Document: 429 U.S. 318 97 S.Ct. 599 50 L.Ed.2d 514 BOSTON STOCK EXCHANGE et al., Appellants,v.STATE TAX COMMISSION al. No. 75-1019. Argued Nov. 2, 1976. Decided Jan. 12, 1977. Syllabus A New York statute imposing a transfer tax on securities transactions, if part of the transaction occurs in York, was amended 1968 so that transactions involving an out-of-state sale are taxed more heavily than most within State. The amendment provides for two deviations from prior uniform application under which and shares same as in-state but sale: (1) by nonresidents afforded 50% reduction rate when involves sale; (2) total liability any taxpayer (resident or nonresident) is limited to $350 single it sale. purpose provide relief competitive disadvantage thought be created stock exchanges, against exchanges. Appellant "regional" exchanges brought action state court appellee State Tax Commission its members challenging constitutionality Commerce Clause. trial denied Commission's motion dismiss, appeal declared constitutional. Held : discriminates interstate commerce violation Pp. 328-337. (a) No State, consistent with Clause, may "impose . providing direct commercial advantage local business," Northwestern Cement Co. v. Minnesota, 358 450, 458, 79 357, 362, 3 421. P. 329. (b) Because imposes greater sales sales, tax, amended, falls short substantially evenhanded treatment demanded extra burden neither compensating like nor neutralizing economic previously enjoyed appellant result unamended statute. 329-332. (c) diversion diminution free competition wholly inconsistent trade With respect residents, discriminatory maximum promotes intrastate at expense nonresidents, both provisions discriminate fact this discrimination favor nonresident, also considered does not save Clause restrictions. 333-336. 37 N.Y.2d 535, 375 N.Y.S.2d 308, 337 N.E.2d 758, reversed remanded. Roger Pascal, appellants. Robert W. Bush, Voorheesville, appellees. Mr. Justice WHITE delivered opinion Court. 1 In case we asked decide recent State's longstanding transactions. Since 1905, has imposed (transfer tax) 1968, legislature now 1972, appellants, six located outside York,1 filed members. Exchanges' complaint alleged unconstitutionally magnitude sales.2 Supreme Court dismiss appealed. Appellate Division ordered granted extent entering judgment declaring constitutional.3 45 A.D. d 365, 357 116 (1974). Appeals affirmed order, 758 (1975), noted probable jurisdiction appeal, 424 964, 96 1457, 47 730 (1976). 2 * Law § 270.1 (McKinney 1966) "all agreements sell, memoranda all deliveries transfers certificates stock" foreign domestic corporation subject tax.4 Administrative regulations promulgated applies one five taxable events regardless where rest takes place, event only payable entire transaction. 20 N.Y.C.R.R. 440.2 For depends selling price per share determined number sold.5 N.Y. 270.2 1966). Thus, version 270, instances, occasion occurrence least based solely securities, sold. Exchanges do challenge 270.6 None States taxes securities. During 1960's Stock Exchange became concerned trading thus responsible growth exchanges.7 response concern fearful would relocate enacted 270-a amend 270 events, sale, place York. First, ("nonresident reduction") Taxable residents (regardless made)8 benefit decrease. Second, limits (maximum If made out-of-State, (or other event) without limitation.9 4 reason enactment intended effect clear legislative history. amendment, found: 5 "The industry, particularly have contributed importantly economy recognition financial center world. regions country business those individuals who requires article twelve law, important contributing element areas detriment state. Furthermore, large blocks stock, must given ease completion such payment tax. order encourage effecting their retention separate classification certain block desirable." Laws, c. 827, 1. 6 granting executive approval 270-a, then Governor Nelson Rockefeller confirmed new law "provide long-term some pressures State."10 announced remain 7 contend history states explicitly what implicit operation 270-a: unequal protect business. They argue impermissible Appellees dispute statements measure reduce agree, however, holding chosen nondiscriminatory, therefore constitutionally permissible, means "encouraging" Exchange. We hold II 8 As Great & P Tea Cottrell, 366, 923, 55 (1976), begin principle "(t)he very create area among several States." McLeod J. E. Dilworth Co., 322 327, 330, 64 1023, 1026, 88 L.Ed. 1304 (1944). It established beyond "the merely authorization Congress enact laws protection encouragement States, own force interference States. (T)he even implementing legislation limitation upon power Freeman Hewit, 329 249, 252, 67 274, 276, 91 265 (1946). not, eclipse reserved "power support governments," Gibbons Ogden, 9 Wheat. 1, 199, 23 (1824), purposes, cf. United Sanchez, 340 42, 44-45, 71 108, 110, 95 (1950); rather, limit power. Defining been continuing task On various occasions called make delicate adjustment between national interest open legitimate individual exercising taxing powers, counseled turns unique characteristics issue particular circumstances each case. g., supra, U.S., S.Ct., 276. This case-by-case approach left "much room controversy confusion little way precise guides exercise indispensable taxation." Portland 457, 421 (1959). Nevertheless, observed Clark just cited: "From quagmire there emerge firm peaks decision unquestioned." Id., 362. Among these fundamental find dispositive before us: business." Ibid. See Halliburton Oil Well Reily, 373 64, 83 1201, 10 202 (1963); Nippert Richmond, 327 416, 66 586, 90 760 (1946); I. M. Darnell Son Memphis, 208 113, 28 247, 52 413 (1908); Guy Baltimore, 100 434, 443, 25 743 (1880); Welton Missouri, 275, 347 (1876). prohibition follows inexorably basic Permitting enterprises businesses "would invite multiplication preferential destructive" protects. Dean Milk Madison, 349, 356, 295, 299, (1951). Although apparently accepting teaching cases, seemed view "compensatory legislation" "neutralize" conferred analogized use survived challenges. N.Y.2d, 542, N.Y.S.2d, 313-314, N.E.2d, 762. will characterization. 11 Prior neutral sales. An delivery triggered fell equally situs choice exchange transferred influenced tax; wherever made, arise. flow channeled into out tax.11 12 Section upset equilibrium. After took effect, nonresident contemplating faced possible burdens. he elected sell exchange, higher rates applied liability; sold one-half up liability. Similarly, engaging were levy $350; they bill basis nontax criteria. seller cannot escape can his obvious extend regional Rather "compensating" supposed resulting forecloses tax-neutral decisions creates sister 13 Equal commerce, lacking common theme running through cases sustained "compensating," taxes. Henneford Silas Mason 300 577, 57 524, 81 814 (1937), Washington 2% goods retail encouraging purchase stores, "compensating tax" did apply, had already subjected equal 2%. constitutional system nondiscriminatory purchases: 14 "Equality exists chattel bought another carried Washington. imported shipped origin received directly destination. situation borne owner balanced strictly local." 584, 527. 15 similar use-sales-tax structure General Trading Comm'n, 335, 1028, 1309 (1944), because "tax (was) professes excise laid personal property" made. 338, 1029. International Harvester Department Treasury, 340, 1019, 1313 (1944); Alaska Arctic Maid, 366 204, 929, 932, 227 (1961). could regard consequences. purchased paid back amount. treated manner. 16 holds be; compensates neutralizes 270.12 III 17 below further attempted invalidation finding might amount unconstitutional discrimination. found no "practical" since "it likely event." 543, 314, involve commerce; kinds state, believed permissible disagree nonresidents. 18 until substantial shares. Investors, institutional individual, large-block expected choose services, prices, market conditions rather geographical proximity. Even small difference (of either services) can, enough additional profit outweigh whatever costs incurred exchange. Legislature, findings connection recognized being conducted exchanges; necessary "(retain) stock." If, assumed, "more likely" retain Nor insubstantial. 30,000 $20 more, example, $350, while $1,500. disparity increases Such penalty markets deemed practical commerce.13 19 Both see 258-259, 279-280, restrictions assure commerce. stated outset, confined freedom State; engage across boundaries. There expressly address question whether manner types interests over businesses, import our impermissible. 743, held "build oppressive burdens industry States"; Baldwin G. A. F. Seelig, Inc., 294 511, 497, 1032 (1935), prohibited regulating milk purchases regulation "to suppress mitigate consequences states." 522, 500.14 More recently, "Court viewed suspicion statutes requiring operations performed home efficiently elsewhere. pursuing clearly interest, virtually se illegal." Pike Bruce Church, 397 137, 145, 844, 849, 174 (1970). Cf.Halliburton 72-73, 1205-1206. 21 primary prohibiting discriminatorily burdening resident's policy led demise fatal York's (transfer, delivery, agreement sell) using "requiring (other) State." consequence, diverted economically efficient channels directed IV 22 Our today prevent structuring systems development industry. compete lies heart policy. process products manufactured reversed, remanded proceedings opinion.15 24 ordered. Appellants Boston Exchange, Detroit Pacific Coast Cincinnati Midwest PBW (Philadelphia-Baltimore-Washington) facilities accounts customers. courts contended Privileges Immunities Art. IV, Protection Fourteenth Amendment. claims them. three grounds: lacked subject-matter jurisdiction, standing statute, (3) failed cause action. All agreed standing, dismissed merits course, general federal rights where, here, Constitution withdraws jurisdiction. agree two-part test Data Processing Service Camp, 150, 184 Appellants' portion involved express challenged infra, 325-328, nn. 7, 10. allegation establishes caused them "injury fact," exists. 151-152, 829. asserting right allege indirectly infringes right. "arguably zone protected guarantee question." 153, 830. Moreover, behalf "(A)n association representative (if it) allege(s) members, them, suffering immediate threatened injury sort justiciable themselves suit." Warth Seldin, 422 490, 2197, 2211, 343 (1975). National Motor Freight Assn. 372 246, 688, 709 NAACP Alabama, 449, 458-460, 78 1163, 1169-1171, 1488 (1958). traded suffer actual satisfy requirements representational standing. case, 21(2) (d) Federal Securities Acts Amendments 1975 effective. change beneficial record ownership effected registered clearing house agent unless otherwise physically 21(2)(d), 89 Stat. 161, amending Act 1934, U.S.C. 78bb(d) (1970 ed., Supp. V). defined 3(6) amendments, 100, 3(a) 78c(a)(25) Senate Committee unclear reached changes ownership, Report amendments indicates 21(2)(d) particular, S.Rep. 94-75, p. 60 (1975) U.S.Code Cong. Admin.News 1975, 179. N.Y.Tax 270.5(i)-(l ) Supp.1976). December counsel Taxation Finance issued covered 270: "(W)here sole 'registered agency' agent,' terms due owing after 1975. However, memorandum thereon paid." CCH Rep. 57-101.605 eliminate many questions raised still apply amendments. provided range 1.25 cents security less $5 highest more. When involved, e. gift, constant 2.5 share. years, 25% surcharge added 270-d Shortly first enacted, upheld Amendment ex rel. Hatch Reardon, 204 152, 27 188, 51 415 (1907). writ error parties argued 157, 189. arguments, Holmes party implicate 161-162, 190-191. should fall raise claim. undecided. 160-161, Thirty-three years later, held, 4-3 decision, violate O'Kane 283 439, 905 (1940). "upon lines." 442, 906. applied, "a non-discriminatory tax," "no practiced commerce." 444, 447, 907, 909. absence discrimination, undue public statement proposed president explained problems organization urged help solve them: "(T)he extensive study City, These studies indicate experienced increasing San Francisco, Los Angeles, Chicago, Detroit, Philadelphia Boston. Some 88% listed 1965 1967, volume increased 73.2%. Regional 'cross' (a broker finds buyer seller) 202% 1965-67. loss regionals. continues grow, snowball develops. become able take away revenue City. " existing preserve "Competitive acute non-resident investors transactions." Statement Haack, Mar. 4, 1968. authority long depend initially smaller gap gradually current July 1973. relevant Supp.1976) follows: "1. Notwithstanding section hundred seventy chapter first, nineteen sixty-nine, set forth paragraph subdivision amounts shall described section. "(a) during periods following table, percentages, article: "Percentage Rates Provided "Period "July 1969 June 30, 1970.............................. 95% 1970 1971.............................. 90% 1971 1972.............................. 80% 1972 1973.............................. 65% 1973 thereafter................................ "2. Where relates class issuer exceed, period beginning sixty-nine ending thirtieth, seventy, sum thousand dollars; seventy-one, fifty seventy-one seventy-two, seven seventy-two seventy-three, provided, member dealer, permitted required pursuant rules commission eighty-one-a pay stamps prescribed article, orders placed dealer day, person, relating issuer, executed day placing orders), shall, purposes two, constitute sale." changing patterns acknowledged changes: "Since far reaching revised keep pace changes. grown essentially international scope. While bulk funnels percent Nation's At time, heightened rise modern telecommunications electronic computer has, greatly expanded capacity recognizes character importance continued presence strength future prosperity "As adoption revisions contained bill, intends expand studying sites building downtown Manhattan." Public Papers 553 (1968). Of discourage occur full rate. neutralize reduced decreases disincentive discouraged. Had sought edge done simply event. Under system, sellers liable incur electing inherent reject argument end true that, absent prohibit property element. 347-348, 1022-1023, 282, (1876): Government) commodity ceased discriminating character. That protects it, entered origin." conclude rely factors choosing Whatever inclinations investors, activities. residents' refusal reinforces inhibiting inhibition barrier prohibits obstructions Cardozo rejected proposition justified measures health industry: "If promote welfare her farmers, guard cheaper prices Vermont, door opened rivalries reprisals meant averted subjecting nation. framed dominion political philosophy parochial range. theory peoples sink swim together, run salvation union division." 522-523, 500. reasons attempts dairy without, attempt Legislature saving provision invalidity affect enforcement part. distinction survive Compare 11. Construction savings clause is, appropriately decided courts.

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