U.S. v. Int'l Business Machines Corp.
| Decision Date | 10 June 1996 |
| Docket Number | 95591 |
| Citation | 517 U.S. 843,116 S.Ct. 1793,135 L.Ed.2d 124 |
| Parties | UNITED STATES v. INTERNATIONAL BUSINESS MACHINES CORP. |
| Court | U.S. Supreme Court |
Certiorari to the United States Court of Appeals for the Federal Circuit.
Supreme Court of the United States
Argued March 18, 1996
Decided June 10, 1996
Pursuant to Section(s) 4371 of the Internal Revenue Code, respondent International Business Machines Corporation (IBM) paid a tax on insurance premiums remitted to foreign insurers to cover shipments of goods to its foreign subsidiaries. When its refund claims were denied, IBM filed suit in the Court of Federal Claims, contending that Section(s) 4371's application to policies insuring export shipments violated the Export Clause, which states that "[n]o Tax or Duty shall be laid on Articles exported from any State." The court agreed, rejecting the Government's argument that Thames & Mersey Marine Ins. Co. v. United States, 237 U. S. 19--in which this Court held that a federal stamp tax on policies insuring marine risks could not, under the Export Clause, be constitutionally applied to policies covering export shipments--had been superseded by subsequent decisions interpreting the Import-Export Clause, which states in relevant part, "No State shall . . . lay any Imposts or Duties on Imports or Exports." The Court of Appeals affirmed.
Held: The Export Clause prohibits assessment of nondiscriminatory federal taxes on goods in export transit. Pp. 2-20.
(a) While this Court has strictly enforced the Export Clause's prohibition against federal taxation of goods in export transit and certain closely related services and activities, see, e.g., Thames & Mersey, supra, it has not exempted pre-export goods and services from ordinary tax burdens or exempted from federal taxation various services and activities only tangentially related to the export process, see, e.g., Cornell v. Coyne, 192 U. S. 418. Conceding that the tax assessed here violates the Export Clause under Thames & Mersey, the Government asks that the case be overruled because its underlying theory has been rejected in the context of the Commerce and Import-Export Clauses and those Clauses have historically been interpreted in harmony with the Export Clause. Pp. 2-7.
(b) When this Court expressly disavowed its early view that the dormant Commerce Clause required a strict ban on state taxation of interstate commerce, Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 288-289, it resolved a long struggle over the meaning of the nontextual negative command of that Clause. The Export Clause, on the other hand, expressly prohibits Congress from laying any tax or duty on exports. These textual disparities strongly suggest that shifts in the Court's view of the dormant Commerce Clause's scope cannot govern Export Clause interpretation. Cf. Richfield Oil Corp. v. State Bd. of Equalization, 329 U. S. 69, 75-76. Pp. 7-9.
(c) While one may question Thames & Mersey's finding that a tax on policies insuring exports is functionally the same as a tax on exportation itself, the Government apparently has chosen not to do so here. Under the principles that animate the policy of stare decisis, the Court declines to overrule Thames & Mersey's longstanding precedent, which has caused no uncertainty in commercial export transactions, on a theory not argued by the parties. Pp. 11-13.
(d) This Court's recent Import-Export Clause cases do not require that Thames & Mersey be overruled. Meaningful textual differences that should not be overlooked exist between the Export Clause and the Import-Export Clause. In finding the assessments in Michelin Tire Corp. v. Wages, 423 U. S. 276, and Department of Revenue of Wash. v. Association of Wash. Stevedoring Cos., 435 U. S. 734, valid, the Court recognized that the Import-Export Clause's absolute ban on ``Imposts or Duties'' is not a ban on every tax. Because impost and duty are thus narrower terms than tax, a particular state assessment might be beyond the Import-Export Clause's reach, while an identical federal assessment might be subject to the Export Clause. The word ``Tax'' has a common, and usually expansive, meaning that should not be ignored. The Clauses were also intended to serve different goals. The Government's policy argument--that the Framers intended the Export Clause to narrowly alleviate the fear of northern repression through taxation of southern exports by prohibiting only discriminatory taxes--cannot be squared with the Clause's broad language. The better reading is that the Framers sought to alleviate their concerns by completely denying to Congress the power to tax exports at all. See Fairbank v. United States, 181 U. S. 283. Pp. 13-18.
(e) Even assuming that Michelin and Washington Stevedoring govern the Export Clause inquiry here, those holdings do not interpret the Import-Export Clause to permit assessment of nondiscriminatory taxes on imports and exports in transit. Pp. 18-20. 59 F. 3d 1234, affirmed.
Stevens, J., took no part in the consideration or decision of the case.
We resolve in this case whether the Export Clause of the Constitution permits the imposition of a generally applicable, nondiscriminatory federal tax on goods in export transit. We hold that it does not.
Section 4371 of the Internal Revenue Code imposes a tax on insurance premiums paid to foreign insurers that are not subject to the federal income tax. 1 26 U. S. C. Section(s) 4371 (1982 ed.). International Business Machines Corporation (IBM) ships products that it manufactures in the United States to numerous foreign subsidiaries and insures those shipments against loss. When the foreign subsidiary makes the shipping arrangements, the subsidiary often places the insurance with a foreign carrier. When it does, both IBM and the subsidiary are listed as beneficiaries in the policy.
IBM filed federal excise tax returns for the years 1975 through 1984, but reported no liability under Section(s) 4371. The IRS audited IBM and determined that the premiums paid to foreign insurers were taxable under Section(s) 4371 and that IBM--as a named beneficiary of the insurance policies--was liable for the tax. The IRS assessed a tax against IBM for each of those years.
IBM paid the assessments and filed refund claims, which the IRS denied. IBM then commenced suit in the Court of Federal Claims, contending that application of Section(s) 4371 to policies insuring its export shipments violated the Export Clause. The focus of the suit was this Court's decision in Thames & Mersey Marine Ins. Co. v. United States, 237 U. S. 19 (1915), in which we held that a federal stamp tax on policies insuring marine risks could not, under the Export Clause, be constitutionally applied to policies covering export shipments. The United States argued that the analysis of Thames & Mersey is no longer valid, having been superseded by subsequent decisions interpreting the Import-Export Clause--specifically, Michelin Tire Corp. v. Wages, 423 U. S. 276 (1976), and Department of Revenue of Wash. v. Association of Wash. Stevedoring Cos., 435 U. S. 734 (1978). The Court of Federal Claims noted that this Court has never overruled Thames & Mersey and ruled that application of Section(s) 4371 to policies insuring goods in export transit violates the Export Clause. 31 Fed. Cl. 500 (1994). The Court of Appeals for the Federal Circuit affirmed. 59 F. 3d 1234 (1995). We agreed to hear this case to decide whether we should overrule Thames & Mersey. 516 U. S. __ (1995).
The Export Clause states simply and directly: "No Tax or Duty shall be laid on Articles exported from any State." U. S. Const., Art. I, Section(s) 9, cl. 5. We have had few occasions to interpret the language of the Export Clause, but our cases have broadly exempted from federal taxation not only export goods, but also services and activities closely related to the export process. At the same time, we have attempted to limit the term "Articles exported" to permit federal taxation of pre-export goods and services.
Our early cases upheld federal assessments on the manufacture of particular products ultimately intended for export by finding that pre-export products are not "Articles exported." See Pace v. Burgess, 92 U. S. 372 (1876); Turpin v. Burgess, 117 U. S. 504 (1886); Cornell v. Coyne, 192 U. S. 418 (1904). Pace and Turpin both involved a federal excise tax on tobacco products. In Pace, though tobacco intended for export was exempted from the tax, the exemption itself was subject to a per-package stamp charge of 25 cents. When a tobacco manufacturer challenged the stamp charge, we upheld the charge on the basis that the stamps were designed to prevent fraud in the export exemption from the excise tax and did not, therefore, represent a tax on exports. 92 U. S., at 375. When Congress later repealed the 25-cent charge for the exemption stamp in a statute that referred to the stamp as an "export tax," another manufacturer sued to recover the money it had paid for the exemption stamps. See Turpin, supra. Without disturbing the prior ruling in Pace that the stamp charge was not a tax on exports, 117 U. S., at 505, we explained that the prohibition of the Export Clause "has reference to the imposition of duties on goods by reason or because of their exportation or intended exportation, or whilst they are being exported," id., at 507. We said that the plaintiffs would have had no Export Clause claim even if there had been no exemption from the excise because the goods were not in the course of exportation and might never be exported. Ibid. Turpin broadly suggested that the Export Clause prohibits both taxes levied on goods in the course of exportation and taxes directed specifically at exports....
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