Associated Industries of Mo. v. Lohman, No. 93-397.

CourtUnited States Supreme Court
Writing for the CourtThomas
Citation511 U.S. 641
Docket NumberNo. 93-397.
Decision Date23 May 1994
PartiesASSOCIATED INDUSTRIES OF MISSOURI et al. v. LOHMAN, DIRECTOR OF REVENUE OF MISSOURI, ET AL.

511 U.S. 641

ASSOCIATED INDUSTRIES OF MISSOURI et al.
v.
LOHMAN, DIRECTOR OF REVENUE OF MISSOURI, ET AL.

No. 93-397.

United States Supreme Court.

Argued March 28, 1994.

Decided May 23, 1994.


511 U.S. 642

COPYRIGHT MATERIAL OMITTED

CERTIORARI TO THE SUPREME COURT OF MISSOURI
511 U.S. 643

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

511 U.S. 643
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

511 U.S. 644
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-ofstate members of the organization must collect the additional

511 U.S. 645
use tax on sales made into the State. Petitioner Alumax Foils, Inc., is a manufacturing firm in Missouri that pays the additional use tax on goods purchased from outside the State. Petitioners brought this action in state court contending that the use tax impermissibly discriminates against interstate commerce in violation of the Commerce Clause. The State Circuit Court rejected petitioners' claims and granted respondents' motion for summary judgment

The Supreme Court of Missouri affirmed. 857 S. W. 2d 182 (1993). The court noted that the 1.5% use tax had been imposed to equalize taxes on in-state and out-of-state goods. Previously, political subdivisions of the State had imposed local sales tax burdens that were not paralleled by any use tax. Because the tax was designed to even exactions on intrastate and interstate trade, the court reasoned that the scheme should be analyzed under the "compensatory tax" doctrine, which the court summarized as permitting States to "impose . . . equivalent burdens" on transactions in local and interstate commerce. Id. , at 187.

The court acknowledged that, in 53.5% of local taxing jurisdictions, the 1.5% use tax exceeded the local sales tax. See id., at 185, n. 3. But the court emphasized that 1990 sales figures from the stipulated record showed that over 93% of the dollar volume of sales in the State occurred in jurisdictions where the local sales tax exceeded the use tax. See id., at 185. Calculating from similar figures, the court determined that, had a flat local sales tax of 1.5%—exactly equivalent to the use tax—been imposed in 1990, it would have reduced the sales tax burden on in-state sales by $100 million. Ibid. In short, the court concluded that given the high average rate of local 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.

After rehearsing these facts, the court stated the issue before it as being whether "a state use tax may impose a

511 U.S. 646
greater burden than the various sales taxes in specific localities, if on a statewide basis the use tax imposes a lesser overall burden than do all the various sales taxes." Id., at 186. Relying on this Court's decision in General American Tank Car Corp. v. Day, 270 U. S. 367 (1926), the court answered that question in the affirmative. The court reasoned that whether the tax scheme discriminated against interstate commerce should be determined on the basis of a comparison of the overall effects of the use tax and the local sales taxes on interstate commerce statewide. Because the figures outlined above suggested that, in the aggregate, the tax scheme imposed greater burdens on intrastate than on interstate commerce, the court concluded that the tax avoided discrimination on a statewide basis and thus did not violate the dictates of the Commerce Clause. 857 S. W. 2d, at 187-192

In dissent, then-Chief Justice Robertson criticized the court's focus on averaging effects across the State to determine whether there was discrimination and suggested that the majority's method was tantamount to basing constitutional analysis on a conclusion that the use tax scheme was "`close enough for government work.' " Id., at 195. Chief Justice Robertson concluded that this Court's cases contained a strict rule of equality that demanded equal treatment of local and interstate commerce in each local jurisdiction, not merely in the overall result for the State. Id. , at 199.

We granted certiorari, 510 U. S. 1009 (1993), to consider the validity of the 1.5% use tax.

II

Although the Commerce Clause is phrased merely as a grant of authority to Congress to "regulate Commerce . . . among the several States," Art. I, § 8, cl. 3, it is well established that the Clause also embodies a negative command forbidding the States to discriminate against interstate trade. See, e. g., Oregon Waste Systems, Inc. v. Department

511 U.S. 647
of Environmental Quality of Ore., ante, at 98; New Energy Co. of Ind. v. Limbach, 486 U. S. 269, 273 (1988). The Clause prohibits economic protectionism—that is, "regulatory measures designed to benefit in-state economic interests by burdening out-of-state competitors." Id., at 273-274. Thus, we have characterized the fundamental command of the Clause as being that "a State may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State," Armco Inc. v. Hardesty, 467 U. S. 638, 642 (1984), and have applied a "virtually per se rule of invalidity" to provisions that patently discriminate against interstate trade, Philadelphia v. New Jersey, 437 U. S. 617, 624 (1978)

A

By its terms, the additional use tax at issue in this case appears to violate the Commerce Clause's cardinal rule of nondiscrimination, for it exempts from its scope all sales of goods occurring within the State. See n. 2, supra. Nevertheless, our cases establish that such a levy may be saved from constitutional infirmity if it is a valid "compensatory tax" designed simply to make interstate commerce bear a burden already borne by intrastate commerce. Under the compensatory tax doctrine, a facially discriminatory tax that imposes on interstate commerce the equivalent of an "identifiable and substantially similar tax on intrastate commerce does not offend the negative Commerce Clause." Oregon Waste, ante, at 103 (internal quotation marks omitted). To ensure that the State is indeed merely imposing countervailing burdens on comparable transactions, we have required that the taxes on interstate and intrastate commerce be imposed on "substantially equivalent events." Maryland v. Louisiana, 451 U. S. 725, 759 (1981). See also Armco, supra, at 643. The end result under the theory of the compensatory tax is that, "when the account is made up, the stranger from afar is subject to no greater burdens . . . than the dweller within the gates. The one pays upon one activity

511 U.S. 648
or incident, and the other upon another, but the sum is the same when the reckoning is closed." Henneford v. Silas Mason Co., 300 U. S. 577, 584 (1937).

To...

To continue reading

Request your trial
117 practice notes
  • Csd No. 2 of Los Angeles v. County of Kern, No. F043095.
    • United States
    • California Court of Appeals
    • April 1, 2005
    ...authority of County and the impact on sewage sludge generated within that area. (See Associated Industries of Missouri v. Lohman (1994) 511 U.S. 641, 650, 114 S.Ct. 1815, 128 L.Ed.2d 639 ["discrimination is appropriately assessed with reference to the specific subdivision in which applicabl......
  • American Petroleum Institute v. Cooper, No. 5:08-CV-396-FL.
    • United States
    • United States District Courts. 4th Circuit. Eastern District of North Carolina
    • January 26, 2010
    ...possibility of favoritism does not constitute discrimination that transgresses constitutional commands," Associated Indus, v. Lohman, 511 U.S. 641, 654, 114 S.Ct. 1815, 128 L.Ed.2d 639 Second, recalling its duty to adopt a construction of a statute that avoids constitutional infirmity if po......
  • Pacific Merchant Shipping Assn. v. Voss, No. S044869
    • United States
    • United States State Supreme Court (California)
    • December 29, 1995
    ...discriminate against or burden the interstate flow of articles of commerce."]; accord, Associated Industries of Missouri v. Lohman (1994) 511 U.S. 641, ----, 114 S.Ct. 1815, 1820, 128 L.Ed.2d 639; Wyoming v. Oklahoma (1992) 502 U.S. 437, 454, 112 S.Ct. 789, 800, 117 L.Ed.2d 1; Lewis v. BT I......
  • Wal-Mart Stores, Inc. v. City of Turlock, No. 1:04-CV-05278 OWW DLB.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • July 3, 2006
    ...the practical effect of the regulation is to control conduct beyond boundaries of state); Associated Industries of Missouri v. Lohman, 511 U.S. 641, 654-655, 114 S.Ct. 1815, 128 L.Ed.2d 639 (1994) (Commerce Clause analysis focuses on whether the challenged statute is discriminatory in effec......
  • Request a trial to view additional results
116 cases
  • Csd No. 2 of Los Angeles v. County of Kern, No. F043095.
    • United States
    • California Court of Appeals
    • April 1, 2005
    ...authority of County and the impact on sewage sludge generated within that area. (See Associated Industries of Missouri v. Lohman (1994) 511 U.S. 641, 650, 114 S.Ct. 1815, 128 L.Ed.2d 639 ["discrimination is appropriately assessed with reference to the specific subdivision in which applicabl......
  • American Petroleum Institute v. Cooper, No. 5:08-CV-396-FL.
    • United States
    • United States District Courts. 4th Circuit. Eastern District of North Carolina
    • January 26, 2010
    ...possibility of favoritism does not constitute discrimination that transgresses constitutional commands," Associated Indus, v. Lohman, 511 U.S. 641, 654, 114 S.Ct. 1815, 128 L.Ed.2d 639 Second, recalling its duty to adopt a construction of a statute that avoids constitutional infirmity if po......
  • Pacific Merchant Shipping Assn. v. Voss, No. S044869
    • United States
    • United States State Supreme Court (California)
    • December 29, 1995
    ...discriminate against or burden the interstate flow of articles of commerce."]; accord, Associated Industries of Missouri v. Lohman (1994) 511 U.S. 641, ----, 114 S.Ct. 1815, 1820, 128 L.Ed.2d 639; Wyoming v. Oklahoma (1992) 502 U.S. 437, 454, 112 S.Ct. 789, 800, 117 L.Ed.2d 1; Lewis v. BT I......
  • Wal-Mart Stores, Inc. v. City of Turlock, No. 1:04-CV-05278 OWW DLB.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Eastern District of California
    • July 3, 2006
    ...the practical effect of the regulation is to control conduct beyond boundaries of state); Associated Industries of Missouri v. Lohman, 511 U.S. 641, 654-655, 114 S.Ct. 1815, 128 L.Ed.2d 639 (1994) (Commerce Clause analysis focuses on whether the challenged statute is discriminatory in effec......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT