State Taxation of Commerce
Author | Edward L. Barrett |
Pages | 2521-2523 |
Page 2521
Since BROWN V. MARYLAND in 1827 the Supreme Court has decided hundreds of cases determining the extent to which the COMMERCE CLAUSE immunizes from state taxation property moving in INTERSTATE COMMERCE or businesses engaged in such commerce. From the outset, agreement has existed on one principle?state taxes that discriminate against interstate commerce are invalid. In Welton v. Missouri (1876) the Court held invalid a state tax on local sales because it applied only to goods produced outside the state. Recently, in Boston Stock Exchange v. State Tax Commission (1977), the Court stated that the "fundamental principle" that no state may impose a tax that discriminates against interstate commerce "follows inexorably from the basic purpose of the [Commerce] Clause. Permitting individual states to enact laws that favor local enterprises at the expense of out-of-state businesses "would invite a multiplication of preferential trade areas destructive' of the free trade which the Clause protects."
The Supreme Court recognized early, however, that even formally nondiscriminatory taxes might put interstate commerce at a competitive disadvantage. In PHILADELPHIA & READING RAILROAD V. PENNSYLVANIA (1873) a tax on transportation companies measured by cents per ton of freight carried within the state (but not apportioned to distance) was held invalid as applied to goods in interstate commerce even though local commerce paid the same tax. The Court noted that if one state could impose this tax all states could and commercial intercourse between states remote from each other might be destroyed. Interstate commerce could bear the imposition of a single tax but "it would be crushed under the load of many." To avoid such burdens the Court formulated broad prophylactic rules. States were not permitted to tax interstate commerce by laying taxes on property in transit in interstate commerce, the business which constituted such commerce, the privilege of engaging in it, or the receipts derived from it.
The Supreme Court did not go so far, however, as to hold that states could never secure revenue from interstate businesses. An immunity that broad would have placed the states in the position of being required to provide governmental services to interstate property and businesses within their borders without being able to secure from them any contribution to the costs of such governmental services. Hence the Court came to recognize a variety of avenues through which states could derive revenue from interstate commerce.
The principal state revenue producer in the last century was the ad valorem property tax. Although property taxes on goods actually moving in interstate commerce were forbidden (because of the risk that they would be applied by more states than one), states were permitted to impose property taxes upon railroad cars and barges if they were apportioned (usually by mileage) so as to apply, in effect, only to the average number of cars present in the state on any one day. The Supreme Court even went so far as to permit states to levy property taxes on the intangible values of interstate transportation companies by permitting the imposition of taxes upon the proportion of the total going-concern value of...
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