Opinion ID: 2458228
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Heading: the hue tax violates the commerce clause

Text: States are not permitted to tax interstate commerce in a manner that discriminates in favor of local interests. Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450, 79 S.Ct. 357, 3 L.Ed.2d 421 (1959); Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 97 S.Ct. 599, 50 L.Ed.2d 514 (1977). The appellants pursue two theories in their commerce clause argument. First, they state the HUE tax, although facially neutral, imposes a far higher effective tax rate on out-of-state trucks than on in-state trucks for the same use of the highways. Their second argument is that as a flat, nonproportional tax, it is not fairly related to the level of highway services provided by the state to each HUE taxpayer. In Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 97 S.Ct. 1076, 51 L.Ed.2d 326 (1977), the United States Supreme Court considered the validity of a state sales tax under the commerce clause. The Court noted that under its prior decision in Spector Motor Service v. O'Connor, 340 U.S. 602, 71 S.Ct. 508, 95 L.Ed. 573 (1951), a state tax on the privilege of doing business was per se unconstitutional when it is applied to interstate commerce. In Brady , the Supreme Court overruled Spector , and instead, applied a four-part test to determine constitutionality under the commerce clause. Under that test a tax is valid when the tax (1) is applied to an activity with a substantial nexus with the taxing State, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to the services provided by the State. In Burlington N.R.R. Co. v. Ragland, Comm'r, 280 Ark. 182, 655 S.W.2d 437 (1983), we acknowledged that whenever there is a challenge to any state tax on interstate commerce, the tax will be subjected to the Brady test. The appellants maintain that the HUE tax fails to meet the third and fourth prongs of the Brady test. Since they admit that the tax is facially neutral, the appellants are claiming in their discussion of the third prong, that its practical effect is to discriminate against interstate commerce. This argument is based on the results of the ATA survey discussed previously. Although several arguments, pro and con, are made about the veracity of the ATA survey, we find no evidence that the HUE tax discriminates against interstate commerce. The tax is structured to offer three options for compliance. A truck that meets the criteria of the tax may pay an annual flat fee, a fee based on mileage, or buy a trip permit. These options are available to intrastate and interstate carriers alike. The money collected is used to offset highway repairs and costs and thus the HUE tax is in the nature of a user fee or tax. In Aero Mayflower Transit Co. v. Georgia Public Serv. Comm'n, et al., 295 U.S. 285, 55 S.Ct. 709, 79 L.Ed. 1439 (1935), the U.S. Supreme Court discussed a Georgia statute imposing an annual license fee for the maintenance of the highways. The Court found the statute did not lay an unlawful burden on interstate commerce. In so holding, the Court noted that the fee is a moderate amount, it is used for the upkeep of highways, and it is exacted without hostility to foreign or interstate transactions, being imposed also upon domestic vehicles operated in like conditions. There, too, the Court was confronted with the argument that the out-of-state carrier uses the roads of Georgia less than the local carriers, yet they pay the same amount. The Court held, [t]he fee is for the privilege for a use as extensive as the carrier wills that it shall be. There is nothing unreasonable or oppressive in a burden so imposed ... One who receives a privilege without limit is not wronged by his own refusal to enjoy it as freely as he may (citations omitted). Here, the amount of the fee is not being challenged as unreasonable per se, the money is used for the upkeep of the highways traveled by the carriers being taxed, and the tax applies to foreign and domestic carriers alike. The interstate carriers can opt to pay the flat fee. The fact that they do not make extensive use of the state's highways, does not make the tax levied discriminatory. Again, in Aero Mayflower Transit Co. v. Bd. of R.R. Comm'rs of Montana, et al., 332 U.S. 495, 68 S.Ct. 167, 92 L.Ed. 99 (1947), the Supreme Court discussed two flat highway taxes imposed in consideration of the use of the highways of this state. The Court found neither exaction discriminated against interstate commerce since each applies alike to local and interstate operations and neither taxes traffic or movements taking place outside Montana. The Court stated: Motor carriers for hire, and particularly truckers of heavy goods, like appellant, make especially arduous use of roadways entailing wear and tear much beyond that resulting from general indiscriminate public use ... Although the state may not discriminate against or exclude such interstate traffic generally in the use of its highways, this does not mean that the state is required to furnish those facilities to it free of charge or indeed on equal terms with other traffic not inflicting similar destructive effects ... Interstate traffic equally with intrastate may be required to pay a fair share of the cost and maintenance reasonably related to the use made of the highways. (citations omitted). The appellants maintain that the Brady decision overruled the Court's early decisions in the two Aero Mayflower cases. We disagree. The Court expressly overruled only Spector . It did not so treat these cases. Furthermore, in Massachusetts v. United States, 435 U.S. 444, 98 S.Ct. 1153, 55 L.Ed.2d 403 (1978), decided one year after Brady , the Supreme Court analogized the problem of a flat fee registration tax on all civil aircraft, to their previous motor vehicle tax cases, citing the Montana Aero Mayflower decision. The Maryland Court of Appeals reached a similar conclusion in American Trucking Ass'ns, Inc., et al v. Goldstein, et al, 301 Md. 372, 483 A.2d 47 (1984), using reasoning we now adopt. That court discussed an annual registration fee imposed on all motor carriers operating in Maryland. The Maryland court specifically found that Brady did not undercut the previously discussed flat highway user tax cases, which included both Aero Mayflower decisions. In finding that the registration fee did not discriminate against interstate commerce under Brady , the Maryland court noted that [i]t is not aimed at placing interstate business at a competitive disadvantage with local businesses, it applies equally to in-state and out-of-state registered motor carriers, and its purpose is not to protect local carriers against foreign competition. Rather, the court noted its purpose is to spread evenly among all commercial users the tax burden of supporting Maryland's highway system. The HUE tax meets the same criteria and accomplishes the same purposes. The appellants claim their statistics show that the HUE tax is discriminatory because, on a cost per mile basis, out of state truckers are charged more. Assuming their statistics are valid, the flat tax portion of our law must, logically, be the most onerous provision. The per mile or per trip alternatives benefit the out of state truckers by permitting them to pay less than the flat tax. We need go no further than to cite the cases holding that a flat tax is not discriminatory. The alternatives offered by our law, which in fact could benefit the out of state truckers, do not make this case distinguishable from the ones approving the flat rate as being a proper tax method in the context of a commerce clause challenge. As to the argument under the fourth prong of Brady , that as a flat tax, it is not fairly related to the level of highway services provided by the state to each HUE taxpayer, it can be answered under the same authority as the previous argument. The first flat fee case dealt with by the U.S. Supreme Court was the Georgia Aero Mayflower case, supra. The Court upheld the flat tax then, and in subsequent flat fee cases, holding that a state may impose a flat fee for the privilege of using its roads. In Capitol Greyhound Lines, et al. v. Brice, Comm'r, 339 U.S. 542, 70 S.Ct. 806, 94 L.Ed. 1053 (1950), the Court held that the formula used in calculating the flat tax was not crucial, rather the relevant inquiry was whether the amount of the tax was excessive. We agree. Acts of the Legislature are presumed to be constitutional and will not be held by the courts to be unconstitutional unless there is a clear incompatibility between the act and the constitution, with all doubts resolved in favor of the act. Pulaski County Municipal Court v. Scott, 272 Ark. 115, 612 S.W.2d 297 (1981). Here, the flat tax rate of $175 was not shown to be excessive or unreasonable.