377 U.S. 436 (1964), 115, General Motors Corp. v. Washington

Docket Nº:No. 115
Citation:377 U.S. 436, 84 S.Ct. 1564, 12 L.Ed.2d 430
Party Name:General Motors Corp. v. Washington
Case Date:June 08, 1964
Court:United States Supreme Court

Page 436

377 U.S. 436 (1964)

84 S.Ct. 1564, 12 L.Ed.2d 430

General Motors Corp.



No. 115

United States Supreme Court

June 8, 1964

Argued February 26, 1964



Appellant, a Delaware corporation, manufactures motor vehicles and parts outside the State of Washington some of which it sells to retail dealers in that State. It operates through substantially independent "Divisions," here, three automotive and one parts, all but the latter maintaining zone offices in Oregon which handle sales and other orders from dealers in Washington. Sales originate through projection of orders of estimated needs, for practical purposes, "a purchase order," worked out between the dealers and the corporation's district managers who conduct business from their homes in Washington and constantly call upon dealers, assisting in sales promotion, training of salesmen, etc.; service contacts are maintained through service representatives. One automotive division has a small branch office in Washington to expedite delivery of cars for dealers in all but nine counties. During the pertinent period, the automotive and parts divisions had about 40 employees resident or principally employed in the State. In addition, out-of-state zone office personnel visited dealers in the State from time to time. The parts division maintains warehouses in Oregon and Washington from which orders from Washington dealers are filled (though only the tax on Oregon shipments is protested). Appellant claims that its products taxed by Washington are manufactured in St. Louis, which levies a license tax measured by sales before shipment. This litigation arises from application of Washington's tax on the privilege of doing business in the State measured by the wholesale sales of appellant within the State. Appellant contended that it constituted a tax on unapportioned gross receipts in violation of the Commerce and Due Process Clauses. The lower court upheld this view except for some of the business conducted from appellant's local branch office. The State Supreme Court reversed, holding that all appellant's activities in the State were subject to the tax, which was measured by its wholesale sales and was found to bear a reasonable relation to appellant's in-state activities.


1. Though interstate commerce cannot be subjected to the burdens of multiple taxation, a tax measured by gross receipts is constitutionally proper if fairly apportioned. Pp. 439-440.

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2. The burden of establishing exemption from a tax rests upon a taxpayer claiming immunity therefrom. Norton Co. v. Department of Revenue, 340 U.S. 534, followed. P. 441.

3. The bundle of appellant's corporate activities or "incidents" in Washington afforded the State a proper basis for imposing a tax. Pp. 442-448.

4. The evidence was sufficient to warrant the finding by the state court of a nexus between appellant's in-state activities and its sales there, especially where its taxable business was so enmeshed with what it claimed was nontaxable. P. 448.

5. This Court does not pass upon appellant's claim of "multiple taxation" in violation of the Commerce Clause, because appellant did not show what definite burden in a constitutional sense the St. Louis tax places on the identical interstate shipments by which Washington measures its tax, or that Oregon levies any tax on appellant's activity bearing on Washington sales. Pp. 448-449.

60 Wash.2d 862, 376 P.2d 843, affirmed.

CLARK, J., lead opinion

MR. JUSTICE CLARK delivered the opinion of the Court.

This appeal tests the constitutional validity, under the Commerce and Due Process Clauses, of Washington's tax imposed upon the privilege of engaging in business activities within the State.1 The tax is measured by the

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appellant's gross wholesale sales of motor vehicles, parts and accessories delivered in the State. Appellant claims that the tax is levied on unapportioned gross receipts from such sales and is, therefore, a tax on the privilege of engaging in interstate commerce; is inherently discriminatory; results in the imposition of a multiple tax burden; and is a deprivation of property without due process of law. The Washington [84 S.Ct. 1567] Superior Court held that the presence of a branch office in Seattle rendered some of the Chevrolet transactions subject to tax, but, as to the remainder, held that the application of the statute would be repugnant to the Commerce and the Due Process Clauses of the United States Constitution. On appeal, the Supreme Court of Washington reversed the latter finding, holding that all of the appellant's transactions were subject

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to the tax on the ground that the tax bore a reasonable relation to the appellant's activities within the State. 60 Wash.2d 862, 376 P.2d 843. Probable jurisdiction was noted. 374 U.S. 824. We have concluded that the tax is levied on the incidents of a substantial local business in Washington, and is constitutionally valid, and therefore affirm the judgment.


We start with the proposition that

[i]t was not the purpose of the Commerce Clause to relieve those engaged in interstate commerce from their just share of state tax burden even though it increases the cost of doing the business.

Western Live Stock v. Bureau of Revenue, 303 U.S. 250, 254 (1938). "Even interstate business must pay its way," Postal Telegraph-Cable Co. v. Richmond, 249 U.S. 252, 259 (1919), as is evidenced by numerous opinions of this Court. For example, the Court has approved property taxes on the instruments employed in commerce, Western Union Telegraph Co. v. Attorney General, 125 U.S. 530 (1888); on property devoted to interstate transportation fairly apportioned to its use within the State, Pullman's Palace Car Co. v. Pennsylvania, 141 U.S. 18 (1891); on profits derived from foreign or interstate commerce by way of a net income tax, William E. Peck & Co. v. Lowe, 247 U.S. 165 (1918), and United States Glue Co. v. Oak Creek, 247 U.S. 321 (1918); by franchise taxes, measured by the net income of a commercially domiciled corporation from interstate commerce attributable to business done in the State and fairly apportioned, Underwood Typewriter Co. v. Chamberlain, 254 U.S. 113 (1920); by a franchise tax measured on a proportional formula on profits of a unitary business manufacturing and selling ale, "the process of manufacturing resulting in no profits until it ends in sales," Bass, Ratcliff & Gretton, Ltd. v. State Tax Comm'n, 266 U.S. 271, 282 (1924); by a personal property

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tax by a domiciliary State on a fleet of airplanes whose home port was in the taxing State, despite the fact that personal property taxes were paid on part of the fleet in other States, Northwest Airlines, Inc. v. Minnesota, 322 U.S. 292 (1944); by a net income tax on revenues derived from interstate commerce where fairly apportioned to business activities within the State, Northwestern States Portland Cement Co. v. Minnesota, 358 U.S. 450 (1959); and by a franchise tax levied on an express company, in lieu of taxes upon intangibles or rolling stock, measured by gross receipts, fairly apportioned, and derived from transportation within the State, Railway Express Agency, Inc. v. Virginia, 358 U.S. 434 (1959).

However, local taxes measured by gross receipts from interstate commerce have not always fared as well. Because every State has equal rights when taxing the commerce it touches, there exists the danger that such taxes can impose cumulative burdens upon interstate transactions which are not presented to local commerce. Cf. Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.S. 157, 170 (1954); Philadelphia & Southern S.S. Co. v. Pennsylvania, 122 U.S. 326, 346 (1887). Such burdens would destroy interstate commerce [84 S.Ct. 1568] and encourage the re-erection of those trade barriers which made the Commerce Clause necessary. Cf. Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 521-522 (1935). And, in this connection, we have specifically held that interstate commerce cannot be subjected to the burden of "multiple taxation." Michigan-Wisconsin Pipe Line Co. v. Calvert, supra, at 170. Nevertheless, as we have seen, it is well established that taxation measured by gross receipts is constitutionally proper if it is fairly apportioned.

A careful analysis of the cases in this field teaches that the validity of the tax rests upon whether the State is exacting a constitutionally fair demand for that aspect of interstate commerce to which it bears a special relation.

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For our purposes, the decisive issue turns on the operating incidence of the tax. In other words, the question is whether the State has exerted its power in proper proportion to appellant's activities within the State, and to appellant's consequent enjoyment of the opportunities and protections which the State has afforded. Where, as in the instant case, the taxing State is not the domiciliary State, we look to the taxpayer's business activities within the State, i.e., the local incidents, to determine if the gross receipts from sales therein may be fairly related to those activities. As was said in Wisconsin v. J. C. Penney Co., 311 U.S. 435, 444 (1940), "[t]he simple but controlling question is whether the state has given anything for which it can ask return."

Here, it is admitted that General Motors has entered the State and engaged in activities therein. In fact, General Motors voluntarily pays considerable taxes on its Washington operations, but contests the validity of the tax levy on four of its Divisions, Chevrolet, Pontiac, Oldsmobile, and General Motors Parts. Under these circumstances, appellant has the burden of showing that the operations of these divisions in the State are

dissociated from the local business, and interstate in nature. The general rule, applicable here, is that a taxpayer claiming immunity...

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