Sears, Roebuck and Co. v. County of Los Angeles and City of Compton

PETITIONER: Sears, Roebuck and Co.
RESPONDENT: County of Los Angeles and City of Compton
LOCATION: Los Angeles County Treasurer and Tax Collector

DOCKET NO.: 78-1577
DECIDED BY: Burger Court (1975-1981)
LOWER COURT:

CITATION: 449 US 1119 (1981)
ARGUED: Jan 15, 1980
DECIDED: Jan 26, 1981
GRANTED: Oct 01, 1979

ADVOCATES:
Andrew S. Garb - on behalf of the petitioners
Ernest J. Brown - on behalf of the United States as amicus curiae
James Dexter Clark - on behalf of respondents

Facts of the case

The County of Los Angeles imposed an ad valorem tax on manufactured items stored in warehouses. Sears, Roebuck and Co. paid this tax under protest and claimed an exemption from that tax for items manufactured outside the United States and imported into the United States. These items were intended for sale both in and out of the State of California. Sears sued for a refund of the tax in the Superior Court of Los Angeles County. The court granted Sears’ motion for summary judgment and awarded the refund. The Court of Appeal of California reversed, holding that giving exemptions to foreign goods intended for interstate commerce provided a competitive advantage over domestic goods. This made the county tax an unconstitutional regulation on interstate commerce.

Question

Is the County of Los Angeles tax an unconstitutional regulation on interstate commerce?

Media for Sears, Roebuck and Co. v. County of Los Angeles and City of Compton

Audio Transcription for Oral Argument - January 15, 1980 in Sears, Roebuck and Co. v. County of Los Angeles and City of Compton

Warren E. Burger:

We will hear arguments next in Sears, Roebuck against County of Los Angeles, No. 78-1577.

Mr. Garb, I think you may proceed whenever you're ready.

Andrew S. Garb:

Mr. Chief Justice, and may it please the Court.

This case comes to the Court on stipulated facts.

The case involves the constitutionality of California's Revenue and Taxation Code, Section 225.

That statute was enacted in 1975, following attempts by the assessors in California to impose the personal property tax on imported goods held in the State that had long been considered immune under the original package doctrine.

In order to avoid and prevent the diversion of import business from California to other States that offered more attractive tax laws, California enacted this exemption which applied to imported goods held in the State for shipment to other States.

The respondents here have attacked the statute as being unconstitutional, alleging that the exemption that was extended to imported goods held for shipment out of the State must also be extended to interstate goods travelling through the State as well.

On the tax rule date, in 1976, the petitioner held imported goods in a warehouse in the State of California for shipment out of the State.

These are precisely the type of goods that are exempt under Section 225.

William H. Rehnquist:

Mr. Garb, are you going to address yourself to the standing issue of the County of Los Angeles at all?

Andrew S. Garb:

I had not intended to, Your Honor, although we believe that that issue is certainly an interesting one, and one presented in the California courts.

William H. Rehnquist:

Well --

Andrew S. Garb:

I would be happy to address myself to that issue if Your Honors --

William H. Rehnquist:

I, for one, would be interested, considering it a part of our Article II jurisdictional limitation.

Andrew S. Garb:

Certainly; let me address myself at this time to that issue.

We're in an interesting situation here.

There is no evidence in this case that any shipper of interstate goods has ever been injured by this statute; indeed, we know of no lawsuit brought by any interstate shipper to complain about this.

We rather have ourselves in a rather anomalous situation.

We have the County of Los Angeles, which is the revenue collecting authority arguing here that its parent, the State of California, that enacted an exemption statute, didn't go far enough.

And what they're contending here is that the statute should have gone further and exempted more goods.

Therefore, we have the kind of situation where there is no injured party, no evidence of actual injury to anyone in a protected class who has ever brought a case of this sort.

William H. Rehnquist:

Certainly no more than injury in fact, at most.

Andrew S. Garb:

We have even no injury in fact, Your Honor.

What we had in the Court of Appeals was an invalidation of this statute based on certain assumptions, certain assumed competition between goods.

And we submit not only that there was no evidence that these assumptions in fact exist in fact; but moreover, the hypothetical construct, the abstraction that was relied upon by the Court of Appeals was in fact erroneous.

And if I may address myself to that for a moment, the concept that was created by the Court of Appeals to invalidate the statute was a suggestion that somehow the Revenue and Taxation Code, Section 225, affords a competitive advantage to imported goods, when they compete with similar domestic goods.

Now, as Mr. Justice Rehnquist pointed out, not only is there no evidence of such competition in fact, but we submit that that construct is erroneous for at least two reasons.

First, we have many States in this country that have so-called free port laws; roughly three-quarters of the States.

None of these free port laws exempt locally manufactured goods that are sold within the State.