Williams v. Vermont

• Decision Date: 04 June 1985
• Docket Number: No. 84-592,84-592
• Citation: 86 L.Ed.2d 11,472 U.S. 14,105 S.Ct. 2465
• Parties: Norman WILLIAMS and Susan Levine, Appellants v. VERMONT et al
• Court: U.S. Supreme Court

472 U.S. 14

105 S.Ct. 2465

86 L.Ed.2d 11

Norman WILLIAMS and Susan Levine, Appellants

v VERMONT et al.

No. 84-592.

Argued March 19, 1985.

Decided June 4, 1985.

Syllabus

Vermont collects a use tax when cars are registered with it, but the tax is not imposed if the car was purchased in Vermont and a sales tax has been paid. The tax is also reduced by the amount of any sales or use tax paid to another State if that State would afford a credit for taxes paid to Vermont in similar circumstances. The credit is available, however, only if the registrant was a Vermont resident at the time he paid the taxes. Appellants, who bought and registered cars outside of Vermont before becoming Vermont residents, were required to pay the full use tax in order to register their cars in Vermont. In proceedings in the Vermont Superior Court, appellants alleged that Vermont's failure to afford them credit for the out-of-state sales taxes they had paid violated, inter alia, the Equal Protection Clause of the Fourteenth Amendment because the credit was provided in the case of vehicles acquired outside the State by Vermont residents. Rejecting appellants' contention, the court dismissed the complaint. The Vermont Supreme Court affirmed by citation to another decision handed down the same day, Leverson v. Conway, 144 Vt. 523, 481 A.2d 1029, in which it rejected a similar equal protection challenge to the tax credit, concluding that the Vermont statute was rationally related to the legitimate state interest in raising revenue to maintain and improve the highways, and rationally placed the burden on those who used them.

Held: When the Vermont statute is viewed on its face, appellants have stated a claim of discrimination prohibited by the Equal Protection Clause. Pp. 18-28.

(a) While the State asserts that the tax credit applies only to Vermont residents who register their cars in Vermont without first having registered them elsewhere, and that a resident who purchases, pays a sales or use tax on, and registers a car in another State must also pay the Vermont use tax upon his return, it does not appear that the Vermont Supreme Court, in ruling on the equal protection claim in Leverson, supra, construed the exemption in such a manner. Instead, every indication is that a Vermont resident enjoys a credit for any sales taxes paid to a reciprocating State, even if he registered and used the car there before registering it in Vermont. Pp. 18-21.

(b) An exemption such as that challenged here will be sustained if the legislature could have reasonably concluded that the challenged classifi- cation would promote a legitimate state purpose. No legitimate purpose is furthered by the discriminatory exemption here. Residence at the time of purchase is a wholly arbitrary basis on which to distinguish among present Vermont registrants—at least among those who used their cars elsewhere before coming to Vermont. The distinction between them bears no relation to the statutory purpose of raising revenue for the maintenance and improvement of Vermont roads. The customary rationale for a use tax—relating to protecting local merchants from out-of-state competition which, because of its lower or nonexistent tax burdens, can offer lower prices—has no application to purchases made out-of-state by those who were not residents of the taxing State at the time of purchase. Nor can the distinction here be justified by a state policy of making those who use the highways contribute to their maintenance and improvement, or as encouraging interstate commerce by enabling Vermont residents, faced with limited automobile offerings at home, to shop outside the State without penalty. Pp. 21-27.

144 Vt. 649, 478 A.2d 993, reversed and remanded.

Norman Charles Williams, Burlington, Vt., for appellants.

Andrew M. Eschen, Waterbury, Vt., for appellees.

Justice WHITE delivered the opinion of the Court.

The State of Vermont collects a use tax when cars are registered with it. The tax is not imposed if the car was purchased in Vermont and a sales tax has been paid. The tax is also reduced by the amount of any sales or use tax paid to another State if that State would afford a credit for taxes paid to Vermont in similar circumstances. The credit is available, however, only if the registrant was a Vermont resident at the time he paid the taxes. Appellants, who bought cars outside of Vermont before becoming residents of that State, challenge the failure to grant them a similar credit. We agree that this failure denies them the equal protection of the laws.

I

Appellants' complaint, which was dismissed before an answer was filed, sets out the following facts. In December 1980, appellant Norman Williams purchased a new car in Illinois, paying a five-percent sales tax. Three months later, he moved to Vermont, bringing the car with him. He subsequently attempted to register the car in Vermont without paying the required use tax. The Vermont Department of Motor Vehicles refused to register the car. Williams responded by suing in the Federal District Court for the District of Vermont, which, relying on 28 U.S.C. § 1341, dismissed his complaint. Williams then paid the tax, which came to $172, unsuccessfully sought a refund from the Department of Motor Vehicles, and filed the present suit in Vermont Superior Court.¹

The complaint alleged a number of constitutional defects in the State's failure to afford appellants credit for the sales taxes they had paid. One of them was that the Equal Protection Clause of the Fourteenth Amendment forbade the State to deny the credit to them while providing it in the case of vehicles "acquired outside the state by a resident of Vermont." Vt.Stat.Ann., Tit. 32, § 8911(9) (1981).

The Superior Court dismissed the complaint. Acknowledging that the use tax "does not afford, on its face, equal treatment to residents and nonresidents who purchase cars out-of-state," App. 14, the court considered the relevant inquiry to be "whether discrimination occurs within the state," id., at 15. It saw no such discrimination, reasoning that in practice Vermont residents always pay the use tax, because reciprocal States excuse payment of the sales tax and therefore there is no out-of-state payment to credit the use tax against. The court also found no burden on the right to travel, no violation of the Privileges and Immunities Clause, and no interference with interstate commerce.

The Vermont Supreme Court affirmed, 144 Vt. 649, 478 A.2d 993 (1984), by citation to another decision handed down the same day, Leverson v. Conway, 144 Vt. 523, 481 A.2d 1029, appeal dism'd for want of a substantial federal question, 469 U.S. 926, 105 S.Ct. 316, 83 L.Ed.2d 255 (1984), pet. for rehearing pending, No. 84-315. Leverson was an essentially identical case brought by a former Wisconsin resident who, like appellants, had purchased a car in his home State and paid a sales tax, then moved to Vermont and been obliged to pay the use tax. The Vermont Supreme Court upheld the tax. First, it rejected the argument that denying a credit for a sales tax paid to another State infringed the right to travel. The use tax did not impose a penalty for moving to Vermont—the obligation was incurred only by registering one's car there. Absent such a penalty, and given that there is no fundamental right to have or to register a car, the Equal Protection Clause required only minimal scrutiny. The statute was rationally related to the legitimate state interest in raising revenue to maintain and improve the highways, and rationally placed the burden on those who used them. The exemption for residents who purchased cars in reciprocal States encouraged purchases within Vermont by residents of those States. This goal would not be furthered by granting an exemption to new residents who have already purchased cars elsewhere. The court went on to hold that the Privileges and Immunities Clause did not come into play because no right, such as the right to travel, qualifying as a privilege or immunity was involved. It also rejected a Commerce Clause challenge, viewing this as a straightforward use tax, imposed only on goods that had come to rest in Vermont.

The Vermont Supreme Court denied rehearing, and appellants brought this appeal. We noted probable jurisdiction, 469 U.S. 1085, 105 S.Ct. 588, 83 L.Ed.2d 698 (1984), and we now reverse.

II

The Vermont Motor Vehicle Purchase and Use Tax, Vt.Stat.Ann., Tit. 32, ch. 219 (1981), is distinct from the State's general sales and use taxes.² It is intended to "improve and maintain the state and interstate highway systems, to pay the principal and interest on bonds issued for the improvement and maintenance of those systems and to pay the cost of administering this chapter." § 8901. The revenue from the tax goes into a distinct "transportation fund." § 8912. The tax is of two sorts: a four-percent sales tax is imposed at the time of purchase of a motor vehicle in Vermont by a Vermont resident, § 8903(a), and a four-percent use tax is imposed upon registration of a motor vehicle in Vermont unless the Vermont sales tax was paid, § 8903(b).³ A number of vehicles are exempt, including, for example, those owned by a State, the United States, or charitable institutions, and those transferred within a family. See generally § 8911. Prior to September 1, 1980, the statute also exempted "pleasure cars, the owners of which were not residents of this State at the time of purchase and had registered and used the vehicle for at least thirty days in a state or province other than Vermont." Vt.Stat.Ann., Tit. 32, § 8911(6) (1970 and Supp.1981) (repealed). That provision would have exempted appellants from the use tax. Since its repeal, registrants who purchased their cars out-of-state when not Vermont residents have had to pay the use tax, regardless of whether they already paid a sales tax in another jurisdiction on the same car.

One other exemption is critical to this case....