A Mississippi tax on the privilege of doing business in the
State
held not to violate the Commerce Clause when it is
applied to an interstate activity (here, the transportation by
motor carrier in Mississippi to Mississippi dealers of cars
manufactured outside the State) with a substantial nexus with the
taxing State, is fairly apportioned, does not discriminate against
interstate commerce, and is fairly related to the services provided
by the State.
Spector Motor Service v. O'Connor,
340 U. S. 602,
overruled. Pp.
430 U. S.
279-289.
330 So. 2d
268, affirmed.
BLACKMUN, J., delivered the opinion for a unanimous Court.
MR. JUSTICE BLACKMUN delivered the opinion of the Court.
Once again we are presented with
"'the perennial problem of the validity of a state tax for the
privilege of carrying on, within a state, certain activities'
related to a corporation's operation of an interstate
business."
Colonial Pipeline Co. v. Traigle, 421 U.
S. 100,
421 U. S. 101
(1975), quoting
Memphis Gas Co. v. Stone, 335 U. S.
80,
335 U. S. 85
(1948). The issue in this case is whether Mississippi runs afoul of
the Commerce Clause, U.S.Const., Art. I, § 8, cl. 3, when it
applies the tax it imposes on "the privilege of . . . doing
business" within the State to appellant's activity in interstate
commerce. The Supreme Court of Mississippi unanimously sustained
the tax against
Page 430 U. S. 275
appellant's constitutional challenge.
330 So.
2d 268 (1976). We noted probable jurisdiction in order to
consider anew the applicable principles in this troublesome area.
429 U.S. 813 (1976).
I
The taxes in question are sales taxes assessed by the
Mississippi State Tax Commission against the appellant, Complete
Auto Transit, Inc., for the period from August 1, 1968, through
July 31, 1972. The assessments were made pursuant to the following
Mississippi statutes:
"There is hereby levied and assessed and shall be collected,
privilege taxes for the privilege of engaging or continuing in
business or doing business within this state to be determined by
the application of rates against gross proceeds of sales or gross
income or values, as the case may be, as provided in the following
sections."
Miss.Code Ann., 1942, § 10105 (1972 Supp.), as amended.
[
Footnote 1]
"Upon every person operating a pipeline, railroad, airplane,
bus, truck, or any other transportation business for the
transportation of persons or property for compensation or hire
between points within this State, there is hereby levied, assessed,
and shall be collected, a tax equal to five per cent of the gross
income of such business. . . ."
§ 10109(2), as amended. [
Footnote 2]
Page 430 U. S. 276
Any person liable for the tax is required to add it to the gross
sales price and, "insofar as practicable," to collect it at the
time the sales price is collected. § 10117, as amended. [
Footnote 3]
Appellant is a Michigan corporation engaged in the business of
transporting motor vehicles by motor carrier for General Motors
Corporation. General Motors assembles outside Mississippi vehicles
that are destined for dealers within the State. The vehicles are
then shipped by rail to Jackson, Miss., where, usually within 48
hours, they are loaded onto appellant's trucks and transported by
appellant to the Mississippi dealers. App. 478, 78-79, 86-87.
Appellant is paid on a contract basis for the transportation from
the railhead to the dealers. [
Footnote 4]
Id. at 50-51, 68.
By letter dated October 5, 1971, the Mississippi Tax
Commission
Page 430 U. S. 277
informed appellant that it was being assessed taxes and interest
totaling $122,160.59 for the sales of transportation services
during the three-year period from August 1, 1968, through July 31,
1971. [
Footnote 5] Remittance
within 10 days was requested.
Id. at 9-10. By similar
letter dated December 28, 1972, the Commission advised appellant of
an assessment of $42,990.89 for the period from August 1, 1971,
through July 31, 1972.
Id. at 11-12. Appellant paid the
assessments under protest and, in April, 1973, pursuant to §
10121.1, as amended, of the 1942 Code (now § 27-657 of the 1972
Code), instituted the present refund action in the Chancery Court
of the First Judicial District of Hinds County.
Appellant claimed that its transportation was but one part of an
interstate movement, and that the taxes assessed and paid were
unconstitutional as applied to operations in interstate commerce.
App. 4, 7. The Chancery Court, in an unreported opinion, sustained
the assessments.
Id. at 99-102.
The Mississippi Supreme Court affirmed. It concluded:
"It will be noted that Taxpayer has a large operation in this
State. It is dependent upon the State for police protection and
other State services the same as other citizens. It should pay its
fair share of taxes so long, but only so long, as the tax does not
discriminate against interstate commerce, and there is no danger of
interstate commerce being smothered by cumulative taxes of several
states. There is no possibility of any other state duplicating the
tax involved in this case."
330 So. 2d at 272.
Appellant, in its complaint in Chancery Court, did not allege
that its activity which Mississippi taxes does not have a
Page 430 U. S. 278
sufficient nexus with the State; or that the tax discriminates
against interstate commerce; or that the tax is unfairly
apportioned; or that it is unrelated to services provided by the
State. [
Footnote 6] No such
claims were made before the Mississippi Supreme Court, and although
appellant argues here that a tax on "the privilege of engaging in
interstate commerce" creates an unacceptable risk of discrimination
and undue burdens, Brief for Appellant 20-27, it does not claim
that discrimination or undue burdens exist in fact.
Appellant's attack is based solely on decisions of this Court
holding that a tax on the "privilege" of engaging in an activity in
the State may not be applied to an activity that is part of
interstate commerce.
See, e.g., Spector Motor Service v.
O'Connor, 340 U. S. 602
(1951);
Freeman v. Hewit, 329 U.
S. 249 (1946). This rule looks only to the fact that the
incidence of the tax is the "privilege of doing business"; it deems
irrelevant any consideration of the practical effect of the tax.
The rule reflects an underlying philosophy that interstate commerce
should enjoy a sort of "free trade" immunity from state taxation.
[
Footnote 7]
Page 430 U. S. 279
Appellee, in its turn, relies on decisions of this Court stating
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
business,"
Western Live Stock v. Bureau of Revenue, 303 U.
S. 250,
303 U. S. 254
(1938). These decisions [
Footnote
8] have considered not the formal language of the tax statute,
but rather its practical effect, and have sustained a tax against
Commerce Clause challenge when the tax is applied to an activity
with a substantial nexus with the taxing State, is fairly
apportioned, does not discriminate against interstate commerce, and
is fairly related to the services provided by the state.
Over the years, the Court has applied this practical analysis in
approving many types of tax that avoided running afoul of the
prohibition against taxing the "privilege of doing business," but,
in each instance, it has refused to overrule the prohibition. Under
the present state of the law, the
Spector rule, as it has
come to be known, has no relationship to economic realities.
Rather, it stands only as a trap for the unwary draftsman.
II
The modern origin of the
Spector rule may be found in
Freeman v. Hewit, supra. [
Footnote 9] At issue in
Freeman was the
application
Page 430 U. S. 280
of an Indiana tax upon "the receipt of the entire gross income"
of residents and domiciliaries. 329 U.S. at
329 U. S. 250.
Indiana sought to impose this tax on income generated when a
trustee of an Indiana estate instructed his local stockbroker to
sell certain securities. The broker arranged with correspondents in
New York to sell the securities on the New York Stock Exchange. The
securities were sold, and the New York brokers, after deducting
expenses and commission, transmitted the proceeds to the Indiana
broker, who, in turn, delivered them, less his commission, to the
trustee. The Indiana Supreme Court sustained the tax, but this
Court reversed.
Mr. Justice Frankfurter, speaking for five Members of the Court,
announced a blanket prohibition against any state taxation imposed
directly on an interstate transaction. He explicitly deemed
unnecessary to the decision of the case any showing of
discrimination against interstate commerce or error in
apportionment of the tax.
Id. at
329 U. S. 254,
329 U. S.
256-257. He recognized that a State could
constitutionally tax local manufacture, impose license taxes on
corporations doing business in the State, tax property within the
State, and tax the privilege of residence in the State and measure
the privilege by net income, including that derived from interstate
commerce.
Id. at
329 U. S. 255.
Nevertheless, a direct tax on interstate sales, even if fairly
apportioned and nondiscriminatory, was held to be unconstitutional
per se.
Mr. Justice Rutledge, in a lengthy concurring opinion, argued
that the tax should be judged by its economic effects, rather than
by its formal phrasing. After reviewing the Court's prior
decisions, he concluded:
"The fact is that 'direct incidence' of a state tax or
regulation . . . has long since been discarded as being in itself
sufficient to outlaw state legislation."
Id. at
329 U. S.
265-266. In his view, a state tax is
unconstitutional
Page 430 U. S. 281
only if the activity lacks the necessary connection with the
taxing state to give "jurisdiction to tax,"
id. at
329 U. S. 271,
or if the tax discriminates against interstate commerce, or if the
activity is subject to multiple taxation.
Id. at
329 U. S.
276-277. [
Footnote
10]
The rule announced in
Freeman was viewed in the
commentary as a triumph of formalism over substance, providing
little guidance even as to formal requirements.
See P.
Hartman, State Taxation of Interstate Commerce 200-204 (1953);
Dunham, Gross Receipts Taxes on Interstate Transactions, 47
Colum.L.Rev. 211 (1947). Although the rule might have been utilized
as the keystone of a movement toward absolute immunity of
interstate commerce from state taxation, [
Footnote 11] the Court consistently has indicated that
"interstate commerce may be made to pay its way," and has moved
toward a standard of permissibility of state taxation based upon
its actual effect, rather than its legal terminology.
The narrowing of the rule to one of draftsmanship and
phraseology began with another Mississippi case,
Memphis Gas
Co. v. Stone, 335 U. S. 80
(1948). Memphis Natural Gas Company owned and operated a pipeline
running from Louisiana to Memphis. Approximately 135 miles of the
line were in Mississippi. Mississippi imposed a "franchise or
excise" tax measured by
"the value of the capital used, invested or employed in the
exercise of any power, privilege or right enjoyed by [a
corporation] within this state."
Miss.Code Ann., 1942, § 9313. The Mississippi Supreme Court
upheld the tax, and this Court affirmed.
In an opinion for himself and two others, Mr. Justice Reed
Page 430 U. S. 282
noted that the tax was not discriminatory, that there was no
possibility of multiple taxation, that the amount of the tax was
reasonable, and that the tax was properly apportioned to the
investment in Mississippi. 335 U.S. at
335 U. S. 87-88.
He then went on to consider whether the tax was "upon the privilege
of doing interstate business within the state."
Id. at
335 U. S. 88. He
drew a distinction between a tax on "the privilege of doing
interstate business" and a tax on "the privilege of exercising
corporate functions within the State," and held that, while the
former is unconstitutional, the latter is not barred by the
Commerce Clause.
Id. at
335 U. S. 88-93.
He then approved the tax there at issue because
"there is no attempt to tax the privilege of doing an interstate
business or to secure anything from the corporation by this statute
except compensation for the protection of the enumerated local
activities of 'maintaining, keeping in repair, and otherwise in
manning the facilities.'"
Id. at
335 U. S.
93.
Mr. Justice Black concurred in the judgment without opinion.
Id. at
335 U. S. 96.
Mr. Justice Rutledge provided the fifth vote, stating in his
concurrence:
"[I]t is enough for me to sustain the tax imposed in this case
that it is one clearly within the state's power to lay insofar as
any limitation of due process or 'jurisdiction to tax' in that
sense is concerned; it is nondiscriminatory, that is, places no
greater burden upon interstate commerce than the state places upon
competing intrastate commerce of like character; is duly
apportioned, that is, does not undertake to tax any interstate
activities carried on outside the state's borders; and cannot be
repeated by any other state."
Id. at
335 U. S. 96-97
(footnotes omitted).
Four Justices dissented,
id. at
335 U. S. 99, on
the grounds that it had not been shown that the State afforded any
protection in
Page 430 U. S. 283
return for the tax, [
Footnote
12] and that, therefore, the tax must be viewed as one on the
"privilege" of engaging in interstate commerce. The dissenters
recognized that an identical effect could be achieved by an
increase in the
ad valorem property tax,
id. at
335 U. S. 104,
but would have held, notwithstanding, that a tax on the "privilege"
is unconstitutional.
The prohibition against state taxation of the "privilege" of
engaging in commerce that is interstate was reaffirmed in
Spector Motor Service v. O'Connor, 340 U.
S. 602 (1951), a case similar on its facts to the
instant case. The taxpayer there was a Missouri corporation engaged
exclusively in interstate trucking. Some of its shipments
originated or terminated in Connecticut. Connecticut imposed on a
corporation a "tax or excise upon its franchise for the privilege
of carrying on or doing business within the state," measured by
apportioned net income.
Id. at
340 U. S.
603-604, n. 1.
Spector brought suit in federal
court to enjoin collection of the tax as applied to its activities.
The District Court issued the injunction. The Second Circuit
reversed. This Court, with three Justices in dissent, in turn
reversed the Court of Appeals and held the tax unconstitutional as
applied.
The Court recognized that,
"where a taxpayer is engaged both in intrastate and interstate
commerce, a state may tax the privilege of carrying on intrastate
business and, within reasonable limits, may compute the amount of
the charge by applying the tax rate to a fair proportion of the
taxpayer's business done within the state, including both
interstate
Page 430 U. S. 284
and intrastate."
Id. at
340 U. S.
609-610 (footnote omitted). It held, nevertheless, that
a tax on the "privilege" of doing business is unconstitutional if
applied against what is exclusively interstate commerce. The
dissenters argued, on the other hand,
id. at
340 U. S. 610,
that there is no constitutional difference between an "exclusively
interstate" business and a "mixed" business, and that a fairly
apportioned and nondiscriminatory tax on either type is not
prohibited by the Commerce Clause.
The
Spector rule was applied in
Railway Express
Agency v. Virginia, 347 U. S. 359
(1954) (
Railway Express I), to declare unconstitutional a
State's "annual license tax" levied on gross receipts for the
"privilege of doing business in this State." The Court, by a 5-to-4
vote, held that the tax on gross receipts was a tax on the
privilege of doing business, rather than a tax on property in the
State, as Virginia contended.
Virginia thereupon revised the wording of its statute to impose
a "franchise tax" on "intangible property" in the form of "going
concern" value as measured by gross receipts. The tax was again
asserted against the Agency, which, in Virginia, was engaged
exclusively in interstate commerce. This Court's opinion,
buttressed by two concurring opinions and one concurrence in the
result, upheld the reworded statute as not violative of the
Spector rule.
Railway Express Agency v. Virginia,
358 U. S. 434
(1959) (
Railway Express II). In upholding the statute, the
Court's opinion recognized that the rule against taxing the
"privilege" of doing interstate business had created a situation
where "the use of magic words or labels" could "disable an
otherwise constitutional levy."
Id. at
358 U. S.
441.
There was no real economic difference between the statutes in
Railway Express I and
Railway Express II. The
Court long since had recognized that interstate commerce may be
made to pay its way. Yet, under the
Spector rule, the
economic realities in
Railway Express I became irrelevant.
The
Page 430 U. S. 285
Spector rule had come to operate only as a rule of
draftsmanship, and served only to distract the courts and parties
from their inquiry into whether the challenged tax produced results
forbidden by the Commerce Clause.
On the day it announced
Railway Express II, the Court
further confirmed that a State, with proper drafting, may tax
exclusively interstate commerce so long as the tax does not create
any effect forbidden by the Commerce Clause. In
Northwestern
Cement Co. v. Minnesota, 358 U. S. 450
(1959), the Court held that net income from the interstate
operations of a foreign corporation may be subjected to state
taxation, provided the levy is not discriminatory and is properly
apportioned to local activities within the taxing State forming
sufficient nexus to support the tax. Limited in that way, the tax
could be levied even though the income was generated exclusively by
interstate sales.
Spector was distinguished, briefly and
in passing, as a case in which "the incidence" of the tax "was the
privilege of doing business." 358 U.S. at
358 U. S.
464.
Thus, applying the rule of
Northwestern Cement to the
facts of
Spector, it is clear that Connecticut could have
taxed the apportioned net income derived from the exclusively
interstate commerce. It could not, however, tax the "privilege" of
doing business as measured by the apportioned net income. The
reason for attaching constitutional significance to a semantic
difference is difficult to discern.
The unsatisfactory operation of the
Spector rule is
well demonstrated by our recent case of
Colonial Pipeline Co.
v. Traigle, 421 U. S. 100
(1975). Colonial was a Delaware corporation with an interstate
pipeline running through Louisiana for approximately 258 miles. It
maintained a workforce and pumping stations in Louisiana to keep
the pipeline flowing, but it did no intrastate business in that
State.
Id. at
421 U. S.
101-102. In 1962, Louisiana imposed on Colonial a
franchise tax for "the privilege of carrying on or doing business"
in the State. The Louisiana Court of Appeal invalidated the
Page 430 U. S. 286
tax as violative of the rule of
Spector. Colonial
Pipeline Co. v. Mouton, 228 So. 2d 718 (1969). The Supreme
Court of Louisiana refused review. 255 La. 474, 231 So. 2d 393
(1970). The Louisiana Legislature, perhaps recognizing that it had
run afoul of a rule of words, rather than a rule of substance, then
redrafted the statute to levy the tax, as an alternative incident,
on the "qualification to carry on or do business in this state or
the actual doing of business within this state in a corporate
form." Again, the Court of Appeal held the tax unconstitutional as
applied to the appellant.
Colonial Pipeline Co. v.
Agerton, 275 So. 2d 834 (1973). But this time the Louisiana
Supreme Court upheld the new tax.
289 So.
2d 93 (1974)
By a 7-to-1 vote, this Court affirmed. No question had been
raised as to the propriety of the apportionment of the tax, and no
claim was made that the tax was discriminatory. 421 U.S. at
421 U. S. 101.
The Court noted that the tax was imposed on that aspect of
interstate commerce to which the State bore a special relation, and
that the State bestowed powers, privileges, and benefits sufficient
to support a tax on doing business in the corporate form in
Louisiana.
Id. at
421 U. S. 109. Accordingly, on the authority of
Memphis Gas, the tax was held to be constitutional. The
Court distinguished
Spector on the familiar ground that it
involved a tax on the privilege of carrying on interstate commerce,
while the Louisiana Legislature, in contrast, had worded the
statute at issue "narrowly to confine the impost to one related to
appellant's activities within the State in the corporate form." 421
U.S. at
421 U. S.
113-114. [
Footnote
13]
Page 430 U. S. 287
While refraining from overruling
Spector, the Court
noted:
"[D]ecisions of this Court, particularly during recent decades,
have sustained nondiscriminatory, properly apportioned state
corporate taxes upon foreign corporations doing an exclusively
interstate business when the tax is related to a corporation's
local activities and the State has provided benefits and
protections for those activities for which it is justified in
asking a fair and reasonable return."
Id. at
421 U. S. 108.
One commentator concluded:
"After reading
Colonial, only the most sanguine
taxpayer would conclude that the Court maintains a serious belief
in the doctrine that the privilege of doing interstate business is
immune from state taxation."
Hellerstein, State Taxation of Interstate Business and the
Supreme Court, 1974 Term:
Standard Pressed Steel and
Colonial Pipeline, 62 Va.L.Rev. 149, 188 (1976). [
Footnote 14]
III
In this case, of course, we are confronted with a situation like
that presented in
Spector. The tax is labeled a privilege
tax "for the privilege of . . . doing business" in Mississippi, §
10105 of the State's 1942 Code, as amended, and the activity taxed
is, or has been assumed to be, interstate commerce. We note again
that no claim is made that the activity is not sufficiently
connected to the State to justify a tax, or that the tax is not
fairly related to benefits provided the taxpayer, or that the tax
discriminates against interstate commerce, or that the tax is not
fairly apportioned.
Page 430 U. S. 288
The view of the Commerce Clause that gave rise to the rule of
Spector perhaps was not without some substance.
Nonetheless, the possibility of defending it in the abstract does
not alter the fact that the Court has rejected the proposition that
interstate commerce is immune from state taxation:
"It is a truism that the mere act of carrying on business in
interstate commerce does not exempt a corporation from state
taxation."
"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."
"
Western Live Stock v. Bureau of Revenue, 303 U. S.
250,
303 U. S. 254 (1938)."
Colonial Pipeline Co. v. Traigle, 421 U.S. at
421 U. S.
108.
Not only has the philosophy underlying the rule been rejected,
but the rule itself has been stripped of any practical
significance. If Mississippi had called its tax one on "net income"
or on the "going concern value" of appellant's business, the
Spector rule could not invalidate it. There is no economic
consequence that follows necessarily from the use of the particular
words, "privilege of doing business," and a focus on that formalism
merely obscures the question whether the tax produces a forbidden
effect. Simply put, the
Spector rule does not address the
problems with which the Commerce Clause is concerned. [
Footnote 15] Accordingly, we now
reject the rule of
Page 430 U. S. 289
Spector Motor Service, Inc. v. O'Connor that a state
tax on the "privilege of doing business" is
per se
unconstitutional when it is applied to interstate commerce, and
that case is overruled.
There being no objection to Mississippi's tax on appellant
except that it was imposed on nothing other than the "privilege of
doing business" that is interstate, the judgment of the Supreme
Court of Mississippi is affirmed.
It is so ordered.
[
Footnote 1]
The statute is now § 27-65-13 of the State's 1972 Code.
[
Footnote 2]
This statute is now § 27-65-19(2) of the 1972 Code. It was
amended, effective August 1, 1972, to exclude the transportation of
property. 1972 Miss.Laws, c. 506, § 2.
Section 10109, as codified in 1942, imposed a tax on gross
income from all transportation, with gross income defined to
exclude
"so much thereof as is derived from business conducted in
commerce between this State and other States of the United States .
. . which the State of Mississippi is prohibited from taxing under
the Constitution of the United States of America."
In 1955, this exclusionary language was eliminated and the
statute was amended to cover only transportation "between points
within this state." 1955 Miss.Laws, c. 109, § 10. The amendment
gave the statute essentially the form it possessed during the
period relevant here.
It might be argued that the statute, as so amended, evinces an
intent to reach only intrastate commerce, and that it should be so
construed. Appellant, however, does not make that argument, and the
Supreme Court of Mississippi clearly viewed that statute as
applying to both intrastate commerce and interstate commerce.
We are advised by the appellee that the tax has been applied
only to commercial transactions in which a distinct service is
performed and payment made for transportation from one point within
the State to another point within the State. Tr. of Oral Arg.
34-35, 38.
[
Footnote 3]
This statute is now § 27-65-31 of the 1972 Code. Violation of
the requirements of the section is a misdemeanor.
Ibid.
[
Footnote 4]
The parties understandably go to great pains to describe the
details of the bills of lading, and the responsibility of various
entities for the vehicles as they travel from the assembly plant to
the dealers. Appellant seeks to demonstrate that the transportation
it provides from the railhead to the dealers is part of a movement
in interstate commerce. Appellee argues that appellant's
transportation is intrastate business, but further argues that even
if the activity is part of interstate commerce, the tax is not
unconstitutional. Brief for Appellant 11-14; Brief for Appellee
12-24; Reply Brief for Appellant 14-16. The Mississippi courts, in
upholding the tax, assumed that the transportation is in interstate
commerce. For present purposes, we make the same assumption.
[
Footnote 5]
Although appellant had been operating in Mississippi since 1960,
App. 77, the state audit and assessment covered only the period
beginning August 1, 1968.
Id. at 37-38. No effort had been
made to apply the tax to appellant for any period prior to that
date.
[
Footnote 6]
See Boston Stock Exchange v. State Tax Comm'n,
429 U. S. 318
(1977);
General Motors Corp. v. Washington, 377 U.
S. 436 (1964);
Illinois Cent. R. Co. v.
Minnesota, 309 U. S. 157
(1940);
Ingels v. Morf, 300 U. S. 290
(1937).
See also Standard Steel Co. v. Washington Rev.
Dept., 419 U. S. 560
(1975), and
Clark v. Paul Gray, Inc., 306 U.
S. 583 (1939).
[
Footnote 7]
The Court summarized the "free trade" view in
Freeman v.
Hewit, 329 U.S. at
329 U. S.
252.
"[T]he Commerce Clause was not merely an authorization to
Congress to enact laws for the protection and encouragement of
commerce among the States, but, by its own force, created an area
of trade free from interference by the States. In short, the
Commerce Clause, even without implementing legislation by Congress,
is a limitation upon the power of the States. . . . This limitation
on State power . . . 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."
[
Footnote 8]
See, e.g., General Motors Corp. v. Washington, supra;
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,
311 U. S. 444
(1940).
[
Footnote 9]
Although we mention
Freeman as the starting point,
elements of the views expressed therein, and the positions that
underlie that debate, were evident in prior opinions.
Compare
82 U. S. 15
Wall. 284 (1873),
with Fargo v. Michigan, 121 U.
S. 230 (1887); and
compare Disanto v.
Pennsylvania, 273 U. S. 34
(1927),
and Cooney v. Mountain States Tel. Co.,
294 U. S. 384
(1935),
with Western Live Stock v. Bureau of Revenue,
303 U. S. 250
(1938).
See generally P. Hartman, State Taxation of
Interstate Commerce (1953); Barrett, State Taxation of Interstate
Commerce -- "Direct Burdens," "Multiple Burdens," or What Have
You?, 4 Vand.L.Rev. 496 (1951), and writings cited therein at 496
n. 1; Dunham, Gross Receipts Taxes on Interstate Transactions, 47
Colum.L.Rev. 211 (1947).
[
Footnote 10]
Mr. Justice Rutledge agreed with the result the Court reached in
Freeman because of his belief that the apportionment
problem was best solved if States other than the market State were
forbidden to impose unapportioned gross receipts taxes of the kind
Indiana sought to exact.
[
Footnote 11]
A consistent application of the doctrine of immunity for
interstate commerce, of course, would have necessitated overruling
the cases approved by the
Freeman Court that upheld taxes
whose burden, although indirect, fell on interstate commerce.
[
Footnote 12]
In arriving at this conclusion, the dissent relied upon a
construction of a stipulation entered into by the parties, 335 U.S.
at
335 U. S.
100-101, and upon an independent review of the record.
The plurality rejected the dissent's reading of the stipulation and
noted, in addition, that the question presented in the petition for
certiorari did not raise a claim that the State was providing no
service for which it could ask recompense.
Id. at
335 U. S. 83-84.
The plurality then relied on the Supreme Court of Mississippi's
holding that the State did provide protection that could properly
be the subject of a tax.
[
Footnote 13]
Five Members of the Court joined in the opinion distinguishing
Spector. Two concurred in the judgment, but viewed
Spector as indistinguishable, and would have overruled it.
421 U.S. at
421 U. S.
114-116. One also viewed
Spector as
indistinguishable, but felt that it was an established precedent
until forthrightly overruled.
Id. at
421 U. S. 116.
Mr. Justice Douglas took no part.
[
Footnote 14]
Less charitably put:
"In light of the expanding scope of the state taxing power over
interstate commerce,
Spector is an anachronism. . . .
Continued adherence to
Spector, especially after
Northwestern States Portland Cement, cannot be
justified."
Comment, Pipelines, Privileges and Labels:
Colonial Pipeline
Co. v. Traigle, 70 Nw.U.L.Rev. 835, 854 (1975).
[
Footnote 15]
It might be argued that "privilege" taxes, by focusing on the
doing of business, are easily tailored to single out interstate
businesses and subject them to effects forbidden by the Commerce
Clause, and that, therefore, "privilege" taxes should be subjected
to a
per se rule against their imposition on interstate
business. Yet property taxes also may be tailored to differentiate
between property used in transportation and other types of
property,
see Railway Express II, 358 U.
S. 434 (1959); an income tax could use different rates
for different types of business; and a tax on the "privilege of
doing business in corporate form" could be made to change with the
nature of the corporate activity involved. Any tailored tax of this
sort creates an increased danger of error in apportionment, of
discrimination against interstate commerce, and of a lack of
relationship to the services provided by the State.
See Freeman
v. Hewit, 329 U.S. at
329 U. S. 265-266, n. 13 (concurring opinion). A
tailored tax, however accomplished, must receive the careful
scrutiny of the courts to determine whether it produces a forbidden
effect on interstate commerce. We perceive no reason, however, why
a tax on the "privilege of doing business" should be viewed as
creating a qualitatively different danger so as to require a
per se rule of unconstitutionality.
It might also be argued that adoption of a rule of absolute
immunity for interstate commerce (a rule that would, of course, go
beyond
Spector) would relieve this Court of difficult
judgments that on occasion will have to be made. We believe,
however, that administrative convenience, in this instance, is
insufficient justification for abandoning the principle that
"interstate commerce may be made to pay its way."