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ASSOCIATED INDUSTRIES MISSOURI v. JANETTE M. LOHMAN

decided: May 23, 1994.

ASSOCIATED INDUSTRIES OF MISSOURI, ET AL., PETITIONERS
v.
JANETTE M. LOHMAN, DIRECTOR OF REVENUE OF MISSOURI, ET AL.



ON WRIT OF CERTIORARI TO THE SUPREME COURT OF MISSOURI.

Thomas, J., delivered the opinion of the Court, in which Rehnquist, C. J., and Stevens, O'connor, Scalia, Kennedy, Souter, and Ginsburg, JJ., joined. Blackmun, J., concurred in the judgment.

Author: Thomas

JUSTICE THOMAS delivered the opinion of the Court.

The State of Missouri imposes a uniform, statewide use tax on all goods purchased outside the State and stored, used, or consumed within the State. Although the tax is purportedly designed to "compensate" for sales taxes imposed by local jurisdictions on sales of goods in the State, local sales tax rates vary widely, and in many jurisdictions the use tax exceeds the sales tax. Petitioners contend that this system discriminates against interstate commerce in violation of the Commerce Clause, even though the local sales taxes across the State may, in the aggregate, place a greater burden on intrastate trade than the uniform use tax places on interstate trade. We agree that, in localities where the use tax exceeds the sales tax, the system is impermissibly discriminatory, and we therefore reverse the judgment of the Supreme Court of Missouri.

I

Missouri has a multitiered system of sales and use taxes. The State imposes by statute a tax of 4% on all sales of personal property in the State, Mo. Rev. Stat. § 144.020 (1986), and, through provisions in the State Constitution, provides for additional sales taxes of one-eighth of one percent and one-tenth of one percent on the same transactions. Mo. Const., Art. IV, §§ 43(a), 47(a). These levies are exactly paralleled by statutory and state constitutional provisions providing for use taxes of 4%, one-eighth of one percent, and one-tenth of one percent, respectively, on the "privilege of storing, using or consuming" within the State any article of personal property purchased outside the State. Mo. Rev. Stat. § 144.610(1); Mo. Const., Art. IV, §§ 43(a), 47(a).*fn1 Thus, under these various provisions, the State imposes a statewide sales tax of 4.225% on sales of goods within the State and a statewide use tax of 4.225% on goods brought into the State after being purchased elsewhere. These taxes are not challenged here.

The State also imposes an "additional use tax" of 1.5% on the privilege of storing, using, or consuming within the State any article of personal property purchased outside the State. Mo. Rev. Stat. § 144.748 (Supp. 1993).*fn2 This use tax is not paired with any sales tax at the state level. The State, however, authorizes political subdivisions, including counties and incorporated municipalities, to impose a local sales tax.*fn3 Over 1,000 localities have used that authority to enact sales taxes ranging from 0.5% to 3.5%, while at least one county has no local sales tax at all.

Petitioner Associated Industries of Missouri is a trade association representing businesses that operate in Missouri and businesses that sell to customers in Missouri. Out-of-state members of the organization must collect the additional use tax on sales made into the State. Petitioner Alumax Foils, Inc., is a manufacturing firm in Missouri that pays the additional use tax on goods purchased from outside the State. Petitioners brought this action in state court contending that the use tax impermissibly discriminates against interstate commerce in violation of the Commerce Clause. The State Circuit Court rejected petitioners' claims and granted respondents' motion for summary judgment.

The Supreme Court of Missouri affirmed. 857 S.W.2d 182 (1993). The court noted that the 1.5% use tax had been imposed to equalize taxes on in-state and out-of-state goods. Previously, political subdivisions of the State had imposed local sales tax burdens that were not paralleled by any use tax. Because the tax was designed to even exactions on intrastate and interstate trade, the court reasoned that the scheme should be analyzed under the "compensatory tax" doctrine, which the court summarized as permitting States to "impose . . . equivalent burdens" on transactions in local and interstate commerce. Id., at 187.

The court acknowledged that, in 53.5% of local taxing jurisdictions, the 1.5% use tax exceeded the local sales tax. See id., at 185, n. 3. But the court emphasized that 1990 sales figures from the stipulated record showed that over 93% of the dollar volume of sales in the State occurred in jurisdictions where the local sales tax exceeded the use tax. See id., at 185. Calculating from similar figures, the court determined that, had a flat local sales tax of 1.5% -- exactly equivalent to the use tax -- been imposed in 1990, it would have reduced the sales tax burden on in-state sales by $100 million. Ibid. In short, the court concluded that given the high average rate of local sales taxes, the overall effect of the use tax scheme across the State was to place a lighter aggregate tax burden on interstate commerce than on intrastate commerce.

After rehearsing these facts, the court stated the issue before it as being whether "a state use tax may impose a greater burden than the various sales taxes in specific localities, if on a statewide basis the use tax imposes a lesser overall burden than do all the various sales taxes." Id., at 186. Relying on this Court's decision in General American Tank Car Corp. v. Day, 270 U.S. 367, 70 L. Ed. 635, 46 S. Ct. 234 (1926), the court answered that question in the affirmative. The court reasoned that whether the tax scheme discriminated against interstate commerce should be determined on the basis of a comparison of the overall effects of the use tax and the local sales taxes on interstate commerce statewide. Because the figures outlined above suggested that, in the aggregate, the tax scheme imposed greater burdens on intrastate than on interstate commerce, the court concluded that the tax avoided discrimination on a statewide basis and thus did not violate the dictates of the Commerce Clause. 857 S.W.2d, at 187-192.

In dissent, then-Chief Justice Robertson criticized the court's focus on averaging effects across the State to determine whether there was discrimination and suggested that the majority's method was tantamount to basing constitutional analysis on a conclusion that the use tax scheme was "'close enough for government work.'" Id., at 195. Chief Justice Robertson concluded that this Court's cases contained a strict rule of equality that demanded equal treatment of local and interstate commerce in each local jurisdiction, not merely in the overall result for the State. Id., at 199.

We granted certiorari, 510 U.S. (1993), to consider the validity ...


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