During the years at issue, West Virginia imposed a gross
receipts tax on persons selling tangible property wholesale, but
exempted local manufacturers. The State Tax Commissioner upheld the
tax assessed on sales by appellant Ashland Oil, Inc., a Kentucky
corporation, finding that the tax was constitutional. While
Ashland's appeal was pending in the State Circuit Court, this
Court, in
Armco, Inc. v. Hardesty, 467 U.
S. 638, invalidated the State's tax scheme as
discriminatory against interstate commerce. The Circuit Court
granted Ashland summary judgment on the basis of
Armco,
but the State Supreme Court of Appeals reversed, holding that
Armco did not apply retroactively. On remand, the Circuit
Court affirmed the Tax Commissioner's decision.
Held: Armco applies retroactively to the taxes
assessed against Ashland under the rule advocated by either the
dissent or the plurality in
American Trucking Assns., Inc. v.
Smith, 496 U. S. 167.
Under the dissent's reasoning,
Armco applies retroactively
because constitutional decisions apply retroactively to all cases
on direct review. Under the plurality's approach, the same result
obtains because
Armco neither overruled clear past
precedent nor decided a wholly new issue of first impression and,
thus, fails to meet the first prong of the retroactivity test of
Chevron Oil Co. v. Huson, 404 U. S.
97,
404 U. S.
106-107.
Reversed and remanded.
PER CURIAM.
Appellant Ashland Oil, Inc., a Kentucky corporation, is an
integrated oil company that maintains business locations worldwide,
including in West Virginia. During the years at issue here, West
Virginia imposed a gross receipts tax on persons selling tangible
property at wholesale. W.Va.Code 11-13-2c (1983). Local
manufacturers were exempt from the tax. 11-13-2. The West Virginia
Tax Department conducted a detailed audit of Ashland's tax returns
for fiscal years ending September 1975 and 1976 and assessed a
Page 497 U. S. 917
deficiency in tax payments of $181,313.22 for wholesale sales
with West Virginia destinations. Ashland filed a timely petition
for reassessment, primarily contending that the tax was
unconstitutional as applied, because there was an insufficient
connection between its in-state activities and the transactions
sought to be taxed. Juris.Statement 38a. After the State Tax
Commissioner rejected Ashland's petition, Ashland appealed to the
Circuit Court of Kanawha County. While the appeal was pending, this
Court decided
Armco, Inc. v. Hardesty, 467 U.
S. 638 (1984), which invalidated the West Virginia tax
scheme that had also been applied against Ashland as discriminatory
against interstate commerce. The State Circuit Court granted
Ashland summary judgment on the basis of our decision in
Armco.
The West Virginia Supreme Court of Appeals reverse, holding that
Armco did not apply retroactively, and remanded for
further proceedings. Relying on its state law criteria for
retroactivity,
see Bradley v. Appalachian Power Co., 163
W.Va. 332, 256 S.E. 879 (1979), which it considered to "follow
closely the analysis employed by the United States Supreme Court in
Chevron Oil Co. v. Huson, 404 U. S.
97,
404 U. S.
106-[1]07 . . . (1971),"
Ashland Oil, Inc. v.
Rose, 177 W.Va. 20, 23, n. 6,
350 S.E.2d
531, 534, n. 6 (1986), the court determined that
Armco
"represented a reversal of prior precedent, and that retroactive
application of the
Armco rule would cause severe
hardship."
Id. at 25, 350 S.E.2d at 536. Accordingly, the court
held that the State was not precluded from collecting the gross
receipts taxes due for the fiscal years preceding the date of
decision in
Armco. Id. at 25-26, 350 S.E.2d at
536-537. We dismissed Ashland's appeal of this decision for want of
a final judgment.
Ashland Oil, Inc. v. Rose, 481 U.S. 1025
(1987). On remand, the Circuit Court rejected Ashland's remaining
claim, and the State Supreme Court of Appeals denied Ashland's
request for review.
Page 497 U. S. 918
In its appeal to this Court, Ashland contends, among other
claims, that the State Supreme Court of Appeals erred in
determining that
Armco applied prospectively only. Because
"[t]he determination whether a constitutional decision of this
Court is retroactive . . . is a matter of federal law,"
American Trucking Assns., Inc. v. Smith, 496 U.
S. 167,
496 U. S. 177
(1990), we must examine the state court's determination that
Armco is not retroactive in light of our nonretroactivity
doctrine.
Applying the view of retroactivity delineated by either the
dissent or the plurality in
American Trucking Assns., we
must reverse the state court's decision. Under the reasoning of the
dissent in
American Trucking Assns., Armco applies
retroactively to the taxes assessed against Ashland because
constitutional decisions apply retroactively to all cases on direct
review.
American Trucking Assns., Inc. v. Smith, supra, at
496 U. S. 212
(STEVENS, J., dissenting). Under the approach of the plurality in
American Trucking Assns., the same result obtains, because
Armco fails to satisfy the first prong of the plurality's
test for determining nonretroactivity.
See Chevron Oil Co. v.
Huson, 404 U. S. 97,
404 U. S.
106-107 (1971), quoted in
American Trucking Assns.,
Inc. v. Smith, supra, at
496 U. S. 179
(plurality opinion).
The first prong of the
Chevron Oil test requires
that
"the decision to be applied nonretroactively must establish a
new principle of law, either by overruling clear past precedent on
which litigants may have relied or by deciding an issue of first
impression whose resolution was not clearly foreshadowed."
404 U.S. at
404 U. S.
106-107 (citation omitted). In
Armco, an Ohio
corporation contested the applicability of West Virginia's
wholesale tax on its in-state sales of steel and wire rope. In
ruling that the tax violated the Commerce Clause, the Court relied
on
Boston Stock Exchange v. State Tax Comm'n, 429 U.
S. 318,
429 U. S. 332,
n. 12 (1977), which held that a State "may not discriminate between
transactions on the basis of some interstate element." On its face,
West Virginia's
Page 497 U. S. 919
statutory scheme had just such a discriminatory effect, as
it
"provides that two companies selling tangible property at
wholesale in West Virginia will be treated differently depending on
whether the taxpayer conducts manufacturing in the State or out of
it."
Armco, supra, at
467 U. S.
642.
The Court next considered the argument that the State's
wholesale tax exemption did not discriminate against out-of-state
taxpayers because it served as compensation for the imposition of a
heavy manufacturing tax on in-state taxpayers. In
Maryland v.
Louisiana, 451 U. S. 725
(1981), we held that a tax on an out-of-state event may be
considered a nondiscriminatory compensation for a tax on an
in-state event when the State
"is attempting to impose a tax on a substantially equivalent
event to assure uniform treatment of goods and materials to be
consumed in the State."
Id. at
451 U. S. 759.
Applying this test to the West Virginia tax scheme, the Court
determined that
"manufacturing and wholesaling are not 'substantial!y equivalent
events' such that the heavy tax on in-state manufacturers can be
said to compensate for the admittedly lighter burden placed on
wholesalers from out of State."
Armco, 467 U.S. at
467 U. S. 643.
The Court distinguished
Alaska v. Arctic Maid,
366 U. S. 199
(1961), and
Caskey Baking Co. v. Virginia, 313 U.
S. 117 (1941), two cases that predated the compensatory
tax doctrine enunciated in
Boston Stock Exchange and Maryland
v. Louisiana. Armco, supra, at
467 U. S. 643,
n. 7.
Finally, the Court rejected the argument that Armco should be
required to prove the tax had actual discriminatory impact.
Instead, the Court asserted that the "internal consistency" test,
enunciated in
Container Corp. of America v. Franchise Tax
Board, 463 U. S. 159,
463 U. S. 169
(1983), was applicable "where the allegation is that a tax, on its
face, discriminates against interstate commerce."
Armco,
supra, at
467 U. S.
644.
Armco unquestionably contributed to the development of
our dormant Commerce Clause jurisprudence.
See, e.g.,
Judson & Duffy, An Opportunity Missed:
Armco, Inc.
v.
Page 497 U. S. 920
Hardesty, A Retreat from Economic Reality in Analysis
of State Taxes, 87 W.Va.L.Rev. 723, 740-743 (1986) (suggesting that
Armco's invalidation of a facially discriminatory tax
statute signaled a retreat from the economically realistic approach
adopted by
Complete Auto Transit, Inc. v. Brady,
430 U. S. 274
(1977), and a return to a more formalistic analysis); Lathrop,
Armco -- A Narrow and Puzzling Test for Discriminatory
State Taxes Under the Commerce Clause, 63 Taxes 551, 558-559
(1985). In adopting the internal consistency test,
Armco
extended that doctrine beyond the context in which it had
originated.
See 467 U.S. at
467 U.
S. J., dissenting). Nevertheless,
Armco neither
overturned established precedent
* nor decided "an
issue of first impression whose resolution was not clearly
foreshadowed."
Chevron Oil, supra, at
404 U. S. 106.
To be sure,
Armco paved the way for
Tyler Pipe
Industries, Inc. v. Washington State Dept. of Revenue,
483 U. S. 232
(1987), which arguably "overturn[ed] a lengthy list of settled
decisions" and "revolutionize[d] the law of state taxation,"
id. at
483 U. S. 257
(SCALIA, J., concurring in part and dissenting in part), by
extending the internal consistency test.
Armco itself,
however, was not revolutionary.
See America Trucking Assns.,
Inc. Scheiner, 483 U. S. 266,
483 U. S. 303
(1987) (O'CONNOR, J., dissenting) ("At most,
Armco may be
read for the proposition that a tax that is facially discriminatory
is unconstitutional if it is not
internally
consistent'").
Page 497 U. S.
921
Because
Armco did not overrule clear past precedent nor
decide a wholly new issue of first impression, it does not meet the
first prong of the
Chevron Oil test.
Armco thus
applies retroactively under either the rule advocated by the
plurality or the rule advocated by the dissent in
American
Trucking Assns., Inc. v. Smith. Accordingly, the State Supreme
Court of Appeals erred in declining to apply
Armco
retroactively to determine the constitutionality of the State's
imposition of taxes on Ashland for the years at issue. The motion
of Committee on State Taxation of the Council of State Chambers of
Commerce for leave to file a brief as
amicus curiae is
granted. We reverse the judgment of the State Circuit Court and
remand the case for further proceedings not inconsistent with this
opinion.
It is so ordered.
* The Court's dismissal for want of a substantial federal
question of
Columbia Gas Transmission Corp. Corp. v. Rose,
459 U.S. 807 (1982), a case raising a nearly identical challenge to
the state tax,
see 467 U.S. at
467 U. S. 644,
n. 7, a year prior to deciding
Armco does not amount to
the "overruling [of] clear past precedent on which litigants may
have relied."
Chevron Oil Co. v. Huson, 404 U. S.
97,
404 U. S. 106
(1971). The Court gives less deference to summary dispositions,
see, e.g., Caban v. Mohammed, 441 U.
S. 380,
441 U. S. 390,
n. 9 (1979), and it is unlikely that West Virginia relied upon the
1982 dismissal of
Columbia Gas, given that the statute
struck down in
Armco had been in effect for more than 50
years.