National Geographic Society v. California Board of Equalization

Citation51 L.Ed.2d 631,97 S.Ct. 1386,430 U.S. 551
Decision Date04 April 1977
Docket NumberNo. 75-1868,75-1868
PartiesNATIONAL GEOGRAPHIC SOCIETY, Appellant, v. CALIFORNIA BOARD OF EQUALIZATION
CourtUnited States Supreme Court
Syllabus

Appellant Society, a nonprofit corporation with headquarters in the District of Columbia, which maintains two offices in California that solicit advertising for the Society's magazine but perform no activities related to the Society's mail-order business for the sale from the District of Columbia of maps, atlases, globes, and books, challenges the constitutionality of California's use tax, as applied to the Society's mail-order activities, which requires every retailer engaged in business in that State and making sales of tangible personal property for storage, use, or other consumption in that State to collect from the purchaser a use tax in lieu of the sales tax imposed on local retailers. Orders for the Society's sales items are mailed from California directly to appellant's headquarters on coupons or forms enclosed with announcements mailed to Society members and magazine subscribers or on order forms contained in the magazine. Held: California's imposition of the use-tax-collection liability on the Society's mail-order operation does not violate the Due Process Clause of the Fourteenth Amendment or the Commerce Clause since the Society's continuous presence in California in the two offices provides a sufficient nexus between the appellant and the State to justify imposition of the use-tax-collection liability as applied to appellant. The out-of-state seller appellant runs no risk of double taxation as the consumer's identification as a resident of the taxing State is obvious and appellant becomes liable for the tax only by failing or refusing to collect it from the resident consumer. Nor, contrary to appellant's contention, is it material that there is no relationship between the appellant's sales activity in California and the two advertising offices, for without regard to the nature of the offices' activities, they had the advantage of the same municipal services as they would have had if their activities had included assistance to the mail-order operations. Pp. 555-562.

16 Cal.3d 637, 128 Cal.Rptr. 682, 547 P.2d 458, affirmed.

Arthur B. Hanson, Washington, D. C., for appellant.

Philip M. Plant, Deputy Atty. Gen., San Francisco, Cal., for appellee.

Mr. Justice BRENNAN delivered the opinion of the Court.

Appellant National Geographic Society, a nonprofit scientific and educational corporation of the District of Columbia, maintains two offices in California that solicit advertising copy for the Society's monthly magazine, the National Geographic Magazine. However, the offices perform no activities related to the Society's operation of a mail-order business for the sale from the District of Columbia of maps, atlases, globes, and books. Orders for these items are mailed from California directly to appellant's Washington, D. C., headquarters on coupons or forms enclosed with announcements mailed to Society members and magazine subscribers or on order forms contained in the magazine. Deliveries are made by mail from the Society's Washington, D. C., or Maryland offices. Payment is either by cash mailed with the order or after a mailed billing following receipt of the merchandise. Such mail-order sales to California residents during the period involved in this suit aggregated $83,596.48.

California Rev. & Tax. Code § 6203 (West Sup.1976) requires every 'retailer engaged in business in this state and making sales of tangible personal property for storage, use, or other consumption in this state' to collect from the purchaser a use tax in lieu of the sales tax imposed upon local retailers. The California Supreme Court held that appellant is subject to the statute as a "retailer engaged in business in this state", because its maintenance of the two offices brings appellant within the definition under § 6203(a) that includes "(a)ny retailer maintaining . . . an office . . ." 16 Cal.3d 637, 642, 128 Cal.Rptr. 682, 685, 547 P.2d 458, 460-461 (1976). Section 6204 makes the retailer liable to the State for any taxes required to be collected regardless of whether he collects the tax.1 See Bank of America v. State Bd. of Equalization, 209 Cal.App.2d 780, 793, 26 Cal.Rptr. 348, 355 (1962).

The question presented by this case is whether the Society's activities at the offices in California2 provided sufficient nexus between the out-of-state seller appellant and the State as required by the Due Process Clause of the Fourteenth Amendment and the Commerce Clause to support the imposition upon the Society of a use-tax-collection liability pursuant to §§ 6203 and 6204, measured by the $83,596.48 of mail-order sales of merchandise from the District of Columbia and Maryland. The California Supreme Court held that the imposition of use-tax-collection liability on the Society violated neither Clause, 16 Cal.3d 637, 128 Cal.Rptr. 682, 547 P.2d 458 (1976).3 We noted probable jurisdiction. 429 U.S. 883, 97 S.Ct. 232, 50 L.Ed.2d 163 (1976). We affirm.

I

All States that impose sales taxes also impose a corollary use tax on tangible property bought out of State to protect sales tax revenues and put local retailers subject to the sales tax on a competitive parity with out-of-state retailers exempt from the sales tax. H.R.Rep.No.565, 89th Cong., 1st Sess., 614 (1965). The constitutionality of such state schemes is settled. Henneford v. Silas Mason Co., 300 U.S. 577, 581, 57 S.Ct. 524, 526, 81 L.Ed. 814 (1937); Monamotor Oil Co. v. Johnson, 292 U.S. 86, 54 S.Ct. 575, 78 L.Ed. 1141 (1934). 4

But the limitation of use taxes to consumption within the State so as to avoid problems of due process that might arise from the extension of the sales tax to interstate commerce, see, e. g., Nelson v. Sears, Roebuck & Co., 312 U.S. 359, 363, 61 S.Ct. 586, 588, 85 L.Ed. 888 (1941); Monamotor Oil Co. v. Johnson, supra, at 95, 54 S.Ct. at 578, does not avoid all constitutional difficulties. States necessarily impose the burden of collecting the tax on the out-of-state seller; the impracticability of its collection from the multitude of individual purchasers is obvious. Miller Bros. Co. v. Maryland, 347 U.S. 340, 343, 74 S.Ct. 535, 538, 98 L.Ed. 744 (1954). However, not every out-of-state seller may constitutionally be made liable for payment of the use tax on merchandise sold to purchasers in the State. The California Supreme Court concluded, based on its survey of the relevant decisions of this Court, that the 'slightest presence' of the seller in California established sufficient nexus between the State and the seller constitutionally to support the imposition of the duty to collect and pay the tax. The California court stated, 16 Cal.3d, at 644, 128 Cal.Rptr., at 686, 547 P.2d at 462:

'We are satisfied that from the above cited decisions the following principle can be distilled and we thus hold: Where an out-of-state seller conducts a substantial mail order business with residents of a state imposing a use tax on such purchasers and the seller's connection with the taxing state is not exclusively by means of the instruments of interstate commerce, the slightest presence within such taxing state independent of any connection through interstate commerce will permit the state interstate commerce will post on the seller the duty of collecting the use tax from such mail order purchasers and the liability for failure to do so.' (Emphasis supplied.)

Our affirmance of the California Supreme Court is not to be understood as implying agreement with that court's 'slightest presenceh standard of constitutional nexus. Appellant's maintenance of two offices in the State and solicitation by employees assigned to those offices of advertising copy in the range of $1 million annually, Tr. of Oral Arg. 6, establish a much more substantial presence than the expression 'slightest presence' connotes. Our affirmance thus rests upon our conclusion that appellant's maintenance of the two offices in California and activities there adequately establish a relationship or 'nexus' between the Society and the State that renders constitutional the obligations imposed upon appellant pursuant to §§ 6203 and 6204.5 This conclusion is supported by several of our decisions.

The requisite nexus was held to be shown when the out-of-state sales were arranged by the seller's local agents working in the taxing State, Felt & Tarrant Co. v. Gallagher, 306 U.S. 62, 59 S.Ct. 376, 83 L.Ed. 488 (1939); General Trading Co. v. Tax Comm'n 322 U.S. 335, 64 S.Ct. 1028, 88 L.Ed. 1309 (1944), and in cases of maintenance in the State of local retail store outlets by out-of-state mail-order sellers. Nelson v. Sears, Roebuck & Co., supra; Nelson v. Montgomery Ward, 312 U.S. 373, 61 S.Ct. 593, 85 L.Ed. 897 (1941). In Scripto, Inc. v. Carson, 362 U.S. 207, 80 S.Ct. 619, 4 L.Ed.2d 660 (1960), the necessary basis was found in the case of a Georgia-based company that had '10 wholesalers, jobbers, or 'salesmen' conducting continuous local solicitation in Florida and forwarding the resulting orders from that State to Atlanta for shipment of the ordered goods,' Id., at 211, 80 S.Ct., at 621, although maintaining no office or place of business in Florida, and having no property or regular full-time employees there.

Standard Pressed Steel Co. v. Washington Rev. Dept., 419 U.S. 560, 95 S.Ct. 706, 42 L.Ed.2d 719 (1975), is also instructive. That case involved a direct tax upon the gross receipts of a foreign corporation resulting from sales to a State of Washington customer, and not imposition of use-tax-collection duties. Although 'a vice in a tax on gross receipts of a corporation doing an interstate business is the risk of multiple taxation . . .,' id., at 563, 95 S.Ct., at 709, see Monamotor Oil Co. v. Johnson, supra, a concern not present when only imposition of use-tax-collection duty is...

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