LOCATION: Clifford Residence
DOCKET NO.: 83-297
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: Supreme Court of Appeals of West Virginia
CITATION: 467 US 638 (1984)
ARGUED: Apr 17, 1984
DECIDED: Jun 12, 1984
Richard R. Dailey - on behalf of the Appellant
Robert Digges, Jr. - on behalf of the Appellee
Facts of the case
Media for Armco Inc. v. Hardesty
Audio Transcription for Oral Argument - April 17, 1984 in Armco Inc. v. Hardesty
Warren E. Burger:
We'll hear arguments next in Franchise Tax Board against the United States Postal Service.
Mr. Dailey, I think you may proceed whenever you're ready.
Richard R. Dailey:
Mr. Chief Justice, and may it please the Court:
This is an appeal from a decision of the Supreme Court of Appeals of West Virginia.
It brings into question the validity under the Constitution of a gross receipts tax imposed by the State of West Virginia upon the appellant Armco as a result of Armco's sale of property to customers in West Virginia.
The issues presented are two.
The first is whether these was a sufficient nexus between the transactions involved here and the State of West Virginia; and the second is whether the tax involved here is invalid because it discriminates against interstate commerce.
Armco is an Ohio corporation which for many years has been qualified to do business in West Virginia.
During the period 1970 through 1975, the audit periods involved here, its connection with the State of West Virginia was of three sorts.
First, it operated a substantial coal mining venture in West Virginia.
Second, it operated a small office in South Charleston from which it sold construction and drainage products.
And third, it sold to customers in West Virginia products manufactured outside of West Virginia.
The tax liabilities owed by Armco to West Virginia from the operation of its coal mines and from the operation of its Charleston office are not at issue here.
What is at issue here are sales of three products manufactured by Armco outside the state.
Those products are metal buildings, steel and wire rope.
These sales have many characteristics in common.
Not only were the materials manufactured outside of West Virginia, there was no sales office involved in West Virginia, no resident salesman in West Virginia, no inventory in West Virginia; orders were accepted outside West Virginia, and the goods were delivered to common carriers outside West Virginia.
The products themselves were marked in West Virginia in two different ways.
The metal buildings were sold to two franchised dealers within West Virginia.
There was no solicitation of these sales in West Virginia, simply franchise agreements pursuant to which Armco agreed that the dealers could use the Armco name, and Armco agreed to share advertising expenses.
The steel and wire rope products were solicited, sales were solicited within West Virginia.
In connection with the steel products, four nonresident salesmen visited West Virginia on an average of once every four to six weeks.
And with regard to the wire rope, three nonresident salesmen visited West Virginia every two to four weeks.
The tax involved here is an annual privilege tax.
It is imposed upon the gross receipts of those who are engaged or continuing within West Virginia in the selling of tangible property at wholesale.
The lower court in West Virginia held that the transactions involved here did not have a sufficient nexus to permit taxation under the Due Process Clause and the Commerce Clause.
The court of appeals or the Supreme Court of Appeals of West Virginia reversed.
My remarks today will address three points.
The first point is the conclusion of the court below that the unitary business theory should be applied to find the appropriate nexus here.
The second point is the assertion that even if the unitary business theory is not applicable here, there was a sufficient nexus between these transactions and the taxing jurisdiction.