Opinion ID: 2464143
Heading Depth: 1
Heading Rank: 6

Heading: Was collection of sales tax by Wyoming unconstitutional?

Text: [¶ 32] Maverick argues that collection of a sales tax on these vehicle transactions violates the Commerce Clause, Art. 1, § 8, of the United States Constitution. First, Maverick asserts that a Wyoming tax discriminates against or unduly burdens interstate commerce; and, second, unless Maverick is allowed a credit for sales or use taxes paid in other states, there is an unconstitutional multiple taxation of a single transaction. [¶ 33] The Commerce Clause gives Congress the power to regulate commerce among the several states. The framers of the Constitution intended to encourage free trade among the several states, to minimize restriction of the flow of commerce among the states, to protect commercial interactions from odious restraint, and to preclude interference through inconsistent or hostile state laws. Oregon Waste Systems, Inc. v. Dep't of Envtl. Quality of State of Or., 511 U.S. 93, 98-99, 114 S.Ct. 1345, 1349, 128 L.Ed.2d 13 (1994). The framers also intended to prohibit one state from exacting more than its just share of revenue from interstate commerce than would be proportionate with the burden imposed within that state by the commercial action. Id. [¶ 34] The modern law of what has come to be called the dormant Commerce Clause is driven by concern about `economic protectionismthat is, regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors.' Dep't of Revenue of Kentucky v. Davis, 553 U.S. 328, 337-338, 128 S.Ct. 1801, 1808, 170 L.Ed.2d 685 (2008). [(T)he] very purpose of the Commerce Clause was to create an area of free trade among the several States. Boston Stock Exchange v. State Tax Comm'n, 429 U.S. 318, 328, 97 S.Ct. 599, 606, 50 L.Ed.2d 514 (1977) (quoting McLeod v. J.E. Dilworth Co., 322 U.S. 327, 330, 64 S.Ct. 1023, 88 L.Ed. 1304 (1944)). The Commerce Clause not only authorized Congress to enact laws to protect and encourage commerce among the States, but it also created `an area of trade free from interference by the States.... (T)he Commerce Clause even without implementing legislation by Congress is a limitation upon the power of the States.' Id. (quoting Freeman v. Hewit, 329 U.S. 249, 252, 67 S.Ct. 274, 91 L.Ed. 265 (1946)). A state may not tax interstate transactions more heavily than intrastate transactions. Chemical Waste Management, Inc. v. Hunt, 504 U.S. 334, 342, 112 S.Ct. 2009, 2014, 119 L.Ed.2d 121 (1992). Once a state tax is found to discriminate against out-of-state commerce, it is typically struck down without further inquiry. Id. [¶ 35] In Complete Auto Transit, Inc. v. Brady, 430 U.S. 274, 279, 97 S.Ct. 1076, 1079, 51 L.Ed.2d 326 (1977), the U.S. Supreme Court imposed a test to aid courts in deciding this question of possible discrimination. Complete Auto involved a carrier which transported automobiles manufactured outside the state of Mississippi to dealers in that state. The carrier sought a refund of a sales tax imposed by Mississippi on those deliveries. The Court noted that the purpose of the Commerce Clause was not to relieve those engaged in interstate commerce of their just share of the state tax burden. Complete Auto, 430 U.S. at 279, 97 S.Ct. at 1079. The Court upheld the Mississippi tax using what has now become known as the  Complete Auto four-prong test. The test is used to determine whether a state tax violates the Commerce Clause, and it overruled the previously more formal and ritualistic view. Instead, the Court, referencing the more pragmatic approach, noted: These decisions have considered not the formal language of the tax statute but rather its practical effect, and have sustained a tax against Commerce Clause challenge 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. Id. [¶ 36] In Okla. Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 115 S.Ct. 1331, 131 L.Ed.2d 261 (1995), the U.S. Supreme Court held that a state had the power to impose a tax on the unapportioned gross receipts from the sales of bus tickets purchased in Oklahoma for trips with an out-of-state destination. The issue was whether the tax should be apportioned because the trip passed through other states. The Court applied the four-pronged Complete Auto test. Id. at 183, 115 S.Ct. at 1337. The Court held that apportionment was not necessary. The Court found that there was no possibility of duplicate taxation by other jurisdictions that would levy the same type of tax since the Oklahoma tax was only imposed on sales made in that state; therefore, the tax had internal consistency. Id. at 185, 115 S.Ct. at 1338. The Court also examined external consistency, which looks not to the logical consequences... but to the economic justification... to discover whether a State's tax reaches beyond that portion of value that is fairly attributable to the economic activity within the taxing State. Id. The Court indicated that although some state taxes must be apportioned in order to satisfy the Commerce Clause, this apportionment is not required in cases involving sales taxes. Id. at 186-88, 115 S.Ct. at 1338-40. A sale subject to sales tax is a discrete transaction, and the Court had consistently approved taxation of sales, without any allocation between the states. Id. at 186-87, 115 S.Ct. at 1339. As to the final two prongs of the test, the Court held that a tax was not discriminatory unless it provided a direct commercial advantage to local businesses. Id. at 197, 115 S.Ct. at 1344. The Oklahoma tax passed muster because it was levied on both interstate and intrastate sales. Id at 199, 115 S.Ct. at 1345. The last factor requires a fair relation between the tax and the benefits conferred by the state. The Court ruled that the state was not required to provide a detailed accounting and that interstate commerce could be required to pay its share and to contribute to the cost of government. Id. [¶ 37] When the Complete Auto analysis is applied to this case, the tax imposed on Maverick sales meets constitutional requirements. The sale in Wyoming is a discrete event; and under Jefferson, the sales tax is appropriate regardless of any subsequent out-of-state use. Since it is a sales tax imposed on a single discrete transaction, apportionment is not required. There is no discrimination; the tax is imposed equally on resident and nonresident buyers. Finally, the relationship between the tax and governmental services, as noted, does not require a detailed comparison of the tax relative to the public services provided. It is sufficient that the event is taxable and, therefore, the taxes may be used for services even if they are not related to the taxable event. [¶ 38] Maverick argues that if Maverick is not given a credit for use taxes paid in other states, then multiple taxes are imposed on a single transaction, contrary to constitutional principles. The parties stipulated, prior to the hearing before the SBOE, that Maverick was not required to prove that its customers had paid a sales or use tax in their home states because the Department was not contesting the payment of this tax. The Department indicated that it had entered into this stipulation because the only issue was whether the tax was due in Wyoming; therefore, payment of taxes in other states was not relevant. Maverick asserts that Wyoming should recognize that sales or use taxes may have been paid in the purchaser's home state, and that collection of the tax by Wyoming violates the holding of Jefferson. [¶ 39] Maverick falls short with its argument that it is entitled to a credit for taxes paid in other states. Maverick fails to recognize that this is not an issue of an imposition of a tax; rather, the issue is a question of whether a sales tax, properly imposed, may be enforced and collected. Maverick had the obligation to collect the tax at the time of the sale. It did not do so, relying solely on statements from the previous owner that were contrary to law. Maverick officials conceded that they did no independent investigation or otherwise attempt to determine their tax obligations. As a result, the sales taxes were not collected because Maverick incorrectly believed that they were not due. This is not a basis for allowing Maverick any tax credit for taxes subsequently paid in other states. [¶ 40] The District of Columbia and 44 of the 45 states that levy sales and use taxes allow a credit or exemption for similar taxes paid other states. Jefferson, 514 U.S. at 194, 115 S.Ct. at 1343, 2 Hellerstein & Hellerstein, ¶ 18.08, 18-100 (2010). However, as explained in Jefferson, these credit provisions create a national system under which the first state of purchase imposes the tax. Id. Wyoming is the first state of purchase, so it is entitled to impose the tax, and other states should allow a credit for the Wyoming tax. Maverick had a statutory obligation to collect the sales tax; and if it had done so, there would be a strong argument that the buyer's home state would be required to grant a credit for the sales tax. To the extent that it may prove difficult or even impossible for Maverick to obtain the credit from these other states or from its customers, these difficulties are solely the result of its own actions. [¶ 41] We affirm the actions of the SBOE in determining that the purchase of the various recreational vehicles at issue in this case constitutes a taxable event in Wyoming. We also agree with the SBOE that collection of sales taxes on these vehicles does not violate the U.S. Constitution, Art. 1, § 8, (the Commerce Clause).