Document: 467 U.S. 638 104 S.Ct. 2620 81 L.Ed.2d 540 ARMCO INC.v.David C. HARDESTY, Jr., State Tax Commissioner of West Virginia. No. 83-297. Supreme Court the United States Argued April 17, 1984. Decided June 12, Rehearing Denied Oct. 9, Syllabus Virginia imposes a gross receipts tax on businesses selling tangible property at wholesale. Local manufacturers are exempt from tax, but subject to higher manufacturing tax. Appellant is an Ohio corporation that manufactures and sells steel products conducted business in It challenged wholesale ground, inter alia, discriminated against interstate commerce because exemption granted local manufacturers. Appellee rejected challenge. The Circuit reversed other grounds, turn was by Appeals. Held: unconstitutionally discriminates commerce. Pp. 642-646. (a) Under Commerce Clause, may not transaction or incident more heavily when it crosses state lines than occurs entirely within State. On its face, has just effect, since whether wholesaler depends upon conducts out it. P. 642. (b) cannot be deemed "compensating tax." Manufacturing wholesaling "substantially equivalent events" such can said compensate for lighter burden placed wholesalers 642-643. (c) Moreover, two taxes considered together, discrimination persists, if any like manufacturers, then appellant others will pay both while sellers only need prove actual discriminatory impact pointing results total imposed in-state Any rule would mean constitutionality Virginia's laws depend shifting complexities 49 States' validity each taxpayer particular which operated. Cf. Container Corp. America v. Franchise Board, 463 159, 103 2933, 77 545 (1983). 644-645. ___ W.Va.___, 303 S.E.2d 706, reversed. Richard R. Dailey, New York City, appellant. Robert Digges, Charleston, W.Va., appellee. Justice POWELL delivered opinion Court. 1 In this appeal claims exempt, We agree reverse court's judgment upholding 2 * Armco Inc. qualified do Its primary products. From 1970 through 1975, time issue here, five divisions subdivisions. Two these had facilities employees State, three sold various customers franchisees nonresident traveling salesmen.1 3 persons engaged W.Va.Code § 11-13-2c (1983).2 For years 1975 took position could sales made salesmen. addition, were see 11-13-2,3 argued After hearing, Commissioner, who appellee determined properly assessed issue, shown discriminatory.4 Kanawha County reversed, holding nexus between insufficient support imposition 4 Appeals upheld 706 Viewing all Armco's activities as "unitary business," court held substantial with taxpayer's fairly related services benefits provided Id., S.E.2d, 714, 716. also did discriminate commerce; making they paid much tax.5 716-717. 5 noted probable jurisdiction, 464 1016, (1983), now reverse. Since we hold does commerce, reach argument there sufficient here permit taxation them. II 6 long been established Clause own force protects free trade among States. Boston Stock Exchange Comm'n, 429 318, 328, 97 599, 606, 50 514 (1977); Freeman Hewit, 329 249, 252, 67 274, 276, 91 L.Ed. 265 (1946). One aspect protection "may transactions basis some element." Exchange, supra, U.S., 332, n. S.Ct., 608, 12. That is, 7 appears have effect. provides companies treated differently depending Thus, manufactured no sale imposed. If imported sale, 0.27% price. See General Motors Washington, 377 436, 459, 84 1564, 1577, 12 430 (1964) (Goldberg, J., dissenting) (similar provision "on Washington purchasers exempted intrastate locally taxing competing sellers"); Columbia Steel Co. 30 Wash.2d 658, 664, 192 P.2d 976, 979 (1948) (invalidating tax). 8 below view favor local, occurred taxpayers far 0.88% This mistaken. tax" competitors. Maryland Louisiana, 451 725, 758-759, 101 2114, 2135, 68 576 (1981), refused consider first use Louisiana gas brought complement severance same amount produced Severance processing event[s]" compensating might 759, 2135. Here, too, heavy admittedly frequently entails say portion attributable manufacturing, sales.6 fact reduced manufacturer goods part takes place makes clear that, proxy States.7 9 persists. 48 every right do—then resident example, adopt precise scheme seller 0.27%; purely 10 suggests should require competitors test. 169, 2942, must "what called internal consistency—that [tax] applied jurisdiction," impermissible interference trade. case, discussing requirement apportioned reflect A similar applies where allegation face unfairly apportions income form id., 170-171, 2948. codes States, operated.8 11 true, appearing amicus curiae points out, faced situation complains (or State) wholesaling. situation, bear taxes, one. But result arise fair encouragement business. What 336-337, 610, relevant well: "Our decision today prevent structuring their systems encourage growth development industry. Nor compete share competition lies heart policy. process discriminatorily operations performed State." 13 14 so ordered. 15 REHNQUIST, dissenting. 16 strikes down finding receipts. Appellant's arguments, however, effectively rest hypothetical another levied corresponding Because out-of-state manufacturer-wholesalers, I affirm below. plain taxed lower rate wholesaling, paying manufacturer-wholesaler. case here. Instead, his pays overall wholesaler. dismisses fact, asserting formally facially discriminatory. rejects possibility incorporates otherwise sales. 17 Neither reasons, my view, supports invalidating State's scheme. Our prior decisions indicate considering discriminatory, "equality purposes flow measured dollars cents, legal abstractions." Halliburton Oil Well Reily, 373 64, 70, 83 1201, 1204, 202 (1963) (footnote omitted). 756, 2134, (1981) (state examined practical effect). Examining structure whole, 460 536, 545-546, 1344, 1350, 75 264 created granting direct commercial advantage businesses. 329, (1977) (transfer stock one-half sales). scheme, manufacturer-wholesalers value product, value. level competes instate goods, quite likely less suffices rebut appellant's 541-542, 1348 (Federal Government federal contractors contractors); Alaska Arctic Maid, 366 199, 204, 929, 932, 227 (1961) (local fish processors tax).a1 18 justifies ground Ohio, manufacture Virginia, possibly manufacturer. demonstrated solely reason sidesteps borrowing concept employed our net cases. line cases consistency into consideration jurisdictions ___, perfectly proper examine system burdens Nevertheless, analysis irrelevant examining based transactions. Where linked exactly taxed, unnecessary unduly burdened. Standard Pressed Revenue Dept., 419 560, 564, 95 709, 42 719 (1975); cf. Commonwealth Edison Montana, 453 609, 617, 2946, 2953, 69 884 (1981). 19 Court's employs formalism though generally abandoned Complete Auto Transit, Brady, 288-289, 15, ,S.Ct. 1076, 1083-1084, 51 326 (1977), per se administrative convenience attended former Spector Motor Service, O'Connor, 340 602, 71 508, 573 (1951). apply similarly realistic approach uphold company's Mining Division mined, cleaned, coal Metal Products construction drainage office staffed employees. Division's metal buildings exclusively franchised dealers Group Union Wire Rope wire rope salesmen solicited 1971 provided, part: "Upon person engaging continuing whatsoever, real personal, . hereby levied, shall collected, fifty-five one-hundredths one percent business, except equal twenty-seven business." W.Va.Acts, ch. 169. 0.25% 1971. 1959 167. Code 11-13-2 (1983) extracting natural resources, read follows, "[A]ny exercising privilege taxable under sections two-a [extracting producing resources sale] two-b [manufacturing] article producers wholesalers, jobbers, retailers consumers consumption purchaser's required section two-c [§ 11-13-2c] article." 1955 165, 2; waived statutory penalties disputed he found objections "good faith effort interpret question law." App. Juris. Statement 49a. 11-13-2b product proceeds derived sale. price multiplied manufacturer's payroll costs As "every compounding preparing profit, use, substance commodity." Prior 1971, 0.8%. 1967 188; expect larger normally greater extent transient 279, 1079, "fairly State"). relied (1961). control statute merely laid nondiscriminatory kind operating freezer ships Alaska. different cannery Alaska, (in higher) 205, 932. There dispute operate precisely ensure latter clear. true Caskey Baking 313 117, 119-120, 121, 61 881, 883, 85 1223 (1941). event decided notion "direct" disapproved, "indirect" constitutional. 120, 4, 4; Department Association Stevedoring Cos., 435 734, 750, 98 1388, 1399, 55 682 (1978). distinction governed definition engaged. acknowledge recent dismissal want raising, nearly identical challenge Gas Transmission Rose, 459 807, 32, 74 46 (1982). find necessary follow precedent given plenary consideration. See, e.g., Caban Mohammed, 441 380, 390, 99 1760, 1767, 60 297 (1979). context relevant: "It suggested, sought impose transaction, burdensome consequences undeniable. being, freedom generated. immunities implicit potential power hardly depend, world affairs, incidence varying moment. Courts possessed instruments determination delicate enable them weigh factors complicated economic setting which, isolated application mitigate obvious commerce." 256, 278, 662-664, 978-979 (1948), language dispositive 72, 1205, (deleterious effects Louisiana's exacerbated "[i]f unequal structures adopted States"). a1 Admittedly, value, theoretically possible happen, one-quarter times normal practice differential seem unlikely. event, failed show 448-449, 1571-1572, (1964).

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