1. The State of Washington's business and occupation tax does
not violate the Commerce Clause by taxing the interstate commerce
activity of stevedoring within the State.
Complete Auto
Transit, Inc. v. Brady, 430 U. S. 274,
followed; Puget Sound Stevedoring Co. v. State Tax Comm'n,
302 U. S. 90, and
Joseph v. Carter & Weekes Stevedoring Co.,
330 U. S. 422,
overruled. Pp.
435 U. S.
743-751.
(a) A State, under appropriate conditions, may tax directly the
privilege of conducting interstate business.
Complete Auto
Transit, Inc. v. Brady, supra. P.
435 U. S.
745.
(b) When a general business tax levies only on the value of
services performed within the State, the tax is properly
apportioned, and multiple burdens on interstate commerce cannot
occur. Pp.
435 U. S.
746-747.
(c) All state tax burdens do not impermissibly impede interstate
commerce, and the Commerce Clause balance tips against the state
tax only when it unfairly burdens commerce by exacting from the
interstate activity more than its just share of the cost of state
government. Pp.
435 U. S.
747-748.
(d) State taxes are valid under the Commerce Clause where they
are applied to activity having a substantial nexus with the State,
are fairly apportioned, do not discriminate against interstate
commerce, and are fairly related to the services provided by the
State; and here, the Washington tax in question meets this
standard, since the stevedoring operations are entirely conducted
within the State, the tax is levied solely on the value of the
loading and unloading occurring in the State, the tax rate is
applied to stevedoring as well as generally to businesses rendering
services, and there is nothing in the record to show that the tax
is not fairly related to services and protection provided by the
State. Pp.
435 U. S.
750-751.
2. Nor is the Washington business and occupation tax, as applied
to stevedoring so as to reach services provided wholly within the
State to imports, exports, and other goods, among the "Imposts or
Duties"
Page 435 U. S. 735
prohibited by the Import-Export Clause.
Michelin Tire Corp.
v. Wages, 423 U. S. 276. Pp.
435 U. S.
751-761.
(a) The application of the tax to stevedoring threatens none of
the Import-Export Clause's policies of precluding state disruption
of United States foreign policy, protecting federal revenues, and
avoiding friction and trade barriers among the States. The tax, as
so applied, does not restrain the Federal Government's ability to
conduct foreign policy. Its effect on federal import revenue is
merely to compensate the State for services and protection extended
to the stevedoring business. The policy against interstate friction
and rivalry is vindicated, as is the Commerce Clause's similar
policy, if the tax falls upon a taxpayer with reasonable nexus to
the State, is properly apportioned, does not discriminate, and
relates reasonably to services provided by the State. Pp.
435 U. S.
751-755.
(b) While, as distinguished from
Michelin Tire Corp. v.
Wages, supra, where the goods taxed were no longer in transit,
the activity taxed here occurs while imports and exports are in
transit, nevertheless the tax does not fall on the goods
themselves, but reaches only the business of loading and unloading
ships,
i.e., the business of transporting cargo, within
the State, and hence the tax is not a prohibited "Impost or Duty"
when it violates none of the policies of the Import-Export Clause.
Pp.
435 U. S.
755-757.
(c) While here the stevedores load and unload imports and
exports, whereas, in
Michelin Tire Corp. v. Wages, supra,
the state tax in question touched only imports, nevertheless the
Michelin approach of analyzing the nature of the tax to
determine whether it is a prohibited "Impost or Duty" should apply
to taxation involving exports as well as imports. Any tax relating
to exports can be tested for its conformity to the Import-Export
Clause's policies of precluding state disruption of United States
foreign policy and avoiding friction and trade barriers among the
States, although the tax does not serve the Clause's policy of
protecting federal revenues in view of the fact that the
Constitution forbids federal taxation of exports. Pp.
435 U. S.
757-758.
(d) The Import-Export Clause does not effect an absolute ban on
all state taxation of imports and exports, but only on "Imposts or
Duties." Pp.
435 U. S.
759-760.
(e) To say that the Washington tax violates the Import-Export
Clause because it taxes the imports themselves while they remain a
part of commerce would be to resurrect the now rejected "original
package" analysis, whereby goods enjoyed immunity from state
taxation as long as they retained their status as imports by
remaining in their import packages. P.
435 U. S.
760.
Page 435 U. S. 736
(f) The Washington tax is not invalid under the Import-Export.
Clause as constituting the imposition of a transit fee upon inland
customers, since, as is the case in Commerce Clause jurisprudence,
interstate friction will not chafe when commerce pays for the state
services it enjoys. Fair taxation will he assured by the
prohibition on discrimination and the requirements of
apportionment, nexus, and reasonable relationship between tax and
benefits. Pp.
435 U. S.
760-761.
88 Wash. 2d 315, 559 P.2d 997, reversed and remanded.
BLACKMUN, J., delivered the opinion of the Court, in which
BURGER, C.J., and STEWART, WHITE, MARSHALL, REHNQUIST, and STEVENS,
JJ., joined, and in all but Part III-B of which POWELL, J., joined.
POWELL, J., filed an opinion concurring in part and concurring in
the result,
post, p.
435 U. S. 761.
BRENNAN, J., took no part in the consideration or decision of the
case.
MR JUSTICE BLACKMUN delivered the opinion of the Court.
For the second time in this century, the State of Washington
would apply its business and occupation tax to stevedoring. The
State's first application of the tax to stevedoring was
unsuccessful, for it was held to be unconstitutional as violative
of the Commerce Clause [
Footnote
1] of the United States Constitution.
Puget Sound
Stevedoring Co. v. State Tax Comm'n, 302 U. S.
90 (1937). The Court now faces the question whether
Washington's second attempt violates either the Commerce Clause or
the Import-Export Clause. [
Footnote
2]
Page 435 U. S. 737
I
Stevedoring, is the business of loading and unloading cargo from
ships. [
Footnote 3] Private
stevedoring companies constitute respondent Association of
Washington Stevedoring Companies; respondent Washington Public
Ports Association is a nonprofit corporation consisting of port
authorities that engage in stevedoring activities. App. 3. In 1974,
petitioner Department of Revenue of the State of Washington adopted
Revised Rule 193, pt. D, Wash.Admin.Code 458-20-193-D, to implement
the State's 1% business and occupation tax on
Page 435 U. S. 738
services, set forth in Wash.Rev.Code §§ 82.04.220 and 82.04.290
(1976). [
Footnote 4] The Rule
applies the tax to stevedoring and reads in pertinent part as set
forth in the margin. [
Footnote
5]
Revised Rule 193D restores the original scope of the Washington
business and occupation tax. After initial imposition
Page 435 U. S. 739
of the tax in 1935, [
Footnote
6] the then State Tax Commission [
Footnote 7] adopted Rule 198 of the Rules and Regulations
Relating to the Revenue Act of 1935. [
Footnote 8] That Rule permitted taxpayers to deduct
certain income received from interstate and foreign commerce.
Income from stevedoring, however, was not described as deductible.
When, in 1937, this Court in,
Puget Sound, invalidated the
application of the tax to stevedoring, the Commission complied by
adding stevedoring income to the list of
Page 435 U. S. 740
deductions. [
Footnote 9] The
deduction for stevedoring remained in effect until the revision of
Rule 193 in 1974. [
Footnote
10]
Seeking to retain their theretofore enjoyed exemption from the
tax, respondents, in January, 1975, sought from the Superior Court
of Thurston County, Wash., a declaratory judgment to the effect
that Revised Rule 193D violated both the Commerce Clause and the
Import-Export Clause. They urged that the case was controlled by
Puget Sound, which this Court had reaffirmed in
Joseph
v. Carter & Weekes Stevedoring Co., 330 U.
S. 422,
330 U. S. 433
(1947) (together, the Stevedoring Cases). Absent a clear invitation
from this Court, respondents submitted that the Superior Court
could not avoid the force of the
Stevedoring Cases, which
had never been overruled. Record 9. [
Footnote 11] Petitioner replied that this Court had
invited rejection
Page 435 U. S. 741
of those cases by casting doubt on the Commerce Clause analysis
that distinguished between direct and indirect taxation of
interstate commerce.
Id. at 25-37, citing,
e.g.,
Interstate Pipe Line Co. v. Stone, 337 U.
S. 662 (1949);
Western Live Stock v. Bureau of
Revenue, 303 U. S. 250
(1938). Petitioner also argued that the Rule did not violate the
Commerce Clause, because it taxed only intrastate activity, namely,
the loading and unloading of ships, Record 17-20, and because it
levied only a nondiscriminatory tax apportioned to the activity
within the State.
Id. at 20-22. The Rule did not impose
any "Imposts or Duties on Imports or Exports," because it taxed
merely the stevedoring services, and not the goods themselves,
id. at 22-25, citing
Canton R. Co. v. Rogan,
340 U. S. 511
(1951). The Superior Court, however, not surprisingly, considered
itself bound by the
Stevedoring Cases. It therefore issued
a declaratory judgment that Rule 193D was invalid to the extent it
related to stevedoring in interstate or foreign commerce. App.
17-18. [
Footnote 12]
Petitioner appealed to the Washington Court of Appeals. Record
77. That court certified the case for direct appeal to the State's
Supreme Court, citing Wash.Rev.Code § 2.06.030(c) (1976), and
Wash.Supreme Court Rule on Appeal I-14(1)(c) (now Rule 4.2(a)(2),
Wash.Rules of Court (1977)).
Page 435 U. S. 742
After accepting certification, the Supreme Court, with two
justices dissenting, affirmed the judgment of the Superior Court.
88 Wash. 2d 315, 559 P.2d 997 (1977). The majority considered
petitioner's argument that recent cases [
Footnote 13] had eroded the holdings in the
Stevedoring Cases. It concluded, nonetheless:
"[W]e must hold the tax invalid; we do so in recognition of our
duty to abide by controlling United States Supreme Court decisions
construing the federal constitution. Hence, we find it unnecessary
to discuss the aforementioned cases beyond the fact that nowhere in
them do we find language criticizing, expressly contradicting, or
overruling (even impliedly) the stevedoring cases."
"
* * * *"
"Fully mindful of our prior criticism of the principles and
reasoning of the stevedore cases (
see Washington-Oregon
Shippers Cooperative Ass'n v. Schumacher, 59 Wn.2d 159, 167,
367 P.2d
112, 115-116 (1961)), we must nevertheless hold the instant tax
on stevedoring invalid."
88 Wash. 2d at 318-320, 559 P.2d at 998-999,. The two dissenting
justices would have upheld the tax against the Commerce Clause
attack on the ground that recent cases had eroded the
direct-indirect taxation analysis employed in the
Stevedoring
Cases. They found no violation of the Import-Export Clause
because the State had taxed only the activity of stevedoring, not
the imports or exports themselves. Even if stevedoring were
considered part of interstate or foreign commerce, the Washington
tax was valid because it did not discriminate against importing or
exporting, did not impair transportation, did not impose multiple
burdens, and did not
Page 435 U. S. 743
regulate commerce. 88 Wash. 2d at 32322, 559 P.2d at
999-1000.
Because of the possible impact on the issues made by our
intervening decision in
Complete Auto Transit, Inc. v.
Brady, 430 U. S. 274
(1977), filed after the Washington Supreme Court's ruling, we
granted certiorari. 434 U.S. 815 (1977).
II
The Commerce Clause
A
In
Puget Sound Stevedoring Co. v. State Tax Comm'n, the
Court invalidated the Washington business and occupation tax on
stevedoring only because it applied directly to interstate
commerce. Stevedoring was interstate commerce, according to the
Court, because:
"Transportation of a cargo by water is impossible or futile
unless the thing to be transported is put aboard the ship and taken
off at destination. A stevedore who in person or by servants does
work so indispensable is as much an agency of commerce as shipowner
or master."
302 U.S. at
302 U. S. 92.
Without further analysis, the Court concluded:
"The business of loading and unloading being interstate or
foreign commerce, the State of Washington is not at liberty to tax
the privilege of doing it by exacting in return therefor a
percentage of the gross receipts. Decisions to that effect are many
and controlling."
Id. at
302 U. S. 94.
The petitioners (officers of New York City), in
Joseph v.
Carter & Weekes Stevedoring Co., urged the Court to
overrule
Puget Sound. They argued that intervening cases
[
Footnote 14] had
permitted
Page 435 U. S. 744
local taxation of gross proceeds derived from interstate
commerce. They concluded, therefore, that the Commerce Clause did
not preclude the application to stevedoring of the New York City
business tax on the gross receipts of a stevedoring corporation.
The Court disagreed on the theory that the intervening cases
permitted taxation only of local activity separate and distinct
from interstate commerce. 330 U.S. at
330 U. S.
430-433. This separation theory was necessary, said the
Court, because it served to diminish the threat of multiple
taxation on commerce; if the tax actually fell on intrastate
activity, there was less likelihood that other taxing jurisdictions
could duplicate the levy.
Id. at
330 U. S. 429.
Stevedoring, however, was not separated from interstate commerce
because, as previously enunciate in
Puget Sound, it was
interstate commerce:
"Stevedoring, we conclude, is essentially a part of the commerce
itself, and therefore a tax upon its gross receipts or upon the
privilege of conducting the business of stevedoring for interstate
and foreign commerce, measured by those gross receipts, is invalid.
We reaffirm the rule of
Puget Sound Stevedoring Company.
'What makes the
Page 435 U. S. 745
tax invalid is the fact that there is interference by a State
with the freedom of interstate commerce.'
Freeman v.
Hewit [
329 U.S.
249,]
329 U. S. 256."
330 U.S. at
330 U. S.
433.
Because the tax in the present case is indistinguishable from
the taxes at issue in
Puget Sound and in
Carter &
Weekes, the
Stevedoring Cases control today's
decision on the Commerce Clause issue unless more recent precedent
and a new analysis require rejection of their reasoning.
We conclude that
Complete Auto Transit, Inc. v. Brady,
where the Court held that a State, under appropriate conditions,
may tax directly the privilege of conducting interstate business,
requires such rejection. In
Complete Auto, Mississippi
levied a gross receipts tax on the privilege of doing business
within the State. It applied the tax to the appellant, a Michigan
corporation transporting motor vehicles manufactured outside
Mississippi. After the vehicles were shipped into Mississippi by
railroad, the appellant moved them by truck to Mississippi dealers.
This Court assumed that appellant's activity was in interstate
commerce. 430 U.S. at
430 U. S. 276
n. 4.
The Mississippi tax survived the Commerce Clause attack.
Absolute immunity from state tax did not exist for interstate
businesses, because it
"'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 business.'"
Id. at
430 U. S. 288,
quoting
Western Live Stock v. Bureau of Revenue, 303 U.S.
at
303 U. S. 254,
and
Colonial Pipeline Co. v. Traigle, 421 U.
S. 100,
421 U. S. 108
(1975). The Court therefore specifically overruled
Spector
Motor Service, Inc. v. O'Connor, 340 U.
S. 602 (1951), where a direct gross receipts tax on the
privilege of engaging in interstate commerce had been invalidated.
430 U.S. at
430 U. S.
288-289.
The principles of
Complete Auto also lead us now to
question the underpinnings of the
Stevedoring Cases.
First,
Puget Sound invalidated the Washington tax on
stevedoring activity only because it burdened the privilege of
engaging in interstate
Page 435 U. S. 746
commerce. Because
Complete Auto permits a State
properly to tax the privilege of engaging in interstate commerce,
the basis for the holding in
Puget Sound is removed
completely. [
Footnote
15]
Second,
Carter & Weekes supported its reaffirmance
of
Puget Sound by arguing that a direct privilege tax
would threaten multiple burdens on interstate commerce to a greater
extent than would taxes on local activity connected to commerce.
But
Complete Auto recognized that errors of apportionment
that may lead to multiple burdens may be corrected when they occur.
430 U.S. at
430 U. S.
288-289, n. 15. [
Footnote 16]
The argument of
Carter & Weekes was an abstraction.
No multiple burdens were demonstrated. When a general business tax
levies only on the value of services performed within the State,
the tax is properly apportioned and multiple burdens
Page 435 U. S. 747
logically cannot occur. [
Footnote 17] The reasoning of
Carter &
Weekes, therefore, no longer supports automatic tax immunity
for stevedoring from a levy such as the Washington business and
occupation tax.
Third,
Carter & Weekes reaffirmed
Puget
Sound on a basis rejected by
Complete Auto and
previous cases.
Carter & Weekes considered any direct
tax on interstate commerce to be unconstitutional because it
burdened or interfered with commerce. 330 U.S. at
330 U. S. 433.
In support of that conclusion, the Court there cited only
Southern Pacific Co. v. Arizona ex rel. Sullivan,
325 U. S. 761,
325 U. S. 767
(1945), the case where Arizona's limitations on the length of
trains were invalidated. In
Southern Pacific, however, the
Court had not struck down the legislation merely because it
burdened interstate commerce. Instead, it weighed the burden
against the State's interests in limiting the size of trains:
"The decisive question is whether, in the circumstances, the
total effect of the law as a safety measure in reducing accidents
and casualties is so slight or problematical as not to outweigh the
national interest in keeping interstate commerce free. . . ."
Id. at
325 U. S.
775-776. Only after concluding that railroad safety was
not advanced by the regulations did the Court invalidate them. They
contravened the Commerce Clause because the burden on interstate
commerce outweighed the State's interests.
Page 435 U. S. 748
Although the balancing of safety interests naturally differs
from the balancing of state financial needs,
Complete Auto
recognized that a State has a significant interest in exacting from
interstate commerce its fair share of the cost of state government.
430 U.S. at
430 U. S. 288.
Accord, Colonial Pipeline Co. v. Traigle, 421 U.S. at 108;
Western Live Stock v. Bureau of Revenue, 303 U.S. at
303 U. S. 254.
All tax burdens do not impermissibly impede interstate commerce.
The Commerce Clause balance tips against the tax only when it
unfairly burdens commerce by exacting more than a just share from
the interstate activity. Again, then, the analysis of
Carter
& Weekes must be rejected.
B
Respondents' additional arguments do not demonstrate the wisdom
of, or need for, preserving the
Stevedoring Cases. First,
respondents attempt to distinguish so-called movement cases, in
which tax immunity has been broad, from nonmovement cases, in which
the immunity traditionally has been narrower. Brief for Respondents
23-28. Movement cases involve taxation on transport, such as the
Texas tax on a natural gas pipeline in
Michigan-Wisconsin Pipe
Line Co. v. Calvert, 347 U. S. 157
(1954). Nonmovement cases involve taxation on commerce that does
not move goods, such as the New Mexico tax on publishing newspapers
and magazines in
Western Live Stock v. Bureau of Revenue.
This distinction, however, disregards
Complete Auto, a
movement case which held that a state privilege tax on the business
of moving goods in interstate commerce is not
per se
unconstitutional.
Second, respondents would distinguish
Complete Auto on
the ground that it concerned only intrastate commerce, that is, the
movement of vehicles from a Mississippi railhead to Mississippi
dealers. Brief for Respondents 228. This purported distinction
ignores two facts. In
Complete Auto, we expressly assumed
that the activity was interstate, a segment of the movement of
vehicles from the out-of-state manufacturer
Page 435 U. S. 749
to the in-state dealers. 430 U.S. at
430 U. S. 276
n. 4. Moreover, the stevedoring activity of respondents occurs
completely within the State of Washington, even though the activity
is a part of interstate or foreign commerce. The situation was the
same in
Complete Auto, and that case, thus, is not
distinguishable from the present one.
Third, respondents suggest that what they regard as such an
important change in Commerce Clause jurisprudence should come from
Congress, and not from this Court. To begin with, our rejection of
the
Stevedoring Cases does not effect a significant
present change in the law. The primary alteration occurred in
Complete Auto. Even if this case did effect an important
change, it would not offend the separation of powers principle,
because it does not restrict the ability of Congress to regulate
commerce. The Commerce Clause does not state a prohibition; it
merely grants specific power to Congress. The prohibitive effect of
the Clause on state legislation results from the Supremacy Clause
and the decisions of this Court.
See, e.g., 53 U.
S. Board of Wardens, 12 How. 299 (1852);
Gibbons v.
Ogden, 9 Wheat. 1 (1824). If Congress prefers less
disruption of interstate commerce, it will act. [
Footnote 18]
Consistent with
Complete Auto, then, we hold that the
Washington business and occupation tax does not violate the
Page 435 U. S. 750
Commerce Clause by taxing the interstate commerce activity of
stevedoring. To the extent that
Puget Sound Stevedoring Co. v.
State Tax Comm'n and
Joseph v.Carter & Weekes
Stevedoring Co. stand to the contrary, each is overruled.
C
With the distinction between direct and indirect taxation of
interstate commerce thus discarded, the constitutionality under the
Commerce Clause of the application of the Washington business and
occupation tax to stevedoring depends upon the practical effect of
the exaction. As was recognized in
Western Live Stock v. Bureau
of Revenue, 303 U. S. 250
(1938), interstate commerce must bear its fair share of the state
tax burden. The Court repeatedly has sustained taxes that are
applied to activity with a substantial nexus with the State, that
are fairly apportioned, that do not discriminate against interstate
commerce, and that are fairly related to the services provided by
the State.
E.g., General Motors Corp. v. Washington,
377 U. S. 436
(1964);
Northwestern Cement Co. v. Minnesota, 358 U.
S. 450 (1959);
Memphis Gas Co. v. Stone,
335 U. S. 80
(1948);
Wisconsin v. J. C. Penney Co., 311 U.
S. 435 (1940);
see Complete Auto Transit, Inc. v.
Brady, 430 U.S. at
430 U. S. 279,
and n. 8.
Respondents proved no facts in the Superior Court that, under
the above test, would justify invalidation of the Washington tax.
The record contains nothing that minimizes the obvious nexus
between Washington and respondents; indeed, respondents conduct
their entire stevedoring operations within the State. Nor have
respondents successfully attacked the apportionment of the
Washington system. The tax under challenge was levied solely on the
value of the loading and unloading that occurred in Washington.
Although the rate of taxation varies with the type of business
activity, respondents have not demonstrated how the 1% rate, which
applies to them and generally to businesses rendering services,
discriminates against interstate commerce. Finally, nothing in
the
Page 435 U. S. 751
record suggests that the tax is not fairly related to services
and protection provided by the State. In short, because respondents
relied below on the
per se approach of
Puget
Sound and
Carter & Weekes, they developed no
factual basis on which to declare the Washington tax
unconstitutional as applied to their members and their stevedoring
activities.
III
The Import-Export Clause
Having decided that the Commerce Clause does not
per se
invalidate the application of the Washington tax to stevedoring, we
must face the question whether the tax contravenes the
Import-Export Clause. Although the parties dispute the meaning of
the prohibition of "Imposts or Duties on Imports or Exports," they
agree that it differs from the ban the Commerce Clause erects
against burdens and taxation on interstate commerce. Brief for
Petitioner 32-33; Brief for Respondents 9-10; Tr. of Oral Arg. 13,
22. The Court has noted before that the Import-Export Clause states
an absolute ban, whereas the Commerce Clause merely grants power to
Congress.
Richfield Oil Corp. v. State Board, 329 U. S.
69,
329 U. S. 75
(1946). On the other hand, the Commerce Clause touches all state
taxation and regulation of interstate and foreign commerce, whereas
the Import-Export Clause bans only "Imposts or Duties on Imports or
Exports."
Michelin Tire Corp. v. Wages, 423 U.
S. 276,
423 U. S. 279,
423 U. S.
290-294 (1976). The resolution of the Commerce Clause
issue, therefore, does not dispose of the Import-Export Clause
question.
A
In
Michelin, the Court upheld the application of a
general
ad valorem property tax to imported tires and
tubes. The Court surveyed the history and purposes of the
Import-Export Clause to determine, for the first time, which taxes
fell within the absolute ban on "Imposts or Duties."
Id.
at
423 U. S.
283-286.
Page 435 U. S. 752
Previous cases had assumed that all taxes on imports and exports
and on the importing and exporting processes were banned by the
Clause.
See, e.g., Department of Revenue v. James B. Beam
Distilling Co., 377 U. S. 341,
377 U. S. 343
(1964);
Richfield Oil Corp. v. State Board, 329 U.S. at
329 U. S. 76;
Joseph v. Carter & Weekes Stevedoring Co., 330 U.S. at
330 U. S. 445
(Douglas, J., dissenting in part);
Anglo-Chilean Corp. v.
Alabama, 288 U. S. 218,
288 U. S.
226-227 (1933);
License Cases,
5 How. 504,
46 U. S.
575-576 (1847) (opinion of Taney, C.J.). Before
Michelin, the primary consideration was whether the tax
under review reached imports or exports. With respect to imports,
the analysis applied the original package doctrine of
Brown v.
Maryland, 12 Wheat. 419 (1827);
see, e.g.,
Department of Revenue v. James B. Beam Distilling Co.;
Anglo-Chilean Corp. v. Alabama; 80 U. S.
Austin, 13 Wall. 29 (1872),
overruled in Michelin Tire
Corp. v. Wages. So long as the goods retained their status as
imports by remaining in their import packages, they enjoyed
immunity from state taxation. With respect to exports, the
dispositive question was whether the goods had entered the "export
stream," the final, continuous journey out of the country.
Kosydar v. National Cash Register Co., 417 U. S.
62,
417 U. S. 70-71
(1974);
Empresa Siderurgica v. County of Merced,
337 U. S. 154,
337 U. S. 157
(1949);
A. G. Spalding Bros. v. Edwards, 262 U. S.
66,
262 U. S. 69
(1923);
Coe v. Errol, 116 U. S. 517,
116 U. S. 526,
527 (1886). As soon as the journey began, tax immunity
attached.
Michelin initiated a different approach to
Import-Export Clause cases. It ignored the simple question whether
the tires and tubes were imports. Instead, it analyzed the nature
of the tax to determine whether it was an "Impost or Duty." 423
U.S. at
423 U. S. 279,
423 U. S.
290-294. Specifically, the analysis examined whether the
exaction offended any of the three policy considerations leading to
the presence of the Clause:
"The Framers of the Constitution thus sought to alleviate three
main concerns . . .: the Federal Government
Page 435 U. S. 753
must speak with one voice when regulating commercial relations
with foreign governments, and tariffs, which might affect foreign
relations, could not be implemented by the States consistently with
that exclusive power; import revenues were to be the major source
of revenue of the Federal Government, and should not be diverted to
the States; and harmony among the States might be disturbed unless
seaboard States, with their crucial ports of entry, were prohibited
from levying taxes on citizens of other States by taxing goods
merely flowing through their ports to the other States not situated
as favorably geographically."
Id. at
423 U. S.
285-286 (footnotes omitted).
The
ad valorem property tax there at issue offended
none of these policies. It did not usurp the Federal Government's
authority to regulate foreign relations, since it did not "fall on
imports as such because of their place of origin."
Id. at
423 U. S. 286.
As a general tax applicable to all property in the State, it could
not have been used to create special protective tariffs, and could
not have been applied selectively to encourage or discourage
importation in a manner inconsistent with federal policy. Further,
the tax deprived the Federal Government of no revenues to which it
was entitled. The exaction merely paid for services, such as fire
and police protection, supplied by the local government. Although
the tax would increase the cost of the imports to consumers, its
effect on the demand for Michelin tubes and tires was
insubstantial. The tax, therefore, would not significantly diminish
the number of imports on which the Federal Government could levy
import duties, and would not deprive it of income indirectly.
Finally, the tax would not disturb harmony among the States,
because the coastal jurisdictions would receive compensation only
for services and protection extended to the imports. Although
intending to prevent coastal States from abusing their geographical
positions, the Framers also did not expect residents
Page 435 U. S. 754
of the ports to subsidize commerce headed inland. The Court
therefore concluded that the Georgia
ad valorem property
tax was not an "Impost or Duty," within the meaning of the
Import-Export Clause, because it offended none of the policies
behind that Clause.
A similar approach demonstrates that the application of the
Washington business and occupation tax to stevedoring threatens no
Import-Export Clause policy. First, the tax does not restrain the
ability of the Federal Government to conduct foreign policy. As a
general business tax that applies to virtually all businesses in
the State, it has not created any special protective tariff. The
assessments in this case are only upon business conducted entirely
within Washington. No foreign business or vessel is taxed.
Respondents, therefore, have demonstrated no impediment posed by
the tax upon the regulation of foreign trade by the United
States.
Second, the effect of the Washington tax on federal import
revenues is identical to the effect in
Michelin. The tax
merely compensates the State for services and protection extended
by Washington to the stevedoring business. Any indirect effect on
the demand for imported goods because of the tax on the value of
loading and unloading them from their ships is even less
substantial than the effect of the direct
ad valorem
property tax on the imported goods themselves.
Third, the desire to prevent interstate rivalry and friction
does not vary significantly from the primary purpose of the
Commerce Clause.
See P. Hartman, State Taxation of
Interstate Commerce 2-3 (193). [
Footnote 19] The third Import-Export Clause policy,
therefore, is vindicated if the tax falls upon a
Page 435 U. S. 755
taxpayer with reasonable nexus to the State, is properly
apportioned, does not discriminate, and relates reasonably to
services provided by the State. As has been explained in
435 U. S.
supra, the record in this case, as presently developed;
reveals the presence of all these factors.
Under the analysis of
Michelin, then, the application
of the Washington business and occupation tax to stevedoring
violates no Import-Export Clause policy, and therefore should not
qualify as an "Impost or Duty" subject to the absolute ban of the
Clause.
B
The Court in
Michelin qualified its holding with the
observation that Georgia had applied the property tax to goods "no
longer in transit." 423 U.S. at
423 U. S. 302.
[
Footnote 20] Because the
goods were no longer in transit, however, the Court did not have to
face the question whether a tax relating to goods in transit would
be an "Impost or Duty" even if it offended none of the policies
behind the Clause. Inasmuch as we now face this inquiry, we note
two distinctions between this case and
Michelin. First,
the activity taxed here occurs while imports and exports are in
transit. Second, however, the tax does not fall on the goods
themselves. The levy reaches only the business of loading and
unloading ships or, in other words, the business of transporting
cargo within the State of Washington. Despite the existence of the
first distinction, the presence of the second leads to the
conclusion that the Washington tax is not a prohibited "Impost or
Duty" when it violates none of the policies.
In
Canton R. Co. v. Rogan, 340 U.
S. 511 (1951), the Court upheld a gross receipts tax on
a steam railroad operating
Page 435 U. S. 756
exclusively within the Port of Baltimore. The railroad operated
a marine terminal and owned rail lines connecting the docks to the
trunk lines of major railroads. It switched and pulled cars, stored
imports and exports pending transport, supplied wharfage, weighed
imports and exports, and rented a stevedoring crane. Somewhat less
than half of the company's 1946 gross receipts were derived from
the transport of imports or exports. The company contended that
this income was immune, under the Import-Export Clause, from the
state tax. The Court rejected that argument primarily on the ground
that immunity of services incidental to importing and exporting was
not so broad as the immunity of the goods themselves: [
Footnote 21]
"The difference is that, in the present case, the tax is not on
the
goods, but on the
handling of them at the
port. An article may be an export and immune from a tax long before
or long after it reaches the port. But when the tax is on
activities connected with the export or import the range of
immunity cannot be so wide. "
Page 435 U. S. 757
". . . The broader definition which appellant tenders distorts
the ordinary meaning of the terms. It would lead back to every
forest, mine, and factory in the land, and create a zone of tax
immunity never before imagined."
Id. at
340 U. S.
514-515 (emphasis in original). In
Canton R.
Co., the Court did not have to reach the question about
taxation of stevedoring, because the company did not load or unload
ships. [
Footnote 22] As
implied in the opinion, however,
id. at
340 U. S. 515,
the only distinction between stevedoring and the railroad services
was that the loading and unloading of ships crossed the waterline.
This is a distinction without economic significance in the present
context. The transportation services in both settings are necessary
to the import-export process. Taxation in neither setting relates
to the value of the goods, and therefore in neither can it be
considered taxation upon the goods themselves. The force of
Canton R. Co. therefore prompts the conclusion that the
Michelin policy analysis should not be discarded merely
because the goods are in transit, at least where the taxation falls
upon a service distinct from the goods and their value. [
Footnote 23]
C
Another factual distinction between this case and
Michelin is that here, the stevedores load and unload
imports and exports,
Page 435 U. S. 758
whereas, in
Michelin, the Georgia tax touched only
imports. As noted in
435 U. S.
supra, the analysis in the export cases has differed from
that in the import cases. In the former, the question was when did
the export enter the export stream; in the latter, the question was
when did the goods escape their original package. The questions
differed, for example, because an export could enter its export
package and not secure tax immunity until later when it began its
journey out of the country. Until
Michelin, an import
retained its immunity so long as it remained in its original
package.
Despite these formal differences, the
Michelin approach
should apply to taxation involving exports as well as imports. The
prohibition on the taxation of exports is contained in the same
Clause as that regarding imports. The export tax ban vindicates two
of the three policies identified in
Michelin. It precludes
state disruption of the United States foreign policy. [
Footnote 24] It does not serve to
protect federal revenues, however, because the Constitution forbids
federal taxation of exports. U.S.Const., Art. I, § 9, cl. 5;
[
Footnote 25]
see United
States v. Hvoslef, 237 U. S. 1 (1915).
But it does avoid friction and trade barriers among the States. As
a result, any tax relating to exports can be tested for its
conformance with the first and third policies. If the
constitutional interests are not disturbed, the tax should not be
considered an "Impost or Duty" any more than should a tax related
to imports. This approach is consistent with
Canton R.
Co., which permitted taxation of income from services
connected to both imports and exports. The respondents' gross
receipts from loading exports, therefore, are as subject to the
Washington business and occupation tax, as are the receipts from
unloading imports.
Page 435 U. S. 759
D
None of respondents' additional arguments convinces us that the
Michelin approach should not be applied in this case to
sustain the tax.
First, respondents contend that the Import-Export Clause effects
an absolute prohibition on all taxation of imports and exports. The
ban must be absolute, they argue, in order to give the Clause
meaning apart from the Commerce Clause. They support this
contention primarily with dicta from
Richfield Oil, 329
U.S. at
329 U. S. 75-78,
and with the partial dissent in
Carter & Weekes, 330
U.S. at
330 U. S.
444-415. Neither, however, provides persuasive support,
because neither recognized that the term "Impost or Duty" is not
self-defining, and does not necessarily encompass all taxes. The
partial dissent in
Carter & Weekes did not address the
term at all.
Richfield Oil's discussion was limited to the
question whether the tax fell upon the sale or upon the right to
retail. 329 U.S. at
329 U. S. 83-84.
The State apparently conceded that the Clause precluded all taxes
on exports and the process of exporting.
Id. at
329 U. S. 84.
The use of these two cases, therefore, ignores the central holding
of
Michelin that the absolute ban is only of "Imposts or
Duties," and not of all taxes. Further, an absolute ban of all
taxes is not necessary to distinguish the Import-Export Clause from
the Commerce Clause. Under the
Michelin approach, any tax
offending either of the first two Import-Export policies becomes
suspect regardless of whether it creates interstate friction.
Commerce Clause analysis, on the other hand, responds to neither of
the first two policies. Finally, to conclude that "Imposts or
Duties" encompasses all taxes makes superfluous several of the
terms of Art. I, § 8, cl. 1, of the Constitution, which grants
Congress the "Power To lay and collect Taxes, Duties, Imposts and
Excises." In particular, the Framers apparently did not include
"Excises," such as an exaction on the privilege of doing business,
within the scope of "Imposts" or "Duties."
See Michelin,
423 U.S. at
423 U. S.
291-292, n. 12, citing
Page 435 U. S. 760
2 M. Farrand, The Records of the Federal Convention of 1787, p.
305 (1911), and 3
id. at 203-204. [
Footnote 26]
Second, respondents would distinguish
Michelin on the
ground that Georgia levied a property tax on the mass of goods in
the State, whereas Washington would tax the imports themselves
while they remain a part of commerce. This distinction is supported
only by citation to the License Cases, 5 How. at
46 U. S. 576
(opinion of Taney, C.J.). The argument must be rejected, however,
because it resurrects the original package analysis.
See
id. at
46 U. S.
574-575. Rather than examining whether the taxes are
"Imposts or Duties" that offend constitutional policies, the
contention would have the Court explore when goods lose their
status as imports and exports. This is precisely the inquiry the
Court abandoned in
Michelin, 423 U.S. at
423 U. S. 279.
Nothing in the
License Cases, in which a fractioned Court
produced nine opinions, prompts a return to the exclusive
consideration of what constitutes an import or export.
Third, respondents submit that the Washington tax imposes a
transit fee upon inland consumers. Regardless of the validity of
such a toll under the Commerce Clause, respondents conclude that it
violates the Import-Export Clause. The problem with that analysis
is that it does not explain how the policy of preserving harmonious
commerce among the States and of preventing interstate tariffs,
rivalries, and friction, differs as between the two Clauses. After
years of development of Commerce Clause jurisprudence, the Court
has concluded that interstate friction will not chafe when commerce
pays for the governmental services it enjoys.
See
435 U. S.
supra. Requiring coastal States to subsidize the commerce
of inland consumers may well exacerbate, rather than diminish,
Page 435 U. S. 761
rivalries and hostility. Fair taxation will be assured by the
prohibition on discrimination and the requirements of
apportionment, nexus, and reasonable relationship between tax and
benefits. To the extent that the Import-Export Clause was intended
to preserve interstate harmony, the four safeguards will vindicate
the policy. To the extent that other policies are protected by the
Import-Export Clause, the analysis of an Art. I, § 10, challenge
must extend beyond that required by a Commerce Clause dispute. But
distinctions not based on differences in constitutional policy are
not required. Because respondents identify no such variation in
policy, their transit fee argument must be rejected.
E
The Washington business and occupation tax, as applied to
stevedoring, reaches services provided wholly within the State of
Washington to imports, exports, and other goods. The application
violates none of the constitutional policies identified in
Michelin. It is, therefore, not among the "Imposts or
Duties" within the prohibition of the Import-Export Clause.
IV
The judgment of the Supreme Court of Washington is reversed, and
the case is remanded for further proceedings not inconsistent with
this opinion. [
Footnote
27]
It is so ordered.
MR. JUSTICE BRENNAN took no part in the consideration or
decision of this case.
[
Footnote 1]
"The Congress shall have Power . . ."
"
* * * *"
"To regulate Commerce with foreign Nations, and among the
several States, and with the Indian Tribes. . . ."
U.S.Const., Art. I, § 8, cl. 3.
[
Footnote 2]
"No State shall, without the Consent of the Congress, lay any
Imposts or Duties on Imports or Exports, except what may be
absolutely necessary for executing its inspection Laws: and the net
Produce of all Duties and Imposts, laid by any State on Imports or
Exports, shall be for the Use of the Treasury of the United States;
and all such Laws shall be subject to the Revision and Controul of
the Congress."
U.S.Const., Art. I, § 10, cl. 2.
[
Footnote 3]
The record does not contain a precise definition or description
of the business of stevedoring or of the activities of respondents
and their respective members. By admitting the factual allegations
in the respondents' Petition for Declaratory Judgment on Validity
of Rule, App. 3-7, petitioner Department of Revenue accepted
paragraph VI of that petition. That paragraph alleged that the
private companies that constitute respondent Association of
Washington Stevedoring Companies "are engaged in the same
stevedoring activities that were held not taxable in Puget Sound
Stevedoring Co." This Court explained the activities of the
appellant stevedoring company in Puget Sound as follows:
"What was done by this appellant in the business of loading and
unloading was not prolonged beyond the stage of transportation and
its reasonable incidents. . . . True, the service did not begin or
end at the ship's side, where the cargo is placed upon a sling
attached to the ship's tackle. It took in the work of carriage to
and from the "first place of rest," which means that it covered the
space between the hold of the vessel and a convenient point of
discharge upon the dock. . . . The fact is stipulated, however,
that no matter by whom the work is done or paid for, "stevedoring
services are essential to waterborne commerce and always commence
in the hold of the vessel and end at the
first place of rest,'
and vice versa.""
302 U.S. at
302 U. S.
93.
[
Footnote 4]
Section 82.04.220 reads:
"There is levied and shall be collected from every person a tax
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."
Section 82.04.290 reads in pertinent part:
"Upon every person engaging within this state in any business
activity other than or in addition to those enumerated in . . . ;
as to such persons the amount of tax on account of such activities
shall be equal to the gross income of the business multiplied by
the rate of one percent. This section includes, among others, and
without limiting the scope hereof . . . , persons engaged in the
business of rendering any type of service which does not constitute
a 'sale at retail' or a 'sale at wholesale.'"
We note also that § 82.04.460 reads in part:
"Any person rendering services taxable under RCW 82.04.290 and
maintaining places of business both within and without this state
which contribute to the rendition of such services shall, for the
purpose of computing tax liability under RCW 82.04.290, apportion
to this state that portion of his gross income which is derived
from services rendered within this state."
A temporary additional tax of 6% of the base tax is now imposed
for the period from June 1, 1976, through June 30, 1979. 1977 Wash.
Laws, 1st Ex. Sess., ch. 324, § 1, and 1975-1976 Wash. Laws, 2d Ex.
Sess., ch. 130, § 3, codified as Wash.Rev.Code § 82.04.2901 (Supp.
1977).
[
Footnote 5]
"In computing tax there may be deducted from gross income the
amount thereof derived as compensation for performance of services
which in themselves constitute interstate or foreign commerce to
the extent that a tax measured thereby constitutes an impermissible
burden upon such commerce. A tax does not constitute an
impermissible burden upon interstate or foreign commerce unless the
tax discriminates against that commerce by placing a burden thereon
that is not borne by intrastate commerce, or unless the tax
subjects the activity to the risk of repeated exactions of the same
nature from other states. Transporting across the state's
boundaries is exempt, whereas supplying such transporters with
facilities, arranging accommodations, providing funds and the like,
by which they engage in such commerce is taxable."
"EXAMPLES OF EXEMPT INCOME:"
"1. Income from those activities which consist of the actual
transportation of persons or property across the state's boundaries
is exempt."
"
* * * *"
"EXAMPLES OF TAXABLE INCOME:"
"
* * * *"
"3. Compensation received by contracting, stevedoring or loading
companies for services performed within this state is taxable."
[
Footnote 6]
1935 Wash. Laws, ch. 180.
[
Footnote 7]
The Tax Commission was abolished in 1967, and, with specified
exceptions, its powers, duties, and functions were transferred to
the Director of the Department of Revenue. 1967 Wash. Laws, Ex.
Sess., ch. 26, § 7.
[
Footnote 8]
Rule 198, as it was in effect in 1936 and 1937, that is, prior
to the decision in
Puget Sound, read in part:
"In computing the tax under the classification of 'Service and
Other Business Activities' there may be deducted from gross income
of the business the amount thereof derived as compensation for the
performance of services which in themselves constitute foreign or
interstate commerce to an extent that a tax measured by the
compensation received therefrom constitutes a direct burden upon
such commerce. Included in the above are those activities which
involve the actual transportation of goods or commodities in
foreign commerce or commerce between the states; the transmission
of communications from a point within the state to a point outside
the state and vice versa; the solicitation of freight for foreign
or interstate shipment; and the selling of tickets for foreign and
interstate passage accommodations."
Rules and Regulations Relating to the Revenue Act of 1935, Rule
198, p. 122 (1936);
id. at 133 (1937).
[
Footnote 9]
Effective May 1, 1939, Rule 198 read in part:
"In computing the tax under the classification of 'Service and
Other Business Activities' there may be deducted from gross income
of the business the amount thereof derived as compensation for the
performance of services which in themselves constitute foreign or
interstate commerce to an extent that a tax measured by the
compensation received therefrom constitutes a direct burden upon
such commerce. Included in the above [is] . . . the compensation
received by a contracting stevedoring company for loading and
unloading cargo from vessels where such cargo is moving in
interstate or foreign commerce and where the work is actually
directed and controlled by the stevedoring company. . . ."
Id. at 137 (1939).
[
Footnote 10]
Rules and Regulations Relating to the Revenue Act of 1935, Rule
193, p. 94 (1943), and
id. Rule 193, p. 123 (1970).
[
Footnote 11]
In a reply brief, respondents supported the continuing validity
of the
Stevedoring Cases. In particular, they argued:
"Final, and we think conclusive, proof of the continued vitality
of the stevedoring cases lies in the language of
Spector Motor
Service, Inc. v. O'Connor, 340 U. S. 602 . . . (1951),
decided
after all four of the 'major' cases relied on by
the State. We have previously noted that
Spector struck
down a tax on the activity of moving goods in interstate
commerce."
Record 69 (emphasis in original).
Spector was overruled last Term in
Complete Auto
Transit, Inc. v. Brady, 430 U. S. 274,
430 U. S.
288-289 (1977), decided after respondents advanced the
above argument.
[
Footnote 12]
In its oral decision, the Superior Court noted its doubt about
the continued validity of the
Stevedoring Cases:
"It would seem to the Court . . . that there certainly is a
swing away from the
Puget Sound and
Carter &
Weeks cases. . . ."
App. 8.
"It sticks in this Court's mind, however, that there has to be a
reason, of which is beyond the ability of this Court to comprehend,
that everyone has shied from the stevedoring cases, and many minds
obviously more brilliant than mine have not been able to overturn
those cases directly in thirty-eight years. . . ."
Id. at 11.
"Under those circumstances, the Court does hold that the
Puget Sound and
Carter & Weeks cases are the
law of the land, as exemplified by those decisions; that they have
not been reversed by implication, nor has there been an invitation
to anyone to reverse those cases."
Id. at 13-14.
[
Footnote 13]
The court stated, 88 Wash. 2d at 318, 559 P.2d at 998, that
petitioner had cited
Michelin Tire Corp. v. Wages,
423 U. S. 276
(1976);
Colonial Pipeline Co. v. Traigle, 421 U.
S. 100 (1975);
Canton R. Co. v. Rogan,
340 U. S. 511
(1951);
Interstate Pipe Line Co. v. Stone, 337 U.
S. 662 (1949); and
Central Greyhound Lines, Inc. v.
Mealey, 334 U. S. 653
(1948).
[
Footnote 14]
They cited, among others, four particular cases. The first was
Department of Treasury v. Wood Preserving Corp.,
313 U. S. 62
(1941). In that case, the Court. sustained an Indiana tax on the
gross receipts of a foreign corporation from purchase and resale of
timber in Indiana. The transaction was considered local even though
the timber was to be transported, after the resale, to Ohio for
creosote treatment by the foreign corporation. The second case was
McGoldrick v. Berwind-White Co., 309 U. S.
33 (1940). There, a Pennsylvania corporation sold coal
to New York City consumers through a city sales office. Even though
the coal was shipped from Pennsylvania., the Court permitted the
city to tax the sale because the tax was conditioned on local
activity, that is, the delivery of goods within New York upon their
purchase in New York for consumption in New York. The third case
was
Southern Pacific Co. v. Gallagher, 306 U.
S. 167 (1939). There, California was permitted to impose
a tax on storage and use with respect to the retention and
ownership of goods brought into the State by an interstate railroad
for its own use. The fourth was
Western Live Stock v. Bureau of
Revenue, 303 U. S. 250
(1938). There, the Court upheld a New Mexico privilege tax upon the
gross receipts from the sale of advertising. It concluded that the
business was local, even though a magazine with interstate
circulation and advertising was published.
[
Footnote 15]
That the holding in
Spector parallels that in
Puget
Sound is demonstrated by the authorities relied upon or
provided by both cases in the past.
Spector relied on
Carter & Weekes, which reaffirmed
Puget
Sound, and upon
Freeman v. Hewit, 329 U.
S. 249 (1946). 340 U.S. at
340 U. S. 609.
Freeman, in turn, relied upon
Puget Sound, 329
U.S. at
329 U. S. 257,
and
Carter & Weekes relied upon
Freeman, 330
U.S. at
330 U. S. 433.
Both
Freeman and
Puget Sound relied upon
Galveston, H. & S. A. R. Co. v. Texas, 210 U.
S. 217 (1908). 329 U.S. at
329 U. S. 257;
302 U.S. at
302 U. S.
94.
Respondents, also, have observed the parallel between
Spector and the
Stevedoring Cases. In their reply
brief to the Superior Court, they argued that
Spector,
which had not then been overruled by
Complete Auto, was
dispositive on the question of the continued vitality of
Puget
Sound and
Carter & Weekes. See n 11,
supra.
[
Footnote 16]
Subsequent to
Carter & Weekes, the Court explained
more precisely its concern about multiple burdens on interstate
commerce:
"While the economic wisdom of state net income taxes is one of
state policy not for our decision, one of the 'realities' raised by
the parties is the possibility of a multiple burden resulting from
the exactions in question. The answer is that none is shown to
exist here. . . . Logically, it is impossible, when the tax is
fairly apportioned, to have the same income taxed twice. . . . We
cannot deal in abstractions. In this type of case, the taxpayers
must show that the formula places a burden upon interstate commerce
in a constitutional sense. This they have failed to do."
Northwestern Cement Co. v. Minnesota, 358 U.
S. 450,
358 U. S.
462-463 (1959).
[
Footnote 17]
Carter & Weekes has received criticism from
commentators for its reliance on the possibility of the imposition
of multiple tax burden. Professor Hartman argued that the burden on
interstate commerce imposed by a privilege tax "is multiple only
because the elements of transportation itself are multiple." P.
Hartman, State Taxation of Interstate Commerce 204 (1953). Because
the loading or unloading of a ship is confined to one State, no
other State could tax that particular phase of commerce.
"Thus, the Court's basis for the unconstitutionality of the
Weekes tax assumed the existence of a premise which did
not exist, except in the mind of a majority of the Justices."
Id. at 205.
See Hellerstein, State Taxation
Under the Commerce Clause: An Historical Perspective, 29
Vand.L.Rev. 335 (1976).
[
Footnote 18]
Respondents seem to be particularly concerned about the
continued validity of
Michigan-Wisconsin Pipe Line Co. v.
Calvert, 347 U. S. 157
(1954). There, Texas levied a tax on the production of natural gas
measured by the entire volume of gas to be shipped in interstate
commerce. A refinery extracted the gas from crude oil and
transported it 300 yards to the pipeline. The State identified, as
a local incident, the transfer of gas from the refinery to the
pipeline. This Court declared the tax unconstitutional because it
amounted to an unapportioned levy on the transportation of the
entire volume of gas. The exaction did not relate to the length of
the Texas portion of the pipeline or to the percentage of the
taxpayer's business taking place in Texas. Today's decision does
not question the
Michigan-Wisconsin judgment, because
Washington apportions its business and occupation tax to activity
within the State. Taxes that are not so apportioned remain
vulnerable to Commerce Clause attack.
[
Footnote 19]
"Two of the chief weaknesses of the Articles of Confederation
were the lack of power in Congress to regulate foreign and
interstate commerce and the presence of power in the States to do
so. The almost catastrophic results from this sort of situation
were harmful commercial wars and reprisals at home among the
States. . . ."
P. Hartman, State Taxation of Interstate Commerce 2 (1953),
citing,
e.g., The Federalist Nos. 7, 11, 22 (Hamilton),
No. 42 (Madison).
[
Footnote 20]
Commentators have noted the qualification, but have questioned
its significance.
See W. Hellerstein,
Michelin Tire
Corp. v. Wages: Enhanced State Power to Tax Imports, 1976
S.Ct.Rev. 99, 122-126; Comment, 30 Rutgers L.Rev.193, 203 (1976);
Note, 12 Wake Forest L.Rev. 1055, 1062 (1976).
[
Footnote 21]
The Court distinguished the Maryland tax from others struck down
by the Court. 340 U.S. at
340 U. S.
513-514, distinguishing
Richfield Oil Corp. v. State
Board, 329 U. S. 69
(1946);
Thames & Mersey Ins. Co. v. United States,
237 U. S. 19
(1915); and
Fairbank v. United States, 181 U.
S. 283 (1901). In these cases, the State had taxed
either the goods or activity so connected with the goods that the
levy amounted to a tax on the goods themselves. In
Richfield, the tax fell upon the sale of goods, and was
overturned because the Court had always considered a tax on the
sale of goods to be a tax on the goods themselves.
See Brown v.
Maryland, 12 Wheat. 419,
25 U. S. 439
(1827). The sale had no value or significance apart from the goods.
Similarly, the stamp tax on bills of lading in
Fairbank
effectively taxed the goods because the bills represented the
goods. The basis for distinguishing
Thames & Mersey is
less clear, because there the tax fell upon marine insurance
policies. Arguably, the policies had a value apart from the value
of the goods. In distinguishing that case from the taxation of
stevedoring activities, however, one might note that the value of
goods bears a much closer relation to the value of insurance
policies on them than to the value of loading and unloading
ships.
[
Footnote 22]
The Court expressly noted that it did not need to reach the
stevedoring issue. 340 U.S. at
340 U. S. 515.
It was also reserved in the companion case of
Western Maryland
R. Co. v. Rogan, 340 U. S. 520,
340 U. S. 522
(1951).
[
Footnote 23]
We do not reach the question of the applicability of the
Michelin approach when a State directly taxes imports or
exports in transit.
Our Brother POWELL, as his concurring opinion indicates,
obviously would prefer to reach the issue today, even though the
facts of the present case, as he agrees, do not present a case of a
tax on goods in transit. As in
Michelin, decided less than
three years ago, we prefer to defer decision until a case with
pertinent facts is presented. At that time, with full argument, the
issue, with all its ramifications, may be decided.
[
Footnote 24]
See Abramson, State Taxation of Exports: The Stream of
Constitutionality, 54 N.C.L.Rev. 59 (1975).
[
Footnote 25]
"No Tax or Duty shall be laid on Articles exported from any
State."
[
Footnote 26]
But see 1 W. Crosskey, Politics and the Constitution in
the History of the United States 296-297 (1953), cited in 423 U.S.
at
423 U. S.
290-291, in which the author argues that the concept of
"Duties" encompassed excises. He does not explain, however, why
Art. I, § 8, cl. 1, enumerated "Taxes, Duties, Imposts and Excises"
if the Framers intended duties to include excises.
[
Footnote 27]
See generally Hellerstein, State Taxation and the
Supreme Court: Toward a More Unified Approach to Constitutional
Adjudication?, 75 Mich.L.Rev. 1426 (1977).
MR. JUSTICE POWELL, concurring in part and concurring in the
result.
I join the opinion of the Court with the exception of
435 U. S. As
that section of the Court's opinion appears to
Page 435 U. S. 762
resurrect the discarded "direct-indirect" test, I cannot join
it. In
Michelin Tire Corp. v. Wages, 423 U.
S. 276 (1976), this Court abandoned the traditional,
formalistic methods of determining the validity of state levies
under the Import-Export Clause and applied a functional analysis
based on the exaction's relationship to the three policies that
underlie the Clause: (i) preservation of uniform federal regulation
of foreign relations; (ii) protection of federal revenue derived
from imports; and (iii) maintenance of harmony among the inland
States and the seaboard States. The nondiscriminatory
ad
valorem property tax in
Michelin was held not to
violate any of those policies, but the Court suggested that even a
nondiscriminatory tax on goods merely in transit through the State
might run afoul of the Import-Export Clause.
The question the Court addresses today in
435 U.
S. The Court. gives a negative answer, apparently for
two reasons. The first is that
Canton R. Co. v. Rogan,
340 U. S. 511
(1951), indicates that this is a tax "not on the
goods,
but on the
handling of them at the port."
Id. at
340 U. S. 514
(emphasis in original). While
Canton R. Co. provides
precedential support for the proposition that a tax of this kind is
not invalid under the Import-Export Clause, its rather artificial
distinction between taxes on the handling of the goods and taxes on
the goods themselves harks back to the arid "direct-indirect"
distinction that we rejected in
Complete Auto Transit, Inc. v.
Brady, 430 U. S. 274
(1977), in favor of analysis framed in light of economic
reality.
The Court's second reason for holding that the instant tax is
not one on goods in transit has the surface appearance of economic
reality analysis, but turns out to be the "direct-indirect" test in
another guise. The Court likens this tax to the one at issue in
Canton R. Co., and declares that, since "[t]axation in
neither setting relates to the value of the goods, . . . in neither
can it be considered taxation upon the goods themselves."
Page 435 U. S. 763
Ante at
435 U. S. 757.
That this distinction has no economic significance is apparent from
the fact that it is possible to design transit fees that are
imposed "directly" upon the goods, even though the amount of the
exaction bears no relation to the value of the goods. For example,
a State could levy a transit fee of $5 per ton or $10 per cubic
yard. These taxes would bear no more relation to the value of the
goods than does the tax at issue here, which is based on the volume
of the stevedoring companies' business, and, in turn, on the volume
of goods passing through the port. Thus, the Court does not explain
satisfactorily its pronouncement that Washington's business tax
upon stevedoring -- in economic terms -- is not the type of transit
fee that the
Michelin Court questioned.
In my view, this issue can be resolved only with reference to
the analysis adopted in
Michelin. The Court's initial
mention of the validity of transit fees in that decision is found
in a discussion concerning the right of the taxing state to seek a
quid pro quo for benefits conferred by the State:
"There is no reason why local taxpayers should subsidize the
services used by the importer; ultimate consumers should pay for
such services as police and fire protection accorded the goods just
as much as they should pay transportation costs associated with
those goods. An evil to be prevented by the Import-Export Clause
was the levying of taxes which could only be imposed because of the
peculiar geographical situation of certain States that enabled them
to single out goods destined for other States. In effect, the
Clause was fashioned to prevent the imposition of exactions which
were no more than transit fees on the privilege of moving through a
State. [The tax at issue] obviously stands on a different footing,
and, to the extent there is any conflict whatsoever with this
purpose of the Clause, it may be secured merely by prohibiting the
assessment of even nondiscriminatory property taxes on goods which
are merely in transit through the State when
Page 435 U. S. 764
the tax is assessed."
423 U.S. at
423 U. S.
289-290. (Footnotes omitted.) In questioning the
validity of "transit fees," the
Michelin Court was
concerned with exactions that bore no relation to services and
benefits conferred by the State. Thus, the transit fee inquiry
cannot be answered by determining whether or not the tax relates to
the value of the goods; instead, it must be answered by inquiring
whether the State is simply making the imported goods pay their own
way, as opposed to exacting a fee merely for "the privilege of
moving through a State."
Ibid.
The Court already has answered that question in this case. In
Part II-C, the Court observes that "nothing in the record suggests
that the tax is not fairly related to services and protection
provided by the State."
Ante at
435 U. S.
750-751. Since the stevedoring companies undoubtedly
avail themselves of police and fire protection, as well as other
benefits Washington offers its local businesses, this statement
cannot be questioned. For that reason, I agree with the Court's
conclusion that the business tax at issue here is not a "transit
fee" within the prohibition of the Import-Export Clause.