Barringer v. Griffes
| Decision Date | 09 August 1993 |
| Docket Number | No. 857,D,857 |
| Citation | 1 F.3d 1331 |
| Parties | Greg R. BARRINGER and Judith M. Barringer, Plaintiffs-Appellants, v. Michael D. GRIFFES, Defendant-Appellee. ocket 92-9062. |
| Court | U.S. Court of Appeals — Second Circuit |
Norman Williams, Burlington, VT (Gravel and Shea, Jerome F. O'Neill, O'Neill and Crawford, of counsel), for plaintiffs-appellants.
William E. Griffin, Asst. Atty. Gen. for State of Vt., Montpelier, VT (Jeffrey L. Amestoy- , Atty. Gen. for State of Vt., of counsel), for defendant-appellee.
Before: VAN GRAAFEILAND, KEARSE and CARDAMONE, Circuit Judges.
Appellants on this appeal wanted to register and operate an automobile in Vermont that they had purchased in another state. Vermont's motor vehicle tax scheme imposes a use tax on automobiles; at the same time it grants a credit against the use tax for any sales tax paid to Vermont. Due to the credit, most Vermonters never have to pay the use tax. Non-residents moving to Vermont find themselves in quite a different situation. They are not credited against the use tax for any sales tax they paid in their former state of residence. Instead, they might pay a sales tax in the state where they previously lived and, in addition, Vermont's use tax. We are asked to decide whether Vermont's attempt to tax the use of an automobile brought from Connecticut, where a sales tax was paid on it, places such a burden on interstate commerce as to render Vermont's use tax invalid as in contravention of the Commerce Clause.
Whenever a court sets sail into the sea of the Interstate Commerce Clause, it should mind which way the wind blows. It was early believed that the Commerce Clause, by its own force, limited the state's authority to tax commerce. Later it was thought the Clause only granted Congress authority to pass legislation in this field, and that the function of the Supreme Court was limited to invalidating state laws contrary to congressional enactments. See Walter Hellerstein, State Taxation of Interstate Business: Perspectives on Two Centuries of Constitutional Adjudication, 41 Tax Law. 37, 41 (1987) [Hellerstein, State Taxation ]. Dealing with these competing approaches took the Supreme Court along one tack until in Cooley v. Board of Wardens, 53 U.S. (12 How.) 299, 13 L.Ed. 996 (1851), it came about, and began a different tack. There it ruled that those aspects of commerce inherently national in character were subject to Congress' single, uniform law; those aspects of commerce that were local in character, demanding diverse approaches, were left to the states to legislate. Id. at 319.
Carried along by these changing winds of doctrine, the Supreme Court then resolved Commerce Clause cases by drawing various distinctions. In different periods, for example, the Court has examined the "national" or "local" nature of a state's tax, whether a state enacted a "direct" or "indirect" tax on interstate commerce, whether a state tax discriminated against interstate commerce in its practical operation, and whether the state tax simply made interstate commerce pay its fair share of the costs of state government or whether it exacted more than its fair share. These analytical tools were among those used to determine the constitutionality of a state tax on interstate transactions. The changes in direction evolving from the emphasis accorded these varying doctrines make plain that to set our sails safely for a favoring breeze in this sea, it is necessary to hug the shore closely, where the wind stands fair.
Plaintiffs, Greg and Judith Barringer, appeal from a judgment entered on September 2, 1992 in the District Court for the District of Vermont by Chief Judge Fred I. Parker. Judge Parker denied their request for declaratory and injunctive relief based on their claim that the Vermont Motor Vehicle Purchase and Use Tax, Vt.Stat.Ann. tit. 32, ch. 219 (1981 and Supp.1992), violates the Commerce Clause of the United States Constitution. See Barringer v. Griffes, 801 F.Supp. 1282, 1289 (D.Vt.1992). The district court also refused to grant the Barringers leave to amend their complaint to include a claim based on the Privileges and Immunities Clause. See id. at 1284 n. 2. Because we hold the Vermont use tax violates the Commerce Clause we need not reach or decide the refusal to permit plaintiffs to amend their complaint to include the latter claim.
The Barringers purchased a 1988 Mazda 626 LT for $14,769 from Partyka Chevrolet in Hamden, Connecticut on September 23, 1988. They were then Connecticut residents and, in compliance with Connecticut law, they paid an approximately 7.5 percent sales tax based on the price of the vehicle, and registered it in that state. The Connecticut sales tax cost them approximately $1,085.
A little less than two years later, on August 25, 1990, the Barringers moved to Middlebury, Vermont to permit Ms. Barringer to take up an assistant professorship in classical archaeology at Middlebury College. After arriving in their new home state they were told that under Vermont law they would have to pay a 4 percent use tax on the depreciated value of their automobile in order to register it there. (Vermont raised the use tax to 5 percent in 1991, though it will revert to 4 percent on July 1, 1993. See Vt.Stat.Ann. tit. 32, Sec. 8903 (Supp.1992). The Barringers also learned that no credit would be granted them for the sales tax they had paid to the State of Connecticut. Because the automobile had a depreciated value of about $7,000, the Vermont 4 percent use tax amounted to $280. They found the total taxes they would pay on their car to both Connecticut and Vermont unacceptable.
In June 1991 plaintiffs therefore brought an action in Vermont Superior Court for declaratory and injunctive relief against the Vermont Motor Vehicle Commissioner, Michael Griffes, defendant-appellee. The Commissioner moved to dismiss the action for lack of subject matter jurisdiction on the grounds that the Barringers had to pay the tax and then seek an administrative refund from the Commissioner. The Barringers withdrew their state complaint and filed in its place on August 27, 1991 the instant federal action seeking the same declaratory and injunctive relief. Plaintiffs claimed that the Vermont tax violated the Commerce Clause of the United States Constitution because it did not grant them a credit for the sales tax they had paid on their Mazda in Connecticut.
The district court dismissed the action as soon as it was filed on the grounds that the case was barred by the Tax Injunction Act, 28 U.S.C. Sec. 1341. On appeal we vacated the dismissal order and remanded the case to the district court, for further proceedings. See Barringer v. Griffes, 964 F.2d 1278, 1284 (2d Cir.1992). On remand the district court held a hearing on plaintiffs' motion for a preliminary injunction, and at the hearing's close suggested consolidating the preliminary and permanent injunction phases of the case, to which both parties agreed. The motion for a preliminary injunction was thereafter consolidated with a trial on the merits pursuant to Fed.R.Civ.P. 65(a)(2). The Barringers also informed the trial judge that they planned to assert an additional claim based on the Privileges and Immunities Clause, and filed a motion to amend that same day.
The district court issued an opinion and order on September 2, 1992, holding that the Vermont Motor Vehicle Purchase and Use Tax did not violate the Commerce Clause, and denying plaintiffs' motion to amend their complaint because it was made too late. See Barringer, 801 F.Supp. at 1284 n. 2, 1289. This appeal followed.
We are aware that the issue of the constitutionality of a sales and use tax focuses on an unsettled question of law that the Supreme Court has explicitly declined to address. That Court once before actually considered the same Vermont vehicle tax at issue before us in the context of a different case, Williams v. Vermont, 472 U.S. 14, 105 S.Ct. 2465, 86 L.Ed.2d 11 (1985). Williams held the statute facially violated the Equal Protection Clause to the extent that it granted a use tax credit to Vermont residents who purchased and registered vehicles outside of Vermont and thus paid sales taxes to another state, but did not grant the same credit to non-residents in similar circumstances. See id. at 27, 105 S.Ct. at 2474; Vt.Stat.Ann., tit. 32, Sec. 8911(9) (1981) (). Accordingly, the Supreme Court in Williams did not reach the Commerce Clause questions raised by the parties. See 472 U.S. at 27, 105 S.Ct. at 2474. Having decided the case on other grounds, the Court explicitly noted, "[w]e again put to one side the question whether a State must in all circumstances credit sales or use taxes paid to another State against its own use tax." Id. at 28, 105 S.Ct. at 2474.
In response to Williams, Vermont issued an administrative ruling narrowing its statute. Under the regulations restricting Sec. 8911(9) to comply with Williams, the sales tax credit is no longer available for Vermont residents who buy and register their automobiles in other states before registering them in Vermont. See Vt. Agency of Transp., Dep't of Motor Vehicles, Rule 86-28-E (July 5, 1985) ().
The statute and regulations currently operate as follows: Sec. 8903(a) of Title 32 of the Vermont Statutes Annotated imposes a sales tax on the purchase of motor vehicles in Vermont; Sec. 8903(b) of Title 32 imposes a use tax on motor vehicles that is payable upon registration of the vehicle with the Vermont Department of Motor Vehicles. Section 8903(b) further grants a credit against the Vermont use tax for any Sec. 8903(a) Vermont sales tax paid. While a credit is thus available for any...
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...effect may lie in the tax itself, but it may also arise from interactions with other states' taxes. See, e.g., Barringer v. Griffes, 1 F.3d 1331, 1337–39 (2d Cir. 1993) (state use tax on automobiles that provided credit for sales tax paid in-state, but not out-of-state was discriminatory). ......
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...Reflections On An Emerging Commerce Clause Restraint On State Taxation, 87 Mich. L.Rev. 138, 160 (1988); see also Barringer v. Griffes, 1 F.3d 1331, 1336 (2d Cir.1993) (observing that "where the Supreme Court examines compensating use taxes under the internal consistency test, such taxes ha......
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