OCTOBER TERM, 1993
Syllabus
ASSOCIATED INDUSTRIES OF MISSOURI ET AL. v. LOHMAN, DIRECTOR OF
REVENUE OF MISSOURI, ET AL.
CERTIORARI TO THE SUPREME COURT OF MISSOURI No. 93-397. Argued
March 28, 1994-Decided May 23,1994
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
642
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 pre deprivation 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, At-
643
torney 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
* Daniel
J. Popeo and Richard A. Samp filed a
brief for the Washington Legal Foundation as amicus curiae urging
reversal.
Briefs of amici curiae urging affirmance were filed for the City
of St.
Louis et al. by Nancy Kelley Yendes; for the Multistate Tax
Commission by Alan H. Friedman and Paull Mines; and for the
National Conference of State Legislatures et al. by Richard Ruda
and Lee Fennell.
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
1 Although the use taxes literally apply to all products to be
used, stored, or consumed in the State, § 144.615(2) provides an
exemption for all goods subject to the Missouri sales tax-that is,
goods purchased within the State-and the constitutional provisions
incorporate by reference the same exemption. See Mo. Const., Art.
IV, §§ 43(a), 47(a).
2 Section 144.748(2) incorporates by reference the same
exemption contained in § 144.615(2). See n. 1,
supra.
Because only the 1.5% additional use tax imposed by § 144.748, not
the 4.225% use tax described above, is at issue in this case,
references below to the "use tax" should be understood to refer to
the 1.5% additional use tax.
3 See, e.
g., Mo. Rev. Stat. §§ 66.600-66.630;
67.500-67.545; 92.400-92.420; 94.500-94.510; 94.600-94.655;
94.700-94.745 (1986 and Supp. 1993).
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 burden[sJ" 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
fiat 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
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
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 event[s]." 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, "[w]hen 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 activ-
648
ity 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 justify any levy as a compensatory tax, "a State must, as a
threshold matter, 'identif[y] ... the [intrastate tax] burden for
which the State is attempting to compensate.'" Oregon Waste, ante,
at 103 (quoting Maryland, supra, at 758). Respondents urge that the
local sales taxes imposed by over a thousand political subdivisions
within the State provide the burden on intrastate commerce that
Missouri seeks to counterbalance through the use tax in this case.
There is no dispute that sales taxes and use taxes such as those at
issue here are imposed on "substantially equivalent event[s]."
Maryland, supra, at 759. Silas Mason itself approved a system of
sales and use taxes, and we have recognized that "[a] use tax is
generally perceived as a necessary complement to [a] sales tax."
Williams v. Vermont,
472 U. S. 14,24 (1985).
Cf. Halliburton Oil Well Cementing Co. v. Reily,
373 U. S. 64, 66 (1963)
("[T]he purpose of such a sales-use tax scheme is to make all
tangible property used or consumed in the State subject to a
uniform tax burden irrespective of whether it is acquired within
the State ... or from without the State").
Missouri's use tax scheme, however, 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. As we observed in Maryland v. Louisiana, the "common thread
running through the cases upholding compensatory taxes is the
equality of treatment between local and interstate commerce." 451
U. S., at 759. See also Halliburton, supra, at 70 ("[E]qual
treatment for in-state and out-of-state taxpayers similarly
situated is the condition precedent for a valid use tax on goods
imported from out-ofstate"). Where a State imposes equivalent sales
and use taxes, we have upheld the system under the Commerce Clause.
See Silas Mason, supra, at 584-587. But in Mis-
649
souri, whether the 1.5% use tax is equal to (or lower than) the
local sales tax is a matter of fortuity, depending entirely upon
the locality in which the Missouri purchaser happens to reside.
Where the use tax exceeds the sales tax, the discrepancy imposes a
discriminatory burden on interstate commerce. Out-of-state goods
brought into such a jurisdiction are subjected to a higher levy
than are goods sold locally. The resulting disparity is
incompatible with what we have termed the "strict rule of equality
adopted in Silas Mason." Halliburton, supra, at 73.
Respondents contend that the foregoing analysis is too
myopic-that in reckoning the balance of accounts alluded to in
Silas Mason we should focus, not on each political subdivision in
which a disparity between the two taxes may result in
discrimination against interstate commerce, but rather on the
overall impact of the use tax and the various sales taxes on
interstate commerce across the State as a whole. Respondents'
theory assumes that discrimination in some parts of a state tax
system may be permissible under the Commerce Clause as long as it
is of a sufficiently limited magnitude to be offset by preferential
treatment for interstate trade in other portions of the tax scheme.
There is no question that, within a locality where the use tax
exceeds the sales tax, the tax structure discriminates against
interstate trade. Respondents merely argue that the local
jurisdiction provides too narrow a framework for proper
constitutional analysis.
We have never suggested, however, that patent discrimination in
part of the operation of a tax scheme, not directly justified under
any theory such as the compensatory tax doctrine, can be rendered
inconsequential for Commerce Clause purposes by advantages given to
interstate commerce in other facets of a tax plan or in other
regions of a State. On the contrary, as a general matter we have
rejected reliance on any calculus that requires a quantification of
discrimination as a preliminary step to determining whether the
discrimination is valid. Under our cases, unless one of several
650
narrow bases of justification is shown, see Oregon Waste, ante,
at 100-101, actual discrimination, wherever it is found, is
impermissible, and the magnitude and scope of the discrimination
have no bearing on the determinative question whether
discrimination has occurred. See Wyoming v. Oklahoma,
502 U. S. 437, 454-455
(1992); New Energy Co., 486 U. S., at 276; Maryland, supra, at
760.
Moreover, two Terms ago we implicitly rejected any theory that
would require aggregating the burdens on commerce across an entire
State to determine the constitutionality of a burden on interstate
trade imposed by a particular political subdivision of the State.
We concluded that proper analysis of the practice of one county
that discriminated against interstate trade was "unaffected by the
fact that some other counties [in the State] ha[d] adopted a
different policy." Fort Gratiot Sanitary Landfill, Inc. v. Michigan
Dept. of Natural Resources,
504 U. S. 353, 363
(1992). Contrary to respondents' suggestions, our reasoning
indicates that discrimination is appropriately assessed with
reference to the specific subdivision in which applicable laws
reveal differential treatment.
Any other approach would frustrate the Commerce Clause's central
objective of securing a national "'area of free trade among the
several States.'" Boston Stock Exchange v. State Tax Comm'n,
429 U. S. 318,
328 (1977) (quoting McLeod v.
J. E. Dilworth Co.,
322 U. S. 327, 330
(1944)). Under respondents' view, the Commerce Clause would
interpose no bar to the systematic subdivision of the national
market through discriminatory taxes as long as the taxes were
imposed by counties, rather than by States-and provided, of course,
that on balance each State as a whole did not discriminate against
interstate trade. Such a rule "would invite a multiplication of
preferential trade areas destructive of the very purpose of the
Commerce Clause." Dean Milk Co. v. Madison,
340 U. S. 349, 356
(1951). We have never suggested that the Commerce Clause will
tolerate such dis-
651
crimination. Rather, "our prior cases teach that a State (or one
of its political subdivisions) may not avoid the strictures of the
Commerce Clause by curtailing the movement of articles of commerce
through subdivisions of the State, rather than through the State
itself." Fort Gratiot, supra, at 361.
Respondents contend that their proposed method of assessing
discrimination on a statewide basis also finds support in our cases
and, following the Supreme Court of Missouri, rely on our decision
in General American Tank Car Corp. v. Day,
270 U. S. 367 (1926).
General American involved a challenge to a Louisiana property tax
scheme under which nondomiciliaries of the State were taxed at a
rate of 25 mills on the dollar, while domiciliaries were taxed at a
rate determined by their parish of domicile. See
id., at
370-371. Even though some parish tax rates were less than 25 mills
on the dollar, the Court did not strike down the tax. The decision,
however, does not provide controlling Commerce Clause analysis for
this case.
Although General American involved both Commerce Clause and
Equal Protection Clause challenges, it was only in analyzing the
tax in question under the Equal Protection Clause that we engaged
in the aggregating analysis respondents urge on us under the
Commerce Clause today. Noting that, considered together, the parish
taxes "average[d] approximately twenty-five mills," we concluded
that "in substance" the scheme did not discriminate against
nondomiciliaries and that it was not "invalid merely because
equality in its operation as compared with local taxation has not
been attained with mathematical exactness." Id., at 373. We
reasoned that, "[i]n determining whether there is a denial of equal
protection of the laws by such taxation, we must look to the
fairness and reasonableness of its purposes and practical
operation, rather than to minute differences between its
application in practice and the application of the taxing statute
or statutes to which it is complementary." Ibid.
652
It might be argued that the assessment of equal treatment in
General American was a final step in the Court's Commerce Clause
analysis as well, for the discussion followed upon the conclusion
that the Louisiana scheme survived Commerce Clause scrutiny "unless
it operate[d] to discriminate in some substantial way between"
domiciliaries and nondomiciliaries. Id., at 372. But even if that
were so, the General American approach to averaging burdens on
interstate and intrastate commerce, which Chief Justice Robertson
aptly characterized as a rule of" 'close enough for government
work,'" 857 S. W. 2d, at 195, never took root in our Commerce
Clause jurisprudence. To the extent that General American's Equal
Protection Clause discussion ever could have been read as
suggesting appropriate Commerce Clause analysis, it has been
bypassed by later decisions, and particularly by the "strict rule
of equality adopted in Silas Mason," Halliburton, 373 U. S., at 73,
a rule that has controlled compensatory tax cases for over half a
century. In Silas Mason, Justice Cardozo was explicit in explaining
for the Court that the compensatory tax doctrine requires precision
to ensure that, upon the "reckoning" of "account[s]," the "sum" on
the interstate side of the ledger is "the same" as that on the
intrastate side. 300 U. S., at 584. More recently, we have
reiterated that strict parity is demanded by the compensatory tax
doctrine as we have explained that a compensatory tax leaves a
consumer free to make choices "without regard to the tax
consequences"; if he purchases within the State he may pay a tax,
but if he purchases from outside the State he will pay a "tax of
the same amount." Boston Stock Exchange, supra, at 332 (emphasis
added).4
4 Of course, in focusing on equality, our cases have addressed
the limit of permissible state regulation of interstate commerce.
In setting the limit at equality, we have not suggested that lesser
burdens on interstate trade are impermissible; that is, we have not
demanded equality and nothing but equality in compensatory tax
cases.
653
Respondents' final defense of the use tax is an appeal to
Missouri's pure motives: that is, its lack of any intent to
discriminate. As the product of a decentralized decisionmaking
process that relies on the independent judgment of hundreds of
local jurisdictions, the use tax scheme, in respondents' view,
cannot reveal any overall design on the part of the State or any
other governmental entity to disfavor interstate trade. In fact,
respondents urge that holding this scheme unconstitutional would
effectively eliminate the State's ability to delegate taxing
authority to local jurisdictions. But a court need not inquire into
the purpose or motivation behind a law to determine that in
actuality it impermissibly discriminates against interstate
commerce. See, e. g., Philadelphia, 437 U. S., at 626 (describing
"legislative purpose" as "not ... relevant to the constitutional
issue to be decided"); Hunt v. Washington State Apple Advertising
Comm'n,
432 U. S.
333, 352-353 (1977). See also Chemical Waste Management, Inc.
v. Hunt,
504 U. S.
334, 340-342 (1992).
It should be apparent that in holding this scheme
unconstitutional we impose no new restrictions on the State's power
to delegate its taxing authority as it sees fit. What a State may
not do is appeal to decentralized decisionmaking to augment its
powers: It may not grant its political subdivisions a power to
discriminate against interstate commerce that the State lacked in
the first instance.
The State remains free to authorize political subdivisions to
impose sales or use taxes, as long as discriminatory treatment of
interstate commerce does not result. Other States apparently have
had little difficulty in combining some local autonomy with the
commands of the Commerce Clause. As the parties stipulated, App.
35, 28 States that provide political subdivisions some authority to
impose use taxes have devised systems to ensure that use taxes are
not higher than sales taxes within the same taxing jurisdiction.
See, e.
g.,
654
Ga. Code Ann. §48-8-110 (Supp. 1994) (requiring the enactment of
a local use tax to be coupled with the adoption of an equivalent
sales tax).
B
As our discussion above makes clear, Missouri's use tax scheme
impermissibly discriminates against interstate commerce only in
those localities where the local sales tax is less than 1.5%.
Apparently hoping to obtain a refund for all moneys paid under the
use tax, however, petitioners seek to have the tax struck down in
its entirety. They urge us to hold that the tax is 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. The evil of the system, under
this view, is not merely the actual discrimination that results in
some localities, but the potential for discrimination in every
locality. Indeed, the logic of petitioners' theory suggests that
the potential for abuse would make Missouri's use tax scheme
impermissibly discriminatory even if every political subdivision
had chosen to impose a sales tax of greater than 1.5%.
But we have never deemed a hypothetical possibility of
favoritism to constitute discrimination that transgresses
constitutional commands. On the contrary, we repeatedly have
focused our Commerce Clause analysis on whether a challenged scheme
is discriminatory in "effect," see, e.
g., Bacchus Imports,
Ltd. v. Dias,
468 U.
S. 263, 270 (1984), and we have emphasized that "equality for
the purposes of ... the flow of commerce is measured in dollars and
cents, not legal abstractions." Halliburton, 373 U. S., at 70. See
also Gregg Dyeing Co. v. Query,
286 U. S. 472, 481 (1932)
("Discrimination, like interstate commerce itself, is a practical
conception. We must deal in this matter, as in others, with
substantial distinctions and real injuries"). A purely nominal
distinction in a State's statutes between the methods of
655
regulating intrastate and interstate commerce, as long as it is
not translated into any difference in the substance of regulations
imposed, cannot be said to provide "benefit[s]" to intrastate
commerce or to impose discriminatory "burden[s]" on interstate
trade. New Energy, 486 U. S., at 273. Thus, it would not violate
the Commerce Clause.
For similar reasons, the mere fact that determining the
compensatory character of the use tax in this case requires
consideration of the sales taxes levied by hundreds of local
jurisdictions does not mean that the use tax should be rejected in
toto as facially discriminatory. A compensatory tax and the tax for
which it compensates need not be promulgated in the same provision
of state law, or even through the same governmental entity, to
survive Commerce Clause scrutiny. Such matters of form do not
determine in substance whether the tax merely requires interstate
commerce to "pay its way," Complete Auto Transit, Inc. v. Brady,
430 U. S. 274,
281 (1977) (internal quotation marks omitted), or discriminates
against interstate trade. "The question of constitutional validity
is not to be determined by artificial standards. What is required
is that state action, whether through one agency or another, or
through one enactment or more than one, shall be consistent with
the restrictions of the Federal Constitution. There is no demand in
that Constitution that the State shall put its requirements in
anyone statute. It may distribute them as it sees fit, if the
result, taken in its totality, is within the State's constitutional
power." Gregg Dyeing, supra, at 480. See also Maryland, 451 U. S.,
at 756; Halliburton, supra, at 69.5 If a State may
5 Of course, this is not to suggest that courts should "plunge
... into the morass of weighing comparative tax burdens," American
Trucking Assns., Inc. v. Scheiner,
483 U. S. 266,289 (1987)
(internal quotation marks omitted). But as far as the compensatory
tax doctrine is concerned, a court that is confined to examining
the rates specified in statutes, ordinances, or regulations for
taxes assessed on "substantially equivalent event[s]," Maryland v.
Louisiana,
451 U. S.
725, 759 (1981)-even if the
656
place the provisions perfecting a compensatory tax scheme in two
or more statutes passed by the state legislature, there is no
logical reason to think that a State's decision to implement its
sales/use tax scheme through provisions promulgated at different
levels of government within the State makes the system invalid.
C
That we have declared the tax scheme impermissibly
discriminatory in some localities does not in itself dictate the
relief that the State must provide. As we noted in McKesson Corp.
v. Division of Alcoholic Beverages and Tobacco, Fla. Dept. of
Business Regulation,
496 U. S. 18, 39-40
(1990), a "State found to have imposed an impermissibly
discriminatory tax retains flexibility in responding to this
determination." We have suggested that the provision of a
"meaningful opportunity for taxpayers to withhold contested tax
assessments and to challenge their validity in a predeprivation
hearing" is itself sufficient to satisfy constitutional concerns.
Id., at 38, n. 21. Because the parties have not addressed the
procedures that were available in Missouri to contest the tax, any
effect Missouri's procedures might have on the appropriate remedy
in this case is best left for consideration on remand. Even if no
such predeprivation procedure existed, the Due Process Clause would
demand only that, "to cure the illegality of the tax as originally
imposed, the State must ultimately collect a tax for the contested
tax period that in no respect impermissibly discriminates against
interstate commerce." Id., at 44, n. 27. The methods best adapted
to achieving equal treatment in this case, whether partial or
complete refunds or other measures, are similarly matters properly
left for determination on remand.
inquiry requires examination of hundreds of provisions for
political units within the State-avoids being drawn into an
amorphous inquiry that involves balancing incommensurate burdens
imposed on disparate activities throughout the complex structure of
a State's tax system.
657
III
For the foregoing reasons, the judgment of the Supreme Court of
Missouri is reversed, and the case is remanded for further
proceedings not inconsistent with this opinion.
It is so ordered.
JUSTICE BLACKMUN concurs in the judgment.
658
Per Curiam
MORGAN STANLEY & CO., INC., ET AL. v. PACIFIC MUTUAL LIFE
INSURANCE CO.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH
CIRCUIT
No. 93-609. Argued April 26, 1994-Decided May 23,1994
997 F.2d
39, affirmed by an equally divided Court.
James W B. Benkard argued the cause for petitioners.
With him on the briefs were James D. Liss, Vincent T. Chang,
Hannah Berkowitz, James L. Truitt, Robert B. Mazur, Ernest E.
Figari, Jr., Theodore Edelman, Fletcher L. Yarbrough, Robert G.
Cohen, Kathryn A. Oberly, and Morton L. Susman.
Richard G. Taranto argued the cause for respondent Pacific
Mutual Life Ins. Co. With him on the brief were H. Bartow Farr III
and Stewart M. Weltman. Michael R. Dreeben argued the cause for the
United States. With him on the brief were Solicitor General Days,
Assistant Attorney General Hunger, Deputy Solicitor General
Kneedler, Barbara C. Biddle, Paul Gonson, and Jacob H. Stillman.
*
PER CURIAM.
The judgment of the United States Court of Appeals for the Fifth
Circuit is affirmed by an equally divided Court.
JUSTICE O'CONNOR took no part in the consideration or decision
of this case.
*James M. Finberg and Paul
J. Mishkin filed a brief for
the National Association of Securities and Commercial Law Attorneys
as amicus curiae urging affirmance.
Barbara B. Edelman and Barry Friedman filed a brief for
Spendthrift Farm, Inc., et al. as amici curiae.
Comments
Be the first to comment
Leave a Comment