511 U.S. 641 (1994), 93-397, Associated Industries of Mo. v. Lohman

Docket Nº:No. 93-397
Citation:511 U.S. 641, 114 S.Ct. 1815, 128 L.Ed.2d 639, 62 U.S.L.W. 4391
Party Name:ASSOCIATED INDUSTRIES OF MISSOURI et al. v. LOHMAN, DIRECTOR OF REVENUE OF MISSOURI, et al.
Case Date:May 23, 1994
Court:United States Supreme Court
 
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511 U.S. 641 (1994)

114 S.Ct. 1815, 128 L.Ed.2d 639, 62 U.S.L.W. 4391

ASSOCIATED INDUSTRIES OF MISSOURI et al.

v.

LOHMAN, DIRECTOR OF REVENUE OF MISSOURI, et al.

No. 93-397

United States Supreme Court

May 23, 1994

Argued March 28, 1994

CERTIORARI TO THE SUPREME COURT OF MISSOURI

Syllabus

Missouri's uniform, statewide "additional use tax" on goods purchased outside the State and stored, used, or consumed within the State is purportedly designed to "compensate" for the taxes imposed by local jurisdictions within the State on in-state sales of goods. Local sales tax rates, however, vary widely, and in many jurisdictions the use tax exceeds the sales tax. Petitioners—a trade association representing businesses that must collect the additional use tax and a manufacturer that pays it—brought this action in state court, contending that the tax scheme impermissibly discriminates against interstate commerce in violation of the Commerce Clause. The State Circuit Court granted respondents summary judgment. In affirming, the Supreme Court of Missouri reasoned that, because the tax was designed to even exactions on intrastate and interstate trade, the tax scheme should be analyzed under the "compensatory tax" doctrine. The court concluded that, given the high average rate of local jurisdictions' sales taxes, the overall effect of the use tax scheme across the State was to place a lighter aggregate tax burden on interstate commerce than on intrastate commerce, even though in some localities the use tax might exceed the sales tax. The court determined that, in such circumstances, there was no discrimination against interstate commerce on a statewide basis and held that the use tax scheme did not violate the Commerce Clause.

Held:

Missouri's use tax scheme impermissibly discriminates against interstate commerce in those localities where the use tax exceeds the sales tax. Pp. 646-657.

(a) Although the compensatory tax doctrine saves from constitutional infirmity a facially discriminatory tax that imposes on interstate commerce the equivalent of an "identifiable and substantially similar tax on intrastate commerce," Oregon Waste Systems, Inc. v. Department of Environmental Quality of Ore., ante, at 103, Missouri's use tax scheme runs afoul of the basic requirement that, for a tax system to be "compensatory," the burdens imposed on interstate and intrastate commerce must be equal, see, e.g., Henneford v. Silas Mason Co., 300 U.S. 577, 584-587. Whether the use tax is equal to (or lower than) the local sales tax is a matter of fortuity in Missouri, depending entirely on the locality

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in which the Missouri purchaser happens to reside. In jurisdictions where the use tax exceeds the sales tax, the discrepancy imposes a discriminatory burden on interstate commerce. The State Supreme Court's statewide averaging approach is contrary to this Court's decisions, which have, for example, implicitly rejected any theory that would require aggregating the burdens on commerce across an entire State to determine the constitutionality of an exaction imposed on interstate trade by a particular political subdivision. See Fort Gratiot Sanitary Landfill, Inc. v. Michigan Dept. of Natural Resources, 504 U.S. 353, 363. General American Tank Car Corp. v. Day, 270 U.S. 367, 373, distinguished. Requiring equal treatment of intrastate and interstate commerce not only across the State as a whole, but also within each political subdivision of the State, does not effectively eliminate the State's ability to delegate taxing authority to local jurisdictions. It merely prohibits the State from granting its subdivisions a power to discriminate that the State lacked in the first instance. Pp. 646-654.

(b) The Court rejects petitioners' contention that the use tax should be struck down in its entirety. Petitioners argue that the tax should be treated as facially invalid in every jurisdiction because there is no countervailing statewide sales tax and no legislation ensuring that local sales taxes will always equal or exceed the use tax. But it is the actual discrimination that results from the Missouri tax system in some localities, not the potential for discrimination in every locality, that transgresses constitutional commands. See, e.g., Gregg Dyeing Co. v. Query, 286 U.S. 472, 481. Pp. 654-656.

(c) The effect that any predeprivation procedures provided under state law for contesting the use tax might have on the appropriate remedy in this case, as well as determination of the methods best adapted to implementing a remedy here, are matters best left for consideration on remand. Pp. 656-657.

857 S.W.2d 182, reversed and remanded.

Thomas, J., delivered the opinion of the Court, in which Rehnquist, C. J., and Stevens, O'Connor, Scalia, Kennedy, Souter, and Ginsburg, JJ., joined. Blackmun, J., concurred in the judgment.

Thomas C. Walsh argued the cause for petitioners. With him on the briefs were Juan D. Keller, Michael G. Biggers, and Brenda L. Talent.

Don M. Downing, Deputy Attorney General of Missouri, argued the cause for respondents. With him on the brief for respondent Lohman were Jeremiah W. (Jay) Nixon, Attorney

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General, and Gretchen Garrison and Jeffrey K. Elnicki, Assistant Attorneys General. George Alex Bartlett, Clifton S. Elgarten, and Stuart H. Newberger filed a brief for respondents Delong's Incorporated et al.[*]

Justice Thomas delivered the opinion of the Court.

The State of Missouri imposes a uniform, statewide use tax on all goods purchased outside the State and stored, used, or consumed within the State. Although the tax is purportedly designed to "compensate" for sales taxes imposed by local jurisdictions on sales of goods in the State, local sales tax rates vary widely, and in many jurisdictions the use tax exceeds the sales tax. Petitioners contend that this system discriminates against interstate commerce in violation of the Commerce Clause, even though the local sales taxes across the State may, in the aggregate, place a greater burden on intrastate trade than the uniform use tax places on interstate trade. We agree that, in localities where the use tax exceeds the sales tax, the system is impermissibly discriminatory, and we therefore reverse the judgment of the Supreme Court of Missouri.

I

Missouri has a multitiered system of sales and use taxes. The State imposes by statute a tax of 4% on all sales of personal property in the State, Mo. Rev. Stat. § 144.020 (1986), and, through provisions in the State Constitution, provides for additional sales taxes of one-eighth of one percent and one-tenth of one percent on the same transactions. Mo. Const., Art. IV, §§ 43(a), 47(a). These levies are exactly

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paralleled by statutory and state constitutional provisions providing for use taxes of 4%, one-eighth of one percent, and one-tenth of one percent, respectively, on the "privilege of storing, using or consuming" within the State any article of personal property purchased outside the State. Mo. Rev. Stat. § 144.610(1) (1986); Mo. Const., Art. IV, §§ 43(a), 47(a).[1] Thus, under these various provisions, the State imposes a statewide sales tax of 4.225% on sales of goods within the State and a statewide use tax of 4.225% on goods brought into the State after being purchased elsewhere. These taxes are not challenged here.

The State also imposes an "additional use tax" of 1.5% on the privilege of storing, using, or consuming within the State any article of personal property purchased outside the State. Mo. Rev. Stat. § 144.748 (Supp. 1993).[2] This use tax is not paired with any sales tax at the state level. The State, however, authorizes political subdivisions, including counties and incorporated municipalities, to impose a local sales tax.[3] Over 1,000 localities have used that authority to enact sales taxes ranging from 0.5% to 3.5%, while at least one county has no local sales tax at all.

Petitioner Associated Industries of Missouri is a trade association representing businesses that operate in Missouri and businesses that sell to customers in Missouri. Out-of-state members of the organization must collect the additional

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use tax on sales made into the State. Petitioner Alumax...

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