Leverson v. Conway

• Decision Date: 15 June 1984
• Docket Number: No. 83-157,83-157
• Court: Vermont Supreme Court
• Parties: Leonard G. LEVERSON v. William H. CONWAY, Commissioner, Vermont Department of Motor Vehicles.

Page 1029

481 A.2d 1029

144 Vt. 523

Leonard G. LEVERSON v. William H. CONWAY, Commissioner, Vermont Department of Motor Vehicles.

No. 83-157.

Supreme Court of Vermont.

June 15, 1984.

Appeal Dismissed Oct. 29, 1984.

See 105 S.Ct. 316.

Leonard G. Leverson, Pittsford, pro se.

John J. Easton, Jr., Atty. Gen., and Andrew M. Eschen, Asst. Atty. Gen., Montpelier, for defendant-appellee.

Before BILLINGS, C.J., and HILL, UNDERWOOD, PECK and GIBSON, JJ.

GIBSON, Justice.

On May 29, 1982, while residing in Wisconsin, plaintiff purchased a 1979 Subaru station wagon for the sum of $4325. He paid a five percent sales tax of $216.25 to the state of Wisconsin. In July 1982 plaintiff moved to Vermont. Upon registering his vehicle in Vermont in August 1982, plaintiff was required to pay a use tax of $112 as a condition of registration. The use tax, computed at the rate of four percent on a low book value of $2800 as of the date of registration, was paid by plaintiff under protest. Subsequently, plaintiff brought suit to recover the $112. The matter was submitted to the small claims court on an agreed statement of facts. Upon the entry of judgment for defendant, plaintiff appealed, presenting the following issues for our consideration.

(1) Whether the Vermont motor vehicle purchase and use tax (32 V.S.A. § 8901 et seq.) violates the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution by its failure to afford to a new resident credit for the sales tax paid on an automobile purchased, used, and registered in a former state of residence;

(2) Whether the Vermont motor vehicle purchase and use tax violates the Proportional Contribution Clause (Ch. I, Art. 9) of the Vermont Constitution by its failure to afford to a new resident credit for the sales tax paid on an automobile purchased, used, and registered in a former state of residence;

(3) Whether the Vermont motor vehicle purchase and use tax violates the Privileges and Immunities Clause of Article IV, § 2, cl. 1 of the United States Constitution by its failure to afford to a new resident credit for the sales tax paid on an automobile purchased, used, and registered in a former state of residence; and

(4) Whether the Vermont motor vehicle purchase and use tax violates the Commerce Clause (Art. I, § 8, cl. 3) of the United States Constitution by its failure to afford to a new resident credit for the sales tax paid on an automobile purchased, used, and registered in a former state of residence.

32 V.S.A. § 8903 imposes a tax of four percent, or $600, whichever is smaller, upon the purchase and use of motor vehicles within the state of Vermont. The tax is payable by residents of the state at the time of purchase, § 8903(a), or, if the vehicle is purchased out of state, at the time the vehicle is first registered for use within the state. § 8903(b).

Residents who purchase pleasure cars outside the state and pay a sales or use tax to another state are exempt from paying a use tax to the state of Vermont, at least to the extent of the tax paid the other state, providing the state of purchase has a reciprocal agreement with Vermont that grants a similar credit for Vermont tax paid under similar circumstances. § 8911(9).

Until recently, a nonresident who purchased, registered and used his pleasure car in another state for at least thirty days was also granted an exemption; however, that exemption was repealed effective September 1, 1980. 1979, No. 202 (Adj.Sess.), § 3, Pt. VI, eff. Sept. 1, 1980 (repealing 32 V.S.A. § 8911(6)). As a result of the repeal, a nonresident who moves to Vermont and desires to register his motor vehicle here must pay the state of Vermont a use tax of four percent of the fair market value of his vehicle as of the time of registration. Although Wisconsin is a state that has a reciprocal agreement with the state of Vermont, the plaintiff, as a person who purchased his vehicle while a resident of Wisconsin and registered and used it in that state for more than thirty days, is not entitled to an exemption in light of the 1980 repeal.

The purpose of the motor vehicle purchase and use tax is to pay for improvement and maintenance of the state and interstate highway systems. 32 V.S.A. § 8901. The use tax, an important complement to the sales tax, is designed "to protect a state's revenues by taking away the advantages to residents of travelling out of state to make untaxed purchases, and to protect local merchants from out-of-state competition which, because of its lower or nonexistent tax burdens, can offer lower prices." Rowe-Genereux, Inc. v. Department of Taxes, 138 Vt. 130, 133-34, 411 A.2d 1345, 1347 (1980). The power of a state to establish a nondiscriminatory tax on the user of goods brought from another state has long been firmly established. Henneford v. Silas Mason Co., 300 U.S. 577, 57 S.Ct. 524, 81 L.Ed. 814 (1937).

Sales and use taxes are different in concept, and they are assessed upon different transactions.

A sales tax is a tax on the freedom of purchase .... A use tax is a tax on the enjoyment of that which was purchased....

... Though sales and use taxes may secure the same revenues and serve the same complementary purposes, they are ... taxes on different transactions and for different opportunities afforded by a State.

McLeod v. J.E. Dilworth Co., 322 U.S. 327, 330-31, 64 S.Ct. 1023, 1025-26, 88 L.Ed. 1304 (1944). Because the taxes are intended to complement one another, a person who has paid a tax upon the purchase of a motor vehicle in Vermont is not subject to the payment of a use tax to the state. 32 V.S.A. § 8903(b).

I.

We first consider whether Vermont's motor vehicle purchase and use tax violates the Equal Protection Clause. Plaintiff claims that the use tax adversely affects his right to travel and that any infringement of this fundamental right must be viewed with "strict scrutiny" by the courts. The right to travel has been recognized by the United States Supreme Court as a right that "protects new residents of a state from being disadvantaged because of their recent migration or from otherwise being treated differently from longer term residents." Zobel v. Williams, 457 U.S. 55, 60 n. 6, 102 S.Ct. 2309, 2312 n. 6, 72 L.Ed.2d 672 (1982) (citing Memorial Hospital v. Maricopa County, 415 U.S. 250, 94 S.Ct. 1076, 39 L.Ed.2d 306 (1974)); see also Memorial Hospital v. Maricopa County, supra (one-year county residency requirement for nonemergency medical benefits struck down as penalizing exercise of right to travel without the showing of a sufficient state interest in justification); Dunn v. Blumstein, 405 U.S. 330, 92 S.Ct. 995, 31 L.Ed.2d 274 (1972) (one-year residency requirement to vote in state election rejected on ground that no compelling state interest was shown to justify the penalty imposed as a result of the exercise of the right to travel); Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969) (one-year residency requirement to qualify for welfare benefits struck down on ground that no compelling governmental interest had been shown in justification of the state action penalizing the exercise of the right to travel).

The "strict scrutiny" test is invoked upon a showing of some penalty resulting from the exercise of a fundamental right, such as the right to travel; there is no requirement of a showing that a person was deterred from traveling, only that there was a penalty for doing so. Dunn v. Blumstein, supra, 405 U.S. at 340, 92 S.Ct. at 1002. Under the strict scrutiny test, "any classification which serves to penalize the exercise of [a fundamental] right, unless shown to be necessary to promote a compelling governmental interest, is unconstitutional." Shapiro v. Thompson, supra, 394 U.S. at 634, 89 S.Ct. at 1331 (emphasis in original).

Ordinarily, when this Court is called upon to determine whether a tax law violates the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution, the Court is required to impose "only the minimum scrutiny of the so-called 'rational basis test.' " Hadwen, Inc. v. Department of Taxes, 139 Vt. 37, 42, 422 A.2d 255, 258 (1980); see Allied Stores of Ohio, Inc. v. Bowers, 358 U.S. 522, 527, 79 S.Ct. 437, 440-41, 3 L.Ed.2d 480 (1959). "This test ... permits a determination of unconstitutionality only where the relevant law classifies similar persons for different treatment upon wholly arbitrary and capricious grounds.... Where the classification rests upon 'some reasonable consideration of legislative policy,' it will not be found unconstitutional." Hadwen, Inc. v. Department of Taxes, supra, 139 Vt. at 42, 422 A.2d at 258-59 (citing Andrews v. Lathrop, 132 Vt. 256, 259, 315 A.2d 860, 862 (1974)); Allied Stores of Ohio, Inc. v. Bowers, supra, 358 U.S. at 527, 79 S.Ct. at 440-41.

Plaintiff complains that the court below erroneously used the "rational basis" test, applying an insufficient standard to his complaint, and that had the "strict scrutiny" test been applied, the use tax, which plaintiff paid under protest, would have been declared an unconstitutional infringement of plaintiff's right to travel under the Equal Protection Clause, entitling plaintiff to recover the $112 he paid to the state.

Plaintiff misconceives the nature of the right he seeks to invoke. His right to travel has not been infringed. He suffered no restrictions on his right to travel to Vermont and incurred no penalty as a result of the exercise of this right. He was free to bring his property, including his station wagon, to Vermont without incurring any penalty as a result. He was free to move about the state in public or private conveyance (other than the station wagon) without restriction or penalty, and he was free to obtain a Vermont driver's license without having to pay any use tax on his vehicle. Only when plaintiff sought the privilege of operating that vehicle on Vermont's highways was he required to register it;...