phrase. It has long been the law that States may not "build up [their] domestic commerce by means of unequal and oppressive burdens upon the industry and business of other States." Guy v. Baltimore, 100 U. S. 434 , 100 U. S. 443
Id. at 100 U. S. 442 . It was to prohibit such a "multiplication of preferential trade areas" that the Commerce Clause was adopted. Dean Milk Co. v. Madison, 340 U. S. 349 , 340 U. S. 356 (1951). Consequently, the propriety of economic protectionism may not be allowed to hinge upon the State's -- or this Court's -- characterization of the industry as either "thriving" or "struggling."
We therefore conclude that the Hawaii liquor tax exemption for okolehao and pineapple wine violated the Commerce Clause because it had both the purpose and effect of discriminating in favor of local products. [ Footnote 11 ]
The State argues in this Court that even if the tax exemption violates ordinary Commerce Clause principles, it is saved by the Twenty-first Amendment to the Constitution. [ Footnote 12 ] Section 2 of that Amendment provides:
Despite broad language in some of the opinions of this Court written shortly after ratification of the Amendment, [ Footnote 13 ] more recently we have recognized the obscurity of the legislative history of § 2. See California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S. 97 , 445 U. S. 107 , n. 10 (1980). No clear consensus concerning the meaning of the provision is apparent. Indeed, Senator Blaine, the Senate sponsor of the Amendment resolution, appears to have espoused varying interpretations. In reporting the view of
It is by now clear that the Amendment did not entirely remove state regulation of alcoholic beverages from the ambit of the Commerce Clause. For example, in Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U. S. 324 , 377 U. S. 331 -332 (1964), the Court stated:
Id. at 377 U. S. 332 . Similarly, in Midcal Aluminum, supra, at 445 U. S. 109 , the Court, noting that recent Twenty-first Amendment cases have emphasized federal interests to a greater degree than had earlier cases, described the mode of analysis to be employed as a "pragmatic effort to harmonize state and federal powers." The question in this case is thus whether the principles underlying the Twenty-first Amendment are sufficiently implicated by the exemption for okolehao and pineapple wine to outweigh the Commerce Clause principles that would otherwise be offended. Or, as we recently asked in a slightly different way,
Capital Cities Cable, Inc. v. Crisp, 467 U. S. 691 , 467 U. S. 714 (1984).
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. [ Footnote 14 ] 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.
For example, in State Board of Equalization v. Young's Market Co., 299 U. S. 59 , 299 U. S. 62 (1936), the Court stated:
The Court went on to observe, however, that a high license fee for importation may "serve as an aid in policing the liquor traffic." Id. at 299 U. S. 63 .
See also Mahoney v. Joseph Triner Corp., 304 U. S. 401 , 304 U. S. 403 (1938) ("since the adoption of the Twenty-first Amendment, the equal protection clause is not applicable to imported intoxicating liquor"). Cf. Craig v. Boren, 429 U. S. 190 (1976).
Four wholesalers of alcoholic beverages filed separate complaints challenging the constitutionality of the Hawaii liquor tax because, pursuant to an exception, since expired, the tax was not imposed on okolehao or pineapple wine in certain tax years. [ Footnote 2/1 ] Although only one of them actually sells okolehao and pineapple wine, [ Footnote 2/2 ] apparently all four of them are entitled to engage in the wholesale sale of these beverages as well as the various other alcoholic beverages that they do sell. The tax which they challenge is an excise tax amounting to 20 percent of the wholesale price; presumably the economic burden of the tax is passed on to the wholesalers' customers.
Today the Court holds that these wholesalers are "entitled to litigate whether the discriminatory tax has had an adverse competitive impact on their business." Ante at 468 U. S. 267 . I am skeptical about the ability of the wholesalers to prove that the exemption for okolehao and pineapple wine has harmed their businesses at all, partly because their customers have reimbursed them for the excise tax and partly because they are free to take advantage of the benefit of the exemption by selling the exempted products themselves. Even if some minimal harm can be proved, I am even more skeptical about the possibility that it will result in the multimillion-dollar refund that the wholesalers are claiming. My skepticism
concerning the economics of the wholesalers' position is not, however, the basis for my dissent. I would affirm the judgment of the Supreme Court of Hawaii because the wholesalers' Commerce Clause claim is squarely foreclosed by the Twenty-first Amendment to the United States Constitution. [ Footnote 2/3 ]
At the outset, it is of critical importance to a proper understanding of the significance of the Twenty-first Amendment in this litigation to note the issues this case does not raise. First, there is no claim that the Hawaii tax is inconsistent with any exercise of the power that Art. I, § 8, cl. 3, of the Constitution confers upon the Congress "To regulate Commerce among . . . the several States." The extent to which the Twenty-first Amendment may or may not have placed limits on the ability of Congress to regulate commerce in alcoholic beverages is simply not at issue in this case. Hence, there is no issue concerning the continuing applicability of previously enacted federal statutes affecting the liquor industry. [ Footnote 2/4 ] For purposes of analysis, we may assume, arguendo, that the Twenty-first Amendment left the power of Congress entirely unimpaired. [ Footnote 2/5 ]
Moreover, there is no claim that the Hawaii tax has impaired interstate commerce that merely passes through the State, [ Footnote 2/6 ] or that is destined to terminate at a federal enclave within the State. [ Footnote 2/7 ] Nor is there a claim of a due process violation, [ Footnote 2/8 ] nor a claim of discrimination among persons, as opposed to goods, [ Footnote 2/9 ] nor a claim of an effect on liquor prices outside the State. [ Footnote 2/10 ]
The tax is applied to the sale of liquor in the local market that presumably will be consumed in Hawaii. It thus falls squarely within the protection given to Hawaii by the second section of the Twenty-first Amendment, which expressly mentions "delivery or use therein." [ Footnote 2/11 ]
under the Commerce Clause. [ Footnote 2/12 ] The Commerce Clause effectively prevented States from unilaterally banning the local sale of intoxicating liquors from out of state, Leisy v. Hardin, 135 U. S. 100 (1890), but Congress, acting pursuant to its plenary power under the Commerce Clause, essentially conferred that authority on them, and this Court upheld that exercise of congressional power. Clark Distilling Co. v. Western Maryland R. Co., 242 U. S. 311 (1917). The Eighteenth Amendment, ratified in 1919, prohibited the manufacture, sale, and transportation of intoxicating liquors for beverage purposes, and expressly conferred concurrent power to enforce the prohibition on Congress and the several States. [ Footnote 2/13 ] Section 1 of the Twenty-first Amendment, ratified in 1933, repealed the Eighteenth Amendment. However, the constitutional authority of the States to regulate commerce in intoxicating liquors did not revert to its status prior to the adoption of these constitutional Amendments; § 2 of the Twenty-first Amendment expressly provides:
McKittrick, 305 U. S. 395 (1939); Indianapolis Brewing Co. v. Liquor Control Comm'n, 305 U. S. 391 (1939); Mahoney v. Joseph Triner Corp., 304 U. S. 401 (1938); State Board of Equalization v. Young's Market Co., 299 U. S. 59 (1936), and we have consistently reaffirmed that understanding of the Amendment, repeatedly acknowledging the broad nature of state authority to regulate commerce in intoxicating liquors, see, e.g., Capital Cities Cable, Inc. v. Crisp, 467 U. S. 691 , 467 U. S. 712 (1984); Craig v. Boren, 429 U. S. 190 , 429 U. S. 206 -207 (1976); Heublein, Inc. v. South Carolina Tax Comm'n, 409 U. S. 275 , 409 U. S. 283 -284 (1972); California v. LaRue, 409 U. S. 109 , 409 U. S. 114 -115 (1972); Seagram & Sons v. Hostetter, 384 U. S. 35 , 384 U. S. 42 (1966); Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U. S. 324 , 377 U. S. 330 (1964); Nippert v. Richmond, 327 U. S. 416 , 327 U. S. 425 (1946); United States v. Frankfort Distilleries, Inc., 324 U. S. 293 , 324 U. S. 299 (1945).
"The plaintiffs argue that, despite the Amendment, a State may not regulate importations except for the purpose of protecting the public health, safety or morals, and that the importer's license fee was not imposed to that end. Surely the State may adopt a lesser degree of regulation than total prohibition. Can it be doubted that a State might establish a state monopoly of the manufacture and sale of beer, and either prohibit all competing importations or discourage importation by laying a heavy impost, or channelize desired importations by confining them to a single consignee? Compare 83 U. S. 16 Wall. 36; Vance v. W. A. Vandercook Co. (No. 1), 170 U. S. 438 , 170 U. S. 447 . There is no basis for holding that it may prohibit, or so limit, importation only if it establishes monopoly of the liquor trade. It might permit the manufacture and sale of beer, while prohibiting hard liquors absolutely. If it may permit the domestic manufacture of beer and exclude all made without the State, may it not, instead of absolute exclusion, subject the foreign article to a heavy importation fee?"
299 U.S. at 299 U. S. 62 -63.
Corp., supra. However, in the passage quoted by the Court, ante at 468 U. S. 275 , Justice Stewart merely rejected the broad proposition that the Twenty-first Amendment had entirely divested Congress of all regulatory power over interstate or foreign commerce in intoxicating liquors. As I have already noted, this case involves no question concerning the power of Congress, see supra at 468 U. S. 279 , and n. 4, and Justice Brandeis, of course, in no way implied that Congress had been totally divested of authority to regulate commerce in intoxicating liquors -- a proposition which Justice Stewart characterized as "patently bizarre." 377 U.S. at 377 U. S. 332 . Moreover, the actual decision in Hostetter was predicated squarely on the principle reflected in the Court's earlier decision in Collins v. Yosemite Park & Curry Co., 304 U. S. 518 (1938). Referring to Collins, the Court explained:
"There it was held that the Twenty-first Amendment did not give California power to prevent the shipment into and through her territory of liquor destined for distribution and consumption in a national park. The Court said that this traffic did not involve "transportation into California for delivery or use therein'" within the meaning of the Amendment. "The delivery and use is in the Park, and under a distinct sovereignty." Id. at 304 U. S. 538 . This ruling was later characterized by the Court as holding "that shipment through a state is not transportation or importation into the state within the meaning of the Amendment." Carter v. Virginia, 321 U. S. 131 , 321 U. S. 137 ."
Hostetter v. Idlewild Bon Voyage Liquor Corp., 377 U.S. at 377 U. S. 332 . [ Footnote 2/14 ]
377 U.S. at 377 U. S. 346 . Indeed, only 11 days ago, we stated that a direct regulation on "the sale or use of liquor" within a State's borders is the "core § 2 power" conferred upon a State, Capital Cities Cable, Inc. v. Crisp, 467 U.S. at 467 U. S. 713 , observing:
The Court's contrary conclusion is based on the "obscurity of the legislative history" of § 2. Ante at 468 U. S. 274 . What the Court ignores is that it was argued in Young's Market that a "limitation of the broad language" of § 2 was "sanctioned by its history," but the Court, observing that the language of the Amendment was "clear," determined that it was unnecessary to consider the history, 299 U.S. at 299 U. S. 63 -64, the history which the Court today considers unclear. But now, according to the Court, the force of the Twenty-first Amendment contention in this case is diminished because the "central purpose of the provision was not to empower States to favor local liquor industries by erecting barriers to competition." Ante at 468 U. S. 276 . It follows, according to the Court, that
the Twenty-first Amendment. [ Footnote 2/15 ] The question is not one of "deference," nor one of "central purposes"; [ Footnote 2/16 ] the question is whether the provision in this case is an exercise of a power expressly conferred upon the States by the Constitution. It plainly is.
Two of the wholesalers, Bacchus Imports, Ltd., and Eagle Distributors, Inc., are appellants in this Court; the other two, Paradise Beverages, Inc., and Foremost McKesson, Inc., are nominally appellees under our Rules, see ante at 468 U. S. 266 , n. 2, but have filed briefs supporting reversal. All four were parties to the case in the Hawaiian Supreme Court.
See generally Capital Cities Cable, Inc. v. Crisp, 467 U. S. 691 (1984); California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc., 445 U. S. 97 (1980); see also Heublein, Inc. v. South Carolina Tax Comm'n, 409 U. S. 275 , 409 U. S. 282 , n. 9 (1972).
See generally Seagram & Sons v. Hostetter, 384 U. S. 35 (1966); compare United States Brewers Assn., Inc. v. Rodriquez, 465 U. S. 1093 (1984) (summarily dismissing appeal from 100 N.M. 216, 668 P.2d 1093 (1983)), with Healy v. United States Brewers Assn., Inc., 464 U.S. 909 (1983) ( summarily aff'g 692 F.2d 275 (CA2 1982)).
See infra at 468 U. S. 281 .
377 U.S. at 377 U. S. 333 -334.