LOCATION: Colorado Springs, Colorado
DOCKET NO.: 93-397
DECIDED BY: Rehnquist Court (1993-1994)
LOWER COURT: Supreme Court of Missouri
CITATION: 511 US 641 (1994)
ARGUED: Mar 28, 1994
DECIDED: May 23, 1994
Don M. Downing - Argued the cause for the respondents
Thomas C. Walsh - Argued the cause for the petitioners
Facts of the case
Following Missouri's imposition of a 1.5% statewide "use tax," the Associated Industries of Missouri - representing Missouri businesses that had to collect the tax and a manufacturing firm that had to pay it - filed suit alleging that the tax violated the Commerce Clause by discriminating against interstate commerce. Such discrimination was said to result from the fact that the use tax exceeded many in-state localities' sales tax rate.
Does Missouri's use tax violate the Commerce Clause by discriminating against interstate commerce in those localities where the use tax exceeds the local sales tax?
Media for Associated Industries of Missouri v. LohmanAudio Transcription for Oral Argument - March 28, 1994 in Associated Industries of Missouri v. Lohman
Audio Transcription for Opinion Announcement - May 23, 1994 in Associated Industries of Missouri v. Lohman
The second case I have to announce is No.93-397, Associated Industries of Missouri versus Lohman which is before us on a writ of certiorari to the Supreme Court of Missouri.
The State of Missouri imposes a uniform statewide use tax of 1.5% on goods purchased outside the State and used or consumed within the State.
The tax is extensively designed to compensate the sales taxes imposed by political subdivisions of the State on sales of goods within the State.
The local sales tax rates, however, vary widely and in many jurisdictions, the 1.5% use tax exceeds the local sales tax.
Petitioners, representing businesses that must collect or pay the use tax, claimed that this tax scheme discriminates against interstate trade in violation of the Commerce Clause.
Analyzing the tax scheme under our compensatory tax doctrine, the Supreme Court of Missouri determined that given the high average rate of local sales taxes in Missouri, the overall effect of the tax scheme was to place a lighter aggregate burden on interstate trade than on intrastate trade.
In the Court's view, that meant that there was no discrimination against interstate trade on a statewide basis and that the tax did not violate the Commerce Clause.
In an opinion filed with the Clerk today, we reverse.
The use tax on its face is discriminatory because it applies only to goods purchased outside the State.
And while it is true that the compensatory tax Doctrine may save a facially discriminatory tax from constitutional infirmity, Missouri's use tax schemes runs afoul of the requirement under our cases that to be compensatory the burdens imposed on interstate and intrastate commerce must be equal or at least that the burden on interstate commerce must not exceed the burden on intrastate commerce.
Under Missouri's scheme, whether the use tax is equal to or lower than the sales tax is entirely a matter of fortuity depending on the locality where the Missouri purchaser happens to reside.
In those localities where the use tax exceeds the sales tax, the tax scheme impermissibly discriminates against interstate commerce.
The Missouri Supreme Court's statewide aggregating approach to assessing discrimination is inconsistent with our prior cases.
We have implicitly rejected any theory that would require aggregating the burdens on commerce across an entire state to determine the constitutionality of a burden on interstate commerce imposed by particular political subdivision.
We reject the argument that the use tax is invalid in its entirety.
It is only the actual discrimination that results in localities where the use tax exceeds the sales facts that violates the Cnstitution.
Justice Blackmun concurs in the judgment.