Appellant, a Delaware corporation, manufactures motor vehicles
and parts outside the State of Washington some of which it sells to
retail dealers in that State. It operates through substantially
independent "Divisions," here, three automotive and one parts, all
but the latter maintaining zone offices in Oregon which handle
sales and other orders from dealers in Washington. Sales originate
through projection of orders of estimated needs, for practical
purposes, "a purchase order," worked out between the dealers and
the corporation's district managers who conduct business from their
homes in Washington and constantly call upon dealers, assisting in
sales promotion, training of salesmen, etc.; service contacts are
maintained through service representatives. One automotive division
has a small branch office in Washington to expedite delivery of
cars for dealers in all but nine counties. During the pertinent
period, the automotive and parts divisions had about 40 employees
resident or principally employed in the State. In addition,
out-of-state zone office personnel visited dealers in the State
from time to time. The parts division maintains warehouses in
Oregon and Washington from which orders from Washington dealers are
filled (though only the tax on Oregon shipments is protested).
Appellant claims that its products taxed by Washington are
manufactured in St. Louis, which levies a license tax measured by
sales before shipment. This litigation arises from application of
Washington's tax on the privilege of doing business in the State
measured by the wholesale sales of appellant within the State.
Appellant contended that it constituted a tax on unapportioned
gross receipts in violation of the Commerce and Due Process
Clauses. The lower court upheld this view except for some of the
business conducted from appellant's local branch office. The State
Supreme Court reversed, holding that all appellant's activities in
the State were subject to the tax, which was measured by its
wholesale sales and was found to bear a reasonable relation to
appellant's in-state activities.
1. Though interstate commerce cannot be subjected to the burdens
of multiple taxation, a tax measured by gross receipts is
constitutionally proper if fairly apportioned. Pp. 377 U. S.
Page 377 U. S. 437
2. The burden of establishing exemption from a tax rests upon a
taxpayer claiming immunity therefrom. Norton Co. v. Department
of Revenue, 340 U. S. 534
followed. P. 377 U. S.
3. The bundle of appellant's corporate activities or "incidents"
in Washington afforded the State a proper basis for imposing a tax.
Pp. 377 U. S.
4. The evidence was sufficient to warrant the finding by the
state court of a nexus between appellant's in-state activities and
its sales there, especially where its taxable business was so
enmeshed with what it claimed was nontaxable. P. 377 U. S.
5. This Court does not pass upon appellant's claim of "multiple
taxation" in violation of the Commerce Clause, because appellant
did not show what definite burden in a constitutional sense the St.
Louis tax places on the identical interstate shipments by which
Washington measures its tax, or that Oregon levies any tax on
appellant's activity bearing on Washington sales. Pp. 377 U. S.
60 Wash. 2d
, 376 P.2d
MR. JUSTICE CLARK delivered the opinion of the Court.
This appeal tests the constitutional validity, under the
Commerce and Due Process Clauses, of Washington's tax imposed upon
the privilege of engaging in business activities within the State.
] The tax is
measured by the
Page 377 U. S. 438
appellant's gross wholesale sales of motor vehicles, parts and
accessories delivered in the State. Appellant claims that the tax
is levied on unapportioned gross receipts from such sales and is,
therefore, a tax on the privilege of engaging in interstate
commerce; is inherently discriminatory; results in the imposition
of a multiple tax burden; and is a deprivation of property without
due process of law. The Washington Superior Court held that the
presence of a branch office in Seattle rendered some of the
Chevrolet transactions subject to tax, but, as to the remainder,
held that the application of the statute would be repugnant to the
Commerce and the Due Process Clauses of the United States
Constitution. On appeal, the Supreme Court of Washington reversed
the latter finding, holding that all of the appellant's
transactions were subject
Page 377 U. S. 439
to the tax on the ground that the tax bore a reasonable relation
to the appellant's activities within the State. 60 Wash. 2d
, 376 P.2d
. Probable jurisdiction was noted. 374 U.S. 824. We have
concluded that the tax is levied on the incidents of a substantial
local business in Washington, and is constitutionally valid, and
therefore affirm the judgment.
We start with the proposition that
"[i]t was not the purpose of the Commerce Clause to relieve
those engaged in interstate commerce from their just share of state
tax burden even though it increases the cost of doing the
Western Live Stock v. Bureau of Revenue, 303 U.
, 303 U. S. 254
(1938). "Even interstate business must pay its way," Postal
Telegraph-Cable Co. v. Richmond, 249 U.
, 249 U. S. 259
(1919), as is evidenced by numerous opinions of this Court. For
example, the Court has approved property taxes on the instruments
employed in commerce, Western Union Telegraph Co. v. Attorney
General, 125 U. S. 530
(1888); on property devoted to interstate transportation fairly
apportioned to its use within the State, Pullman's Palace Car
Co. v. Pennsylvania, 141 U. S. 18
(1891); on profits derived from foreign or interstate commerce by
way of a net income tax, William E. Peck & Co. v.
Lowe, 247 U. S. 165
(1918), and United States Glue Co. v. Oak Creek,
247 U. S. 321
(1918); by franchise taxes, measured by the net income of a
commercially domiciled corporation from interstate commerce
attributable to business done in the State and fairly apportioned,
Underwood Typewriter Co. v. Chamberlain, 254 U.
(1920); by a franchise tax measured on a
proportional formula on profits of a unitary business manufacturing
and selling ale, "the process of manufacturing resulting in no
profits until it ends in sales," Bass, Ratcliff & Gretton,
Ltd. v. State Tax Comm'n, 266 U. S. 271
266 U. S. 282
(1924); by a personal property
Page 377 U. S. 440
tax by a domiciliary State on a fleet of airplanes whose home
port was in the taxing State, despite the fact that personal
property taxes were paid on part of the fleet in other States,
Northwest Airlines, Inc. v. Minnesota, 322 U.
(1944); by a net income tax on revenues derived
from interstate commerce where fairly apportioned to business
activities within the State, Northwestern States Portland
Cement Co. v. Minnesota, 358 U. S. 450
(1959); and by a franchise tax levied on an express company, in
lieu of taxes upon intangibles or rolling stock, measured by gross
receipts, fairly apportioned, and derived from transportation
within the State, Railway Express Agency, Inc. v.
Virginia, 358 U. S. 434
However, local taxes measured by gross receipts from interstate
commerce have not always fared as well. Because every State has
equal rights when taxing the commerce it touches, there exists the
danger that such taxes can impose cumulative burdens upon
interstate transactions which are not presented to local commerce.
Cf. Michigan-Wisconsin Pipe Line Co. v. Calvert,
347 U. S. 157
347 U. S. 170
(1954); Philadelphia & Southern S.S. Co. v.
Pennsylvania, 122 U. S. 326
122 U. S. 346
(1887). Such burdens would destroy interstate commerce and
encourage the re-erection of those trade barriers which made the
Commerce Clause necessary. Cf. Baldwin v. G.A.F. Seelig,
Inc., 294 U. S. 511
294 U. S.
-522 (1935). And, in this connection, we have
specifically held that interstate commerce cannot be subjected to
the burden of "multiple taxation." Michigan-Wisconsin Pipe Line
Co. v. Calvert, supra,
at 347 U. S. 170
Nevertheless, as we have seen, it is well established that taxation
measured by gross receipts is constitutionally proper if it is
A careful analysis of the cases in this field teaches that the
validity of the tax rests upon whether the State is exacting a
constitutionally fair demand for that aspect of interstate commerce
to which it bears a special relation.
Page 377 U. S. 441
For our purposes, the decisive issue turns on the operating
incidence of the tax. In other words, the question is whether the
State has exerted its power in proper proportion to appellant's
activities within the State, and to appellant's consequent
enjoyment of the opportunities and protections which the State has
afforded. Where, as in the instant case, the taxing State is not
the domiciliary State, we look to the taxpayer's business
activities within the State, i.e.,
the local incidents, to
determine if the gross receipts from sales therein may be fairly
related to those activities. As was said in Wisconsin v. J. C.
Penney Co., 311 U. S. 435
311 U. S. 444
(1940), "[t]he simple but controlling question is whether the state
has given anything for which it can ask return."
Here, it is admitted that General Motors has entered the State
and engaged in activities therein. In fact, General Motors
voluntarily pays considerable taxes on its Washington operations,
but contests the validity of the tax levy on four of its Divisions,
Chevrolet, Pontiac, Oldsmobile, and General Motors Parts. Under
these circumstances, appellant has the burden of showing that the
operations of these divisions in the State are
"dissociated from the local business, and interstate in nature.
The general rule, applicable here, is that a taxpayer claiming
immunity from a tax has the burden of establishing his
Norton Co. v. Department of Revenue, 340 U.
, 340 U. S. 537
(1951). And, as we also said in that case, this burden is not
"by showing a fair difference of opinion which, as an original
matter, might be decided differently. This corporation, by
submitting itself to the taxing power . . . [of the State],
likewise submitted itself to its judicial power to construe and
apply its taxing statute insofar as it keeps within constitutional
bounds. Of course, in constitutional cases, we have power to
examine the whole record to arrive at an
Page 377 U. S. 442
independent judgment as to whether constitutional rights have
been invaded, but that does not mean that we will reexamine, as a
court of first instance, findings of fact supported by substantial
At 340 U. S.
With these principles in mind, we turn to the facts.
1. GENERAL MOTORS` CORPORATE ORGANIZATION
AND SALES OPERATION
General Motors is a Delaware corporation which was engaged in
business in Washington during the period of time involved in this
case, January 1, 1949, through June 30, 1953. Chevrolet, Pontiac,
Oldsmobile and General Motors Parts are divisions of General
Motors, but they operate substantially independently of each other.
The corporation manufactures automobiles, trucks and other
merchandise which are sold to dealers in Washington. However, all
of these articles are manufactured in other States. In order to
carry on the sale, in Washington, of the products of Chevrolet,
Pontiac, Oldsmobile and General Motors Parts, the corporation
maintains an organization of employees in each of these divisions
on a national, regional and district level. During the taxing
period in question, the State of Washington was located in the
western region of the corporation's national organization, and each
division, except General Motors Parts, maintained a zone office at
Portland, Oregon. These zone offices serviced General Motors'
operations in Oregon, Washington, Idaho, portions of Montana and
Wyoming, and all of the then Territory of Alaska. Chevrolet
Division also maintained a branch office at Seattle which was under
the jurisdiction of the Portland zone office and which rendered
special service to all except the nine southern counties of
Washington, which were still serviced by the Portland office. The
zone offices of each division
Page 377 U. S. 443
were broken down into geographical district offices, and it is
in these districts that the dealers, to whom the corporation sold
its products for resale, were selected and located. [Footnote 2
] The orders for these products
were sent by the dealers to the zone office located at Portland.
They were accepted or rejected there or at the factory, and the
sales were completed by shipments f.o.b. the factories.
2. PERSONNEL RESIDING WITHIN THE STATE,
AND THEIR ACTIVITIES
The sales organizations of the Chevrolet, Pontiac and Oldsmobile
Divisions were similar in most respects. The zone manager was
located in Portland, and had charge of the sales operation. His job
"to secure and maintain a quality dealer organization . . . , to
administer and promote programs, plans and procedures that will
cause that dealer organization to give . . . the best possible
business representation in this area."
R. 76. The district managers lived within the State of
Washington, and their jobs were
"the maintenance of a quality organization -- dealer
organization -- and the follow-through and administration of
programs, plans and procedures within their district that will help
to develop the dealer organization, for the best possible financial
and sales results."
R. 109. While he had no office within the State, the district
manager operated from his home, where he received mail and
telephone calls and otherwise carried on the corporation's
business. He called upon each dealer in his district on an average
of at least once a month, and often saw the larger dealers weekly.
A district manager had from 12 to 30 dealers under his supervision,
and functioned as the zone manager's direct contact
Page 377 U. S. 444
with these dealers, acting
"in a supervisory or advisory capacity to see that they have the
proper sales organization and to acquaint them with the Divisional
sales policies and promotional and training plans to improve the
selling ability of the sales organization."
R. 246. In this connection, the district manager also assisted
in the organization and training of the dealer's sales force. At
appropriate times, he distributed promotional material and advised
on used car inventory control.
It was also the duty of the district manager to discuss and work
out with the dealer the 30-, 60- and 90-day projection of orders of
estimated needs which the dealer or the district manager then filed
with the zone manager. These projections indicated the number of
cars a dealer needed during the indicated period, and also included
estimates for accessories and equipment. The projected orders were
prepared and filed each month, and the estimates contained in them
could, for all practical purposes, be "construed as a purchase
order." [Footnote 3
In addition to the district manager, each of the Chevrolet,
Pontiac and Oldsmobile Divisions also maintained service
representatives who called on the dealers with regularity,
assisting the service department in any troubles it experienced
with General Motors products. These representatives also checked
the adequacy of the service department inventory to make certain
that the dealer's agreement was being complied with and to ensure
the best possible service to customers. It was also their duty to
note the appearance of the dealer's place of business
Page 377 U. S. 445
and, where needed, to require rehabilitation, improved
cleanliness or any other repairs necessary to achieve an attractive
sales and service facility. At the dealer's request, or on
direction from his zone superior, the service representative also
conducted service clinics at the dealer's place of business for the
purpose of teaching the dealer and his service personnel the proper
techniques necessary to the operation of an efficient service
department. The service representative also gave assistance to the
dealer with the more difficult customer complaints, some of which
were registered with the dealer, but others of which were
registered with the corporation.
During the tax period involved here, the Chevrolet, Oldsmobile,
and Pontiac Divisions had an average of about 20 employees resident
or principally employed in Washington. [Footnote 4
] General Motors Parts Division employed about
The Chevrolet Division's branch office at Seattle consisted of
one man and his secretary. That office performed the function of
getting better service for Washington dealers on orders of
Chevrolet Division products. The branch office had no jurisdiction
over sales or over other Chevrolet personnel in the State. Since
January 1, 1954, Chevrolet Division has maintained a zone office in
Seattle, and has paid the tax without dispute.
3. OUT-OF-STATE PERSONNEL, PERFORMING
The zone manager, who directed all zone activities, visited with
each Washington dealer on the average of once each 60 days, the
larger ones, each month. About one-half of these visits were staged
at the dealer's place of business and the others were at Portland.
Page 377 U. S. 446
business management manager was the efficiency expert for the
zone, and supervised the capital structure and financing of the
Washington dealers. The zone parts and service manager held
responsibility for the adequacy of the Washington dealer services
to customers. He worked through the local Washington service
representative, but also made personal visits to Washington dealers
and conducted schools for the promotion of good service policies.
The zone used car manager (for the Chevrolet Division only)
assisted Washington dealers in the disposition of used cars through
appropriate display and reconditioning.
4. ACTIVITIES OF GENERAL MOTORS PARTS DIVISION
During the period of this tax, the General Motors Parts Division
warehoused, sold and shipped parts and accessories to Washington
dealers for Chevrolet, Pontiac and Oldsmobile vehicles. It
maintained warehouses in Portland and Seattle. No personnel of this
division visited the dealers, but all of the Chevrolet, Pontiac and
Oldsmobile dealers in Washington obtained their parts and
accessories from these warehouses. Items carried by the Seattle
warehouse were shipped from it, and those warehoused at Portland
were shipped from there. The Seattle warehouse, which carried the
items most often called for in Washington, employed from 20 to 28
people during the taxing period. The Portland warehouse carried the
less frequently needed parts. The tax on the orders filled at the
Seattle warehouse was paid, but the tax on the Portland shipments
is being protested.
"It is beyond dispute," we said in Northwestern States
Portland Cement Co. v. Minnesota, supra,
at 358 U. S. 458
"that a State may not lay a tax on the privilege' of engaging
in interstate commerce." But that is not this case. To so contend
here is to overlook a long line of cases of
Page 377 U. S.
this Court holding that an in-state activity may be a
sufficient local incident upon which a tax may be based. As was
said in Spector Motor Service, Inc. v. O'Connor,
340 U. S. 602,
340 U. S. 609
"[t]he State is not precluded from imposing taxes upon other
activities or aspects of this [interstate] business which, unlike
the privilege of doing interstate business, are subject to the
sovereign power of the State."
This is exactly what Washington seeks to do here, and we cannot
say that appellant has shown that its activities within the State
are not such incidents as the State can reach. Norton Co. v.
Department of Revenue, supra,
at 340 U. S. 537
Unlike Field Enterprises, Inc. v.
Washington, 47 Wash. 2d
, 289 P.2d
352 U.S. 806 (1956), citing Norton,
the Pontiac and Oldsmobile Divisions of General Motors
had no branch offices in Washington. But these divisions had
district managers, service representatives and other employees who
were residents of the State and who performed substantial services
in relation to General Motors' functions therein, particularly with
relation to the establishment and maintenance of sales, upon which
the tax was measured. We place little weight on the fact that these
divisions had no formal offices in the State, since, in actuality,
the homes of these officials were used as corporate offices.
Despite their label as "homes," they served the corporation just as
effectively as "offices." In addition, the corporation had a
Chevrolet branch office and a General Motors Parts Division
warehouse in Seattle.
Thus, in the bundle of corporate activity, which is the test
here, we see General Motors activity so enmeshed in local
connections that it voluntarily paid taxes on various of its
operations, but insists that it was not liable on others. Since
General Motors elected to enter the State in this fashion, we
cannot say that the Supreme Court of Washington erred in holding
that these local incidents were
Page 377 U. S. 448
sufficient to form the basis for the levy of a tax that would
not run contrary to the Constitution. Norton Co. v. Department
of Revenue, supra.
The tax that Washington levied is measured by the wholesale
sales of the respective General Motors divisions in the State. It
is unapportioned, and, as we have pointed out, is, therefore,
suspect. We must determine whether it is so closely related to the
local activities of the corporation as to form "some definite link,
some minimum connection, between a state and the person, property
or transaction it seeks to tax." Miller Bros. Co. v.
Maryland, 347 U. S. 340
347 U. S.
-345 (1954). On the basis of the facts found by the
state court, we are not prepared to say that its conclusion was
constitutionally impermissible. Norton Co. v. Department of
at 340 U. S. 538
Here, just as in Norton,
the corporation so mingled its
taxable business with that which it claims nontaxable that we can
"conclude that, in the light of all the evidence, the judgment
attributing . . . [the corporation's Washington sales to its local
activity] was within the realm of permissible judgment. Petitioner
has not established that such services as were rendered . . .
[through in-state activity] were not decisive factors in
establishing and holding this market."
Although mere entry into a State does not take
from a corporation the right to continue to do an interstate
business with tax immunity, it does not follow that the corporation
can channel its operations through such a maze of local connections
as does General Motors, and take advantage of its gain on
domesticity, and still maintain that same degree of immunity.
A more difficult question might arise from appellant's claim of
multiple taxation. Gwin, White & Prince, Inc. v.
Henneford, 305 U. S. 434
305 U. S. 440
(1939). General Motors
Page 377 U. S. 449
claims that some of its products taxed by Washington are
manufactured in St. Louis, where a license tax, measured by sales
before shipment, is levied. See American Mfg. Co. v. St.
Louis, 250 U. S. 459
(1919). It is also urged that General Motors' Oregon-based activity
which concerns Washington sales might afford sufficient incidents
for a similar tax by Oregon. The Court touched upon the problem of
multiple taxation in Northwest Airlines v. Minnesota,
at 322 U. S. 295
but laid it to one side as "not now before us." Thereafter, in
Northwestern States Portland Cement Co. v. Minnesota,
at 358 U. S. 463
we held that,
"[i]n this type of case, the taxpayers must show that the
formula places a burden upon interstate commerce in a
Appellant has not done this. It has not demonstrated what
definite burden, in a constitutional sense, the St. Louis tax
places on the identical interstate shipments by which Washington
measures its tax. Cf. International Harvester Co. v.
Evatt, 329 U. S. 416
329 U. S.
-423 (1947). And further, it has not been shown that
Oregon levies any tax on appellant's activity bearing on Washington
sales. In such cases, we have refrained from passing on the
question of "multiple taxation," e.g., Northwestern States
Portland Cement Co. v. Minnesota, supra,
and we adhere to that
Relevant sections of the Washington statute as they were in
force during the taxable period in this case, January 1, 1949,
through June 30, 1953, are:
"Section 4. From and after the first day of May, 1935, there is
hereby levied and there shall be collected from every person a
for the act or privilege of engaging in business activities.
Such tax shall be measured by the application of rates against
value of products, gross proceeds of sales, or gross income of the
business, as the case may be, as follows:
"* * * *"
"(e) Upon every person . . . engaging within this state in the
business of making sales at wholesale; as to such persons the
amount of tax with respect to such business shall be equal to the
gross proceeds of sales of such business multiplied by the rate of
one-quarter of one per cent;"
"* * * *"
"Section 5. For the purposes of this title . . ."
"* * * *"
"(e) The term 'sale at wholesale' or 'wholesale sale' means any
sale of tangible personal property and any sale of or charge made
for labor and services rendered in respect to real or personal
property, which is not a sale at retail;"
"(f) The term 'gross proceeds of sales' means the value
proceeding or accruing from the sale of tangible personal property
and/or for services rendered without any deduction on account of
the cost of property sold, the cost of materials used, labor costs,
interest, discount paid, delivery costs, taxes, or any other
expense whatsoever paid or accrued and without any deduction on
account of losses."
Laws of Wash. 1949, c. 228 at 814-819.
The dealers are independent merchants, often financing
themselves, owning their own facilities and paying for all products
R. 341. A Chevrolet zone manager said that:
"Once that projection and estimate has been made, and a meeting
of minds between the district manager and the dealer, or his
representative, arrived at, the dealer then places individual
orders with us on a separate form for the merchandise. Those
separate forms, of course, are to allow him to specifically specify
color option, and things of that character."
At times, Pontiac had three, Oldsmobile six, and Chevrolet 17
assigned personnel in the State.
MR. JUSTICE BRENNAN, dissenting.
This case presents once again the thorny problem of the power of
a State to tax the gross receipts from interstate sales arising
from activities occurring only partly within its borders. In
upholding the Washington gross receipts tax, the Court has, in my
judgment, confused two quite different issues raised by the case,
and, in doing so, has ignored a fatal defect in the Washington
In order to tax any transaction, the Due Process Clause requires
that a State show a sufficient "nexus between
Page 377 U. S. 450
such a tax and transactions within a state for which the tax is
an exaction." Northwestern States Portland Cement Co. v.
Minnesota, 358 U. S. 450
358 U. S. 464
This question, which we considered in McLeod v. J. E. Dilworth
Co., 322 U. S. 327
Norton Co. v. Department of Revenue, 340 U.
, is the most fundamental precondition on state
power to tax. But the strictures of the Constitution on this power
do not stop there. For, in the case of a gross receipts tax imposed
upon an interstate transaction, even though the taxing State can
show "some minimum connection," Northwestern States Portland
Cement Co., supra,
358 U. S. 465
, the Commerce Clause requires that
"[t]axation measured by gross receipts from interstate commerce
. . . [be] fairly apportioned to the commerce carried on within the
Western Live Stock v. Bureau of Revenue, 303 U.
, 303 U. S. 256
See J. D. Adams Mfg. Co. v. Storen, 304 U.
The Court recognizes that "taxation measured by gross receipts
is constitutionally proper if it is fairly apportioned,"
p. 377 U. S. 440
In concluding that the tax in this case includes a fair
apportionment, however, the Court relies upon the fact that
Washington has sufficient contacts with the sale to satisfy the
standard, which was formulated to meet the quite
different problem of defining the requirements of the Due Process
Clause. See 377 U. S.
Our prior decisions clearly indicate that a quite
different scheme of apportionment is required. Of course, when a
sale may be localized completely in one State, there is no danger
of multiple taxation, and, as in the case of a retail sales tax,
the State may use as its tax base the total gross receipts arising
within its borders. See McGoldrick v. Berwind-White Coal Mining
Co., 309 U. S. 33
far more common in our complex economy is the kind of sale
presented in this case, which exhibits significant contacts with
more than one State. In such a situation, it is the commercial
Page 377 U. S. 451
activity within the State, and not the sales volume, which
determines the State's power to tax, and by which the tax must be
apportioned. While the ratio of in-state to out-of-state sales is
often taken into account as one factor among others in apportioning
a firm's total net income, see, e.g.,
the description of
the "Massachusetts Formula" in Note, 75 Harv.L.Rev. 953, 1011
(1962), it nevertheless remains true that, if commercial activity
in more than one State results in a sale in one of them, that State
may not claim as all its own the gross receipts to which the
activity within its borders has contributed only a part. Such a tax
must be apportioned to reflect the business activity within the
taxing State. Cf.
my concurring opinion in Railway
Express Agency v. Virginia, 358 U. S. 434
358 U. S. 446
Since the Washington tax on wholesales is, by its very terms,
applied to the "gross proceeds of sales" of those "engaging within
this state in the business of making sales at wholesale," Rev.Code
Wash. 82.04.270, it cannot be sustained under the standards
required by the Commerce Clause.
MR. JUSTICE GOLDBERG, with whom MR. JUSTICE STEWART and MR.
JUSTICE WHITE join, dissenting.
The issue presented is whether the Commerce Clause permits a
State to assess an unapportioned gross receipts tax on the
interstate wholesale sales of automobiles delivered to dealers for
resale in that State. In upholding the tax involved in this case,
the Court states as a general proposition that "taxation measured
by gross receipts (from interstate sales) is constitutionally
proper if it is fairly apportioned." Ante
at 377 U. S. 440
The Court concludes from this that the validity of Washington's
wholesale sales tax may be determined by asking "the simple but
controlling question [of] whether the state has given anything for
which it can ask return." Ante
at 377 U. S. 441
This elusively simple test and its application to this case
Page 377 U. S. 452
an important departure from a fundamental purpose of the
Commerce Clause and from an established principle which had
heretofore provided guidance in an area otherwise fraught with
complexities and inconsistencies.
The relevant facts, which are undisputed, merit brief
restatement. General Motors manufactures in California, Missouri
and Michigan motor vehicles, parts, and accessories which are sold
at wholesale to independent dealers. The corporation manufactures
none of these products within the State of Washington, but does
sell them to local Washington retail dealers. General Motors
conducts business through "Divisions" which, although not
separately incorporated, are operated as substantially independent
entities. This case involves wholesale sales by the Chevrolet,
Pontiac, Oldsmobile and General Motors Parts Divisions to
independent dealers in Washington. As a general matter, the sales
and orders involved in this case were handled and approved by zone
offices in Portland, Oregon. General Motors has a limited number of
sales representatives ("district managers") who reside in
Washington and who maintain contacts with the local dealers in
order to facilitate the sales of General Motors products, but these
sales representatives conducted no business in Washington other
than the promotion of their wholesale interstate sales. The orders
for automobiles were sent directly to the Portland zone offices,
where they were accepted for shipment, f.o.b., from points outside
of Washington. For the purposes of this case, however, it is useful
to divide the transactions -- the taxability of which is in dispute
-- into three categories:
"(1) Pontiac and Oldsmobile Divisions Sales: these Divisions had
no office, establishment or intrastate business in Washington; they
operated entirely through Portland zone offices and the Washington
sales representatives. "
Page 377 U. S. 453
"(2) General Motors Parts Division Sales: this Division
maintained warehouses in both Seattle, Washington, and Portland,
Oregon. The Seattle warehouse sold directly to local Washington
dealers, and the tax imposed on such sales has been paid, and is
not disputed here. The sales to Washington dealers of parts and
accessories ordered from and delivered by the Portland warehouse
were, however, also taxed and those taxes are disputed here."
"(3) Chevrolet Division Sales -- 'Class A and B' Sales: the
Chevrolet Division maintained a one-man branch office in Seattle,
Washington; and all sales within the territorial jurisdiction of
that office have been referred to in this litigation as 'Class A'
transactions. This one-man office operated under the direction of
the Portland zone office, and conducted no business in the State of
Washington other than to facilitate the management and handling of
sales and orders through the Portland zone office. The Seattle
office, however, dealt only with Washington's northern counties,
and did not deal with nine of Washington's southern counties; the
sales to dealers in those southern counties have been labeled
'Class B' sales, and had no connection with Chevrolet's Seattle
office. The 'Class B' sales were therefore similar to those in
category (1) above."
All of the above transactions have been subjected to an
unapportioned gross receipts tax which the State of Washington
assesses for the privilege of "engaging within this state in the
business of making sales at wholesale." Rev.Code Wash. 82.04.270;
Wash.Laws 1949, c. 228, § 1(e). [Footnote 2/1
Page 377 U. S. 454
On these facts, the Court holds that the activities of the sales
representatives constitute "an in-state activity" forming "a
sufficient local incident upon which a tax may be based."
at 377 U. S. 447
This decision departs from Norton Co. v. Department of
Revenue, 340 U. S. 534
adopts a test there rejected. Norton
Massachusetts corporation which operated "a branch office and
warehouse" in Chicago, Illinois, from which it made "local sales at
at 340 U. S. 535
The Massachusetts corporation was admittedly engaging in intrastate
business within Illinois, and was making local sales concededly
subject to taxation by the State. In addition to "over-the-counter"
Chicago sales, the Massachusetts firm made two other types of sales
to Illinois inhabitants: (1) Sales based on orders or shipments
which at some point were routed through or utilized the Chicago
outlet and (2) sales based on orders from Illinois inhabitants sent
directly to Massachusetts and filled by direct shipment to the
purchasers. The Illinois tax was imposed upon all receipts obtained
by Norton from sales to Illinois residents regardless of whether
those sales were associated or connected with the local office and
warehouse, which was conducting intrastate business. The Court
stated that, when, "as here, the corporation has gone into the
State to do local business," the firm could be exempted from
taxation on sales "only by" sustaining the burden of "showing that
the particular transactions are dissociated from the local business
and interstate in nature." Id.
at 340 U. S. 537
The Court held in part that
"the judgment attributing to the Chicago branch income from all
sales that utilized it
either in receiving the orders or
distributing the goods was within the realm of permissible
at 340 U. S. 538
(Emphasis added.) But, in spite of the burden of persuasion resting
on a firm having an office doing intrastate business, the Court
concluded that the tax on all sales by Norton to Illinois customers
Page 377 U. S. 455
not wholly within "the realm of permissible judgment." The Court
held that those sales involving goods and orders which proceeded
directly from Massachusetts to the Illinois customers without
becoming associated with the Chicago outlet were so clearly
"interstate in character" that they could not be subjected to the
Illinois tax. Id.
at 340 U. S. 539
In so holding, the Court stated that the out-of-state
"could have approached the Illinois market through solicitors
only, and it would have been entitled to the immunity of interstate
commerce. . . ."
at 340 U. S.
The facts and holdings of Norton
should be compared
with the facts and decision of the Court in the present case. The
decision surely requires immunity for the sales in
category (1) (Pontiac and Oldsmobile Divisions Sales), for those
sales were not only interstate in character, but were wholly free
from association with any local office or warehouse conducting
With respect to the transactions in category (2) (General Motors
Parts Division Sales), it appears that the offices and warehouses
operated by the Parts Division in Seattle, Washington, and in
Portland, Oregon, create a situation strikingly similar to that in
where the Massachusetts firm maintained an outlet
in Chicago, Illinois. Here as in Norton,
the Court is
presented with an identifiable group of sales transactions (those
involving sales at the local Seattle warehouse) which appear to
have been over-the-counter and intrastate in character and with a
readily distinguishable group of sales transactions (those
involving only the Portland warehouse) which were not connected
with an intrastate business and which were interstate in character.
the latter type of purely interstate sales,
those unconnected with any intrastate business, were squarely held
Finally, with respect to transactions in category (3) (Chevrolet
Division Sales -- "Class A and B" Sales),
Page 377 U. S. 456
those in "Class B" which, by definition, lacked any connection
with an in-state office, would seem to be precisely like those in
which had no connection with an in-state
establishment and which, accordingly, were exempted. And, as to the
"Class A" sales which were connected with the one-man Seattle
office, it is important to note that this in-state "office," unlike
the "office and warehouse" involved in Norton,
intrastate or retail sales, stocked no products, and had no
authority to accept sales orders. In fact, the Seattle "office"
simply operated to facilitate the interstate sales directed by the
zone office in Portland, Oregon.
Although the opinion of the Court seems to imply that there
still is some threshold requirement of in-state activity which must
be found to exist before a "fairly apportioned" tax may be imposed
on interstate sales, it is difficult to conceive of a state gross
receipts tax on interstate commerce which could not be sustained
under the rationale adopted today. Every interstate sale invariably
involves some local incidents -- some "in-state" activity. It is
difficult, for example, to distinguish between the in-state
activities of the representatives here involved and the in-state
activities of solicitors or traveling salesmen -- activities which
this Court has held are insufficient to constitute a basis for
imposing a tax on interstate sales. McLeod v. J. E. Dilworth
Co., 322 U. S. 327
cf. Real Silk Hosiery Mills v. City of Portland,
268 U. S. 325
Robbins v. Shelby County Taxing District, 120 U.
. Surely the distinction cannot rest on the fact
that the solicitors or salesmen make hotels or motels their
"offices," whereas, in the present case, the sales representatives
made their homes their "offices." In this regard, the
decision rested solidly on the fact that the
taxpayer had a branch office and warehouse making intrastate retail
The opinion of the Court goes beyond a consideration of whether
there has been in-state activity of appropriate
Page 377 U. S. 457
character to satisfy a threshold requirement for imposing a tax
on interstate sales. The Court asserts as a general principle that
the validity of a tax on interstate commerce
"rests upon whether the State is exacting a constitutionally
fair demand for that aspect of interstate commerce to which it
bears a special relation."
at 377 U. S. 440
What is "fair"? How are we to determine whether a State has exerted
its power in "proper proportion to appellant's activities within
the State"? Ante
at 377 U. S. 441
Note, Developments -- Federal Limitations on State
Taxation of Interstate Business, 75 Harv.L.Rev. 953, 957 (1962). I
submit, with due respect for the complexity of the problem, that
the formulation suggested by the Court is unworkable.
Constitutional adjudication under the Commerce Clause would find
little guidance in a concept of state interstate sales taxation
tested and limited by the tax's "fair" proportion or degree. The
attempt to determine the "fairness" of an interstate sales tax of a
given percentage imposed on given activities in one State would be
almost as unseemly as an attempt to determine whether that same tax
was "fairly" apportioned in light of taxes levied on the same
transaction by other States. The infinite variety of factual
configurations would readily frustrate the usual process of
clarification through judicial inclusion and exclusion. The only
coherent pattern that could develop would, in reality, ultimately
be based on a wholly permissive attitude toward state taxation of
The dilemma inhering in the Court's formulation is revealed by
its treatment of the "more difficult," but inextricably related,
question arising from the alleged multiple taxation. The Court
would avoid the basic question by saying that appellant
"has not demonstrated what definite burden, in a constitutional
sense, the St. Louis tax places on the identical interstate
shipments. . . . And further, it has not been shown that Oregon
Page 377 U. S. 458
any tax on appellant's activity bearing on Washington sales.
at 377 U. S. 449
These problems are engendered by the rule applied here, and cannot
be evaded. For if it is "fair" to subject the interstate sales to
the Washington wholesale sales tax because of the activities of the
sales representatives in Washington, then it would seem equally
"fair" for Oregon, which is the site of the office directing and
consummating these sales, to tax the same gross sales receipts.
Moreover, it would seem "fairer" for California, Michigan, or
Missouri -- States in which automobiles are manufactured, assembled
or delivered -- to impose a tax measured by, and effectively
bearing upon, the same gross sales receipts. See
Wash.L.Rev. 277, 281 (1963). Presumably, if there is to be a
limitation on the taxing power of each of these States, that
limitation surely cannot be on a "first come, first tax" basis.
Alternatively, if diverse local incidents can afford bases for
multistate taxation of the same interstate sale, then the Court is
left to determine, out of some hypothetical maximum taxable amount,
which proportion is "fair" for each of
Page 377 U. S. 459
the States having a sufficient "in-state" contact with the
The burden on interstate commerce and the dangers of multiple
taxation are made apparent by considering Washington's tax
provisions. The Washington provision here involved -- the "tax on
wholesalers" -- provides that every person "engaging within this
state in the business of making sales at wholesale" shall pay a tax
on such business "equal to the gross proceeds of sales of such
business multiplied by the rate of one-quarter of one per cent."
Rev.Code Wash. 82.04.270; Wash.Laws 1949, c. 228, § 1(e). [Footnote 2/3
] In the same chapter,
Washington imposes a "tax on manufacturers" which similarly
provides that every person "engaging within this state in business
as a manufacturer" shall pay a tax on such business "equal to the
value of the products . . . manufactured, multiplied by the rate of
one-quarter of one per cent." Rev.Code Wash. 82.04.240; Wash.Laws
1949, c. 228, § 1(b). Then in a provision entitled "Persons taxable
on multiple activities," the statute endeavors to insure that local
Washington products will not be subjected both to the "tax on
manufacturers" and to the "tax on wholesalers." Rev.Code Wash.
82.04.440; Wash.Laws 1949, c. 228, § 2-A. Prior to its amendment in
1950, the exemptive terms of this "multiple activities" provision
were designed so that a Washington manufacturer-wholesaler would
pay the manufacturing tax and be exempt from the wholesale tax.
This provision, on its face, discriminated against interstate
wholesale sales to Washington purchasers, for it exempted the
intrastate sales of locally made products, while taxing the
competing sales of interstate sellers. In 1950, however, the
"multiple activities" provision was amended, reversing the tax and
the exemption, so that a Washington manufacturer-wholesaler would
first be subjected
Page 377 U. S. 460
to the wholesale tax and then, to the extent that he is taxed
thereunder, exempted from the manufacturing tax. Rev.Code Wash.
82.04.440; Wash.Laws 1950 (special session), c. 5, § 2. See
McDonnell & McDonnell v. State, 62 Wash. 2d
, 557, 383 P.2d
, 908. This amended provision would seem to have essentially
the same economic effect on interstate sales, but has the advantage
of appearing nondiscriminatory.
Even under the amended "multiple activities" exemption, however,
an out-of-state firm manufacturing goods in a State having the same
taxation provisions as does Washington would be subjected to two
taxes on interstate sales to Washington customers. The firm would
pay the producing State a local manufacturing tax measured by sales
receipts and would also pay Washington a tax on wholesale sales to
Washington residents. Under such taxation programs, if an
out-of-state manufacturer competes with a Washington manufacturer,
the out-of-state manufacturer may be seriously disadvantaged by the
duplicative taxation. Even if the out-of-state firm has no
Washington competitors, the imposition of interstate sales taxes,
which add to the cost of producing, may diminish the demand for the
product in Washington, and thus affect the allocation of resources
in the national economy. Moreover, the threat of duplicative
taxation, even where there is no competitor manufacturing in the
consuming State, may compel the out-of-state producer to relocate
his manufacturing operations to avoid multiple taxation. Thus,
taxes such as the one upheld today may discourage the development
of multistate business operations and the most advantageous
distribution of our national resources; the economic effect
inhibits the realization of a free and open economy unencumbered by
local tariffs and protective devices. As the Court said in
McLeod v. J. E. Dilworth Co.,
at 322 U. S.
"The very purpose of the Commerce Clause was to create an area
Page 377 U. S. 461
trade among the several States. That clause vested the power of
taxing a transaction forming an unbroken process of interstate
commerce in the Congress, not in the States."
It may be urged that the Washington tax should be upheld because
it taxes in a nondiscriminatory fashion all wholesale sales,
intrastate and interstate, to Washington purchasers. The Commerce
Clause, however, was designed, as Mr. Justice Jackson said in
H. P. Hood & Sons, Inc. v. Du Mond, 336 U.
, 336 U. S. 538
to create a "federal free trade unit" -- a common national market
among the States, and the Constitution thereby precludes a State
from defending a tax on interstate sales on the ground that the
State taxes intrastate sales generally. Nondiscrimination alone is
no basis for burdening the flow of interstate commerce. The
"does not merely forbid a State to single out interstate
commerce for hostile action. A State is also precluded from taking
any action which may fairly be deemed to have the effect of
impeding the free flow of trade between States. It is immaterial
that local commerce is subjected to a similar encumbrance."
Freeman v. Hewit,
at 329 U. S. 252
A State therefore should not be enabled to put out-of-state
producers and merchants at a disadvantage by imposing a tax to
"equalize" their costs with those of local businessmen who would
otherwise suffer a competitive disadvantage because of the State's
own taxation scheme. The disadvantage stemming from the wholesale
sales tax was created by the State itself, and therefore the fact
that the State simultaneously imposes the same tax on interstate
and intrastate transactions should not obscure the fact that
interstate commerce is being burdened in order to protect the local
market. [Footnote 2/4
Page 377 U. S. 462
In my view, the rules set forth in Norton Co. v. Department
of Revenue, supra,
reflect an attempt to adhere to the basic
purposes of the Commerce Clause. Therefore, in dealing with
unapportioned taxes on interstate sales, I would adhere to the
rules, instead of departing from them by adopting a
standard of "fairness." I would hold that a manufacturer or
wholesaler making interstate sales is not subject to a state gross
receipts tax merely because those sales were solicited or processed
by agents living or traveling in the taxing State. As
recognized, a different rule may be applied to the
taxation of sales substantially connected with an office or
warehouse making intrastate sales. The test adopted by the Court
today, if followed logically in future cases, would seem to mean
that States will be permitted to tax wholly interstate sales by any
company selling through local agents or traveling salesmen. Such a
rule may leave only mail-order houses free from state taxes on
interstate sales. With full sympathy for the revenue needs of
States, I believe there are other legitimate means of raising state
revenues without undermining the common national market created by
the Commerce Clause. I therefore respectfully dissent.
The tax periods involved in this case are from January 1, 1949,
through June 30, 1953.
With respect to the view that the application of the Commerce
Clause depends upon the existence of actual, as distinguished from
potential, multiple taxation, compare Freeman v. Hewit,
329 U. S. 249
329 U. S.
"It is suggested . . . that the validity of a gross sales tax
should depend on whether another State has also sought to impose
its burden on the transactions. If another State has taxed the same
interstate transaction, the burdensome consequences to interstate
trade are undeniable. But that, for the time being, only one State
has taxed is irrelevant to the kind of freedom of trade which the
Commerce Clause generated. The immunities implicit in the Commerce
Clause and the potential taxing power of a State can hardly be made
to depend, in the world of practical affairs, on the shifting
incidence of the varying tax laws of the various States at a
particular moment. Courts are not possessed of instruments of
determination so delicate as to enable them to weigh the various
factors in a complicated economic setting which, as to an isolated
application of a State tax, might mitigate the obvious burden
generally created by a direct tax on commerce."
fn2/1|>note 1, supra.
Cf. Baldwin v. G.A.F. Seelig, Inc., 294 U.
, 294 U. S.
"To give entrance to that excuse ['the economic welfare of the
farmers or of any other class or classes' of local businessmen]
would be to invite a speedy end of our national solidarity. The
Constitution was framed under the dominion of a political
philosophy less parochial in range. It was framed upon the theory
that the peoples of the several states must sink or swim together,
and that, in the long run, prosperity and salvation are in union,
and not division."
See H. P. Hood & Sons, Inc. v. Du Mond,
336 U. S. 525
336 U. S.