General Motors Corporation v. Tracy

PETITIONER: General Motors Corporation
RESPONDENT: Tracy
LOCATION: City Hall

DOCKET NO.: 95-1232
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: Ohio Supreme Court

CITATION: 519 US 278 (1997)
ARGUED: Oct 07, 1996
DECIDED: Feb 18, 1997

ADVOCATES:
Jeffrey S. Sutton - Columbus, Ohio, argued the cause for the respondent
Timothy B. Dyk - Argued the cause for the petitioner

Facts of the case

The State of Ohio imposes general sales and use taxes on natural gas purchases from all sellers, whether in-state or out-of-state, that do not meet its statutory definition of a "natural gas company." Ohio's state-regulated natural gas utilities, known as local distribution companies or LDC's, satisfy the definition. Other producers and independent marketers, according to the State Supreme Court, generally do not. During the period in question, General Motors Corporation (GMC) bought virtually all the gas for its plants from out-of-state independent marketers, rather than from LDC's, making it subject to the Ohio tax. In front of the State Supreme Court, GMC argued that denying a tax exemption to sales by marketers but not LDC's violates the Commerce and Equal Protection Clauses. After an initial conclusion, the court held that GMC lacked standing to bring a Commerce Clause challenge. The court then dismissed the equal protection claim as buried in GMC's Commerce Clause argument.

Question

Does the State of Ohio's different tax treatment of sales of gas by domestic utilities subject to regulation and sales of gas by other entities violate the Commerce Clause or Equal Protection Clause?

Media for General Motors Corporation v. Tracy

Audio Transcription for Oral Argument - October 07, 1996 in General Motors Corporation v. Tracy

William H. Rehnquist:

We'll hear argument next in Number 95-1232, General Motors Corporation v. Roger W. Tracy.

Mr. Dyk.

Timothy B. Dyk:

Mr. Chief Justice and may it please the Court:

This case involves the question whether the State of Ohio can discriminate against interstate transactions in the application of its sales and use tax of natural gas purchases.

If the purchaser in Ohio, such as General Motors in this case, purchases from a local public utility which supplies the gas through its own distribution lines, the sale or use is exempt.

On the other hand, if the gas is supplied by an interstate marketer of natural gas which has no distribution lines within the State, the purchase is not exempt, and this is--

William H. Rehnquist:

When you say discriminate, Mr. Dyk, you suggest that these two entities should be treated as equals.

Timothy B. Dyk:

--Well, I--

William H. Rehnquist:

That there aren't really any factors that distinguish them.

Timothy B. Dyk:

--There are no factors that distinguish them in our view, Mr. Chief Justice.

It's the same gas that can come from the same well, distributed over the same interstate pipeline, distributed through the same local pipeline, and the local natural gas company may or may not be selling tariff gas.

In other words, it may be--

Sandra Day O'Connor:

Well, but isn't it a public utility that we're talking about?

Timothy B. Dyk:

--Justice O'Connor, it is a public utility, but the sales by the public utility are not regulated sales.

Sandra Day O'Connor:

Well, I'm very concerned about your theory, frankly, because it seems to me that your theory would really eviscerate public regulation of public utilities.

Timothy B. Dyk:

Well, I don't think so, Justice O'Connor.

First of all, what we have here is our local public utilities, which are making to a very significant extent nontariff sales.

That's admitted at the very outset of the respondent's brief at page 1 and 2.

It's reflected in the record, in the Joint Appendix at pages 229 and 230.

As a result of local deregulation, natural gas public utilities in Ohio, and this is true in other States as well, are permitted to engage in the business of gas marketing.

In other words, they're largely unregulated.

All they had to do during the period in question was to file the contract with the public utility commission.

They in fact were allowed to do this, to engage in these unregulated sales, because they faced competition from these interstate marketers, and the public utilities--

Sandra Day O'Connor:

But I assume that the overall rate the utility can earn is limited by regulation.

Timothy B. Dyk:

--Not in these sales, Justice O'Connor.

These sales are unregulated sales.

There is no tariff for them.

The price at which the gas is sold is not regulated.

The whole purpose of this was to allow these local public utilities to compete with the interstate marketers so they wouldn't have to sell pursuant to a tariff, so that they could engage in the same kind of competition, the same kind of discounting, the same kind of individual pricing that the out-of-State marketers--

Anthony M. Kennedy:

Was this a new statute, Mr. Dyk, or was... the statutory permission for the utilities to do unregulated sales, was that statute in effect during the tax period here in question?