United States v. International Business Machines Corp.
Annotate this Case
517 U.S. 843 (1996)
OCTOBER TERM, 1995
UNITED STATES v. INTERNATIONAL BUSINESS MACHINES CORP.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
No.95-591. Argued March 18, 1996-Decided June 10, 1996
Pursuant to § 4371 of the Internal Revenue Code, respondent International Business Machines Corporation (IBM) paid a tax on insurance premiums remitted to foreign insurers to cover shipments of goods to its foreign subsidiaries. When its refund claims were denied, IBM filed suit in the Court of Federal Claims, contending that § 4371's application to policies insuring export shipments violated the Export Clause, which states that "[n]o Tax or Duty shall be laid on Articles exported from any State." The court agreed, rejecting the Government's argument that Thames & Mersey Marine Ins. Co. v. United States, 237 U. S. 19-in which this Court held that a federal stamp tax on policies insuring marine risks could not, under the Export Clause, be constitutionally applied to policies covering export shipments-had been superseded by subsequent decisions interpreting the Import-Export Clause, which states in relevant part, "No State shall ... lay any Imposts or Duties on Imports or Exports." The Court of Appeals affirmed.
Held: The Export Clause prohibits assessment of nondiscriminatory federal taxes on goods in export transit. Pp. 846-863.
(a) While this Court has strictly enforced the Export Clause's prohibition against federal taxation of goods in export transit and certain closely related services and activities, see, e. g., Thames & Mersey, supra, it has not exempted pre-export goods and services from ordinary tax burdens or exempted from federal taxation various services and activities only tangentially related to the export process, see, e. g., Cornell v. Coyne, 192 U. S. 418. Conceding that the tax assessed here violates the Export Clause under Thames & Mersey, the Government asks that the case be overruled because its underlying theory has been rejected in the context of the Commerce and Import-Export Clauses and those Clauses have historically been interpreted in harmony with the Export Clause. pp. 846-850.
(b) When this Court expressly disavowed its early view that the dormant Commerce Clause required a strict ban on state taxation of interstate commerce, Complete Auto Transit, Inc. v. Brady, 430 U. S. 274, 288-289, it resolved a long struggle over the meaning of the nontextual negative command of that Clause. The Export Clause, on the other
hand, expressly prohibits Congress from laying any tax or duty on exports. These textual disparities strongly suggest that shifts in the Court's view of the dormant Commerce Clause's scope cannot govern Export Clause interpretation. Cf. Richfield Oil Corp. v. State Ed. of Equalization, 329 U. S. 69, 75-76. Pp.850-853.
(c) While one may question Thames & Mersey's finding that a tax on policies insuring exports is functionally the same as a tax on exportation itself, the Government apparently has chosen not to do so here. Under the principles that animate the policy of stare decisis, the Court declines to overrule Thames & Mersey's longstanding precedent, which has caused no uncertainty in commercial export transactions, on a theory not argued by the parties. Pp. 854-856.
(d) This Court's recent Import-Export Clause cases do not require that Thames & Mersey be overruled. Meaningful textual differences that should not be overlooked exist between the Export Clause and the Import-Export Clause. In finding the assessments in Michelin Tire Corp. v. Wages, 423 U. S. 276, and Department of Revenue of Wash. v. Association of Wash. Stevedoring Cos., 435 U. S. 734, valid, the Court recognized that the Import-Export Clause's absolute ban on "Imposts or Duties" is not a ban on every tax. Because impost and duty are thus narrower terms than tax, a particular state assessment might be beyond the Import-Export Clause's reach, while an identical federal assessment might be subject to the Export Clause. The word "Tax" has a common, and usually expansive, meaning that should not be ignored. The Clauses were also intended to serve different goals. The Government's policy argument-that the Framers intended the Export Clause to narrowly alleviate the fear of northern repression through taxation of southern exports by prohibiting only discriminatory taxes-cannot be squared with the Clause's broad language. The better reading is that the Framers sought to alleviate their concerns by completely denying to Congress the power to tax exports at all. See Fairbank v. United States, 181 U. S. 283. Pp. 857-861.
(e) Even assuming that Michelin and Washington Stevedoring govern the Export Clause inquiry here, those holdings do not interpret the Import-Export Clause to permit assessment of nondiscriminatory taxes on imports and exports in transit. Pp.861-862.
59 F.3d 1234, affirmed.
THOMAS, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and O'CONNOR, SCALIA, SOUTER, and BREYER, JJ., joined. KENNEDY, J., filed a dissenting opinion, in which GINSBURG, J., joined, post, p. 863. STEVENS, J., took no part in the consideration or decision of the case.