CONGRESSES ROLE IN REGULATING COMMERCE

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CONGRESSES ROLE IN REGULATING COMMERCE

• Since Congress can regulate interstate and
  foreign commerce, it could allow discrimination
  or allocations, etc. but largely has not. Why do
  you suppose the have failed to act.?
• There have been a few congressional steps taken.
  In Prudential Insurance p. 321 South Carolina
  was permitted to grossly discriminate against
  out-of-state insurance companies foreign
  insurance company premiums were taxed but not
  domestic company premiums because Congress let
  them do it.
• Similarly, on pp. 321-325, instances of
  congressional action dictating the result in
  state taxing cases are listed. They involve
  taxes on airlines gross receipts, crude oil,
  natural gas, railroad property, stock transfer
  fees, pensions, the Internet and cell-phones

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SPECIFIC CONGRESSIONAL ACTION

• Congress permitted the states to discriminate in
  levying taxes on insurance premiums. This law
  permitted South Carolina to levy such a tax on
  foreign insurers and exempt local companies.
• Congress prohibited state taxes on air commerce
  which doomed Hawaiis tax on the gross income of
  airlines.
• Congress permitted the duty and tax free
  importation of crude oil which trumped New York
  Cities attempt to levy a sales tax on such
  products.
• Louisianas attempt to impose its tax on natural
  gas onto the consumers, who were largely out of
  state, was a violation of the Federal Natural Gas
  Act.

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MICHELIN TIRE CORPORATION V WAGES

• Georgia imposed a property tax on tires shipped
  into the state from Canada and Nova Scotia. Some
  tires were in their original package and some
  were not. None of the tires were in transit in
  the sense they were not moving. The Georgia
  Supreme court taxed the unwrapped those not in
  their original containers tires, but held the
  tires in their original cartons were not taxable
  as still in transit, meaning in the original
  package.
• An 1872 case, Low v. Austin, had held that states
  cannot tax imports until the goods lose their
  character as an import and affirmed the original
  package doctrine. The court in Low based its
  decision on the power of the federal government
  to regulate imports and exports. That case was
  overruled here.

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MICHELIN, CONTINUED

• The court notes that the founding fathers had
  three objectives in drafting the Import-Export
  clause of the Constitution. First, the federal
  government must speak with a single voice in
  foreign matters.
• Next, the constitution reserved import duties
  solely to the federal government, and
• Last, there should be no financial advantage
  given to the seaboard states through which goods
  would flow into the interior.

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MICHELIN, CONCLUDED

• The court notes that the the importer should have
  to bear the cost of government like everyone
  else.
• While the original package doctrine is dead, is
  there still any vitality to the in transit
  exemption from state ad valorum this means
  property taxes taxation? Yes. States may not
  levy taxes on foreign goods still in transit.
• In U.S. v. IBM, p. 348 the court suggested
  that a direct tax on goods in transit might be
  invalid. We thought that the distinction between
  direct and indirect taxes went out the window in
  Complete Auto. See also Virginia Indonesia v
  Harris County, p 349 and the Port of Miami case
  pp. 349-350upholding an inspection fee on
  vehicles leaving that port.

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JAMES BEAM DISTILLING.

• The Supreme court held in 1964 that a Kentucky
  tax of 10 a gallon on whiskey imported from
  Scotland could not be sustained, since the goods
  were in the original package in a bonded
  warehouse.
• Your author asks p. 340 whether James Beam
  Distilling is good law in light of the rejection
  of the original package doctrine in Michelin.
• Probably the decision would be upheld today since
  the 10 per gallon tax is like a duty or impost,
  expressly forbidden to the states by the
  constitution

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Chateau de Hluboka, Czech Republic
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DEPT OF REV. OF WASHINGTON V. STEVEDORING
COMPANIES

• In 1937 Washington failed to convince the
  Supreme Court to impose its Business and
  Occupation tax on stevedores for both commerce
  and export-import clause reasons. Thirty-nine
  years later it tries again and now succeeds. Is
  there any decision of the Supreme Court in this
  area of the law that is more than 40 years old
  that hasnt been over-ruled?
• The court finds that there are three reasons for
  the export-import clause, and this tax does not
  offend any of them They are restraint of
  foreign policy, no interference with federal
  import duties nor is there any interstate rivalry.

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STEVEDORING COMMENTS

• While it is true that the goods being loaded or
  unloaded are in transit, Blackman says the tax
  is not laid on the goods, but on the service of
  stevedoring. Do you think the stevedores will
  pass the tax on to the shipper? Since they have a
  virtual monopoly, it is quite certain they will
  do so.
• The court also notes that there should be no
  difference between the taxation of imports or
  exports. Observe that the constitution forbids
  federal and state taxes on exports so there is
  a constitutional difference.

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MORE ON IN TRANSIT

• On page 348 your author notes that the Supremes
  have said that a direct tax on goods in transit
  might be proper. U.S. v. IBM. 1996 Of course,
  Complete Auto abandoned the direct-indirect tax
  distinction, but that was 1977.
• Then the 11th Circuit upheld a fee pp. 349-358,
  for inspecting cars exported from the Port of
  Miami. Auto Cargo, Inc. 2001 Tell me, why do
  autos being exported need to be inspected by a
  governmental agency?
• Footnote D, p. 350. The tax in Diamond-Shamrock
  was levied on goods going from one county to
  another in Texas and hence was a valid tax under
  the Michelin tests.

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THIS WOULD ALSO BE THE REACTION OF THE LAW
FACULTY
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QUILL CORPORATION V. NORTH DAKOTA

• Quill had no office, employee, independent
  contractor or property in North Dakota. It
  solicited sales through catalogs and direct mail.
  Quills offices are in Illinois, Georgia and
  California. It is the 6th largest seller of
  office supplies in the North Dakota.
• The sales tax is imposed on a retailer and a
  sale at retail. In 1987 North Dakota amended
  the definition of retailer to include one who
  systematically engages in the solicitation of
  goods, defined by regulation to mean three adds
  in a 12 month period. 57-40.2-016, NDCC.

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MORE QUILL

• North Dakota tried to impose use tax collection
  responsibility on Quill, and the state Supreme
  Court upheld the tax commissioner, despite
  Bella-Hess, a case directly on point decided by
  the U.S. Supreme Court in 1967.
• Bella Hess had found an identical lack of nexus
  for the mail order seller under both the due
  process and commerce clauses. But here the court
  finds that there is due process nexus, and to
  that extent overrules Bella Hess.

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QUILL AGAIN

• Since Quill directed its activities at North
  Dakota there is a link, a minimum connection to
  the state that satisfies due process nexus
  despite a total lack of physical presence in
  North Dakota.
• BUT for the first time ever, the court invents a
  different kind of nexus for the commerce clause
  and that nexus requirement is intended to limit
  burdens on interstate commerce. So, a company
  can have due process nexus but lack commerce
  clause nexus. And that is the holding of the
  court in Quill.

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THOUGHTS ABOUT QUILL

• The court worries about the 6000 taxing
  jurisdictions Quill might have to deal with. But
  with computers, is that a problem? Just program
  in the tax data for each shipping address zip
  code and the software takes care of the
  computation.
• Note the problem with the N.D. statutes 3
  advertisement test. See footnote 6, p. 358.
• It is quite likely that the court was influenced
  by the presence of congressional bills to
  eliminate the mail order immunity from tax which
  have been introduced in every Congress for
  decades, and never passed. It is a cowardly
  congress.

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MORE THOUGHTS ABOUT QUILL

• This new nexus theory might mean that there is a
  different nexus test for sales taxes than for
  income or gross receipt taxes. What if North
  Dakota levies an income tax against Quill? But
  see J.C. Penny Bank, p. 370.
• North Dakota has not amended its definition of
  retailer to coincide with Quill, nor does the
  publisher of the NDCC list the Quill case as an
  annotation for that statute.
• Stevens admits p.359-60 our law in this area
  is something of a quagmire and the application
  of constitutional principles to specific state
  statutes leaves much room for controversy and
  confusion.

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FOOTNOTES, PP. 367-369.

• How much presence in the state is needed for
  nexus under the commerce clause? In Florida v.
  Share, the presence of the president and vice
  president of the company for seminars at which
  they sold lots of their product, was not enough.
  In Intercard, 11 visits over 4 years in Kansas
  was not enough, but in Care Computer, 80 visits
  over 4 years in Arizona is sufficient to justify
  the tax. All these cases are on page p. 367.

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ANOTHER FOOTNOTE, P. 368

• A book publisher sends order forms to school
  teachers who pass them out to the students. The
  teacher has no contract of any sort with the
  publisher, but he/she gets points which must be
  good for something. Is nexus present so as to
  require the publisher to collect the use tax on
  the sale? Kansas and California say yes, while
  Arkansas and Michigan say no.
• Remember Tyler Pipe which found nexus
  requirements for Washingtons Business and
  Occupations tax satisfied by the seller dealing
  through an independent contractor? Would the
  commerce clause nexus requirement be satisfied if
  Quill sold goods through Gaffneys Office Supplies
  here in Grand Forks? Damned if I know.

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LAST FOOTNOTE P. 369

• Saks 5th Avenue has a store in Ohio but the Ohio
  courts have held that its wholly owned subsidiary
  mail order corporation does not have nexus there
  for sales and use tax purposes. Bloomingdales
  has a store in Pennsylvania but its subsidiary
  mail order corporation similarly does not possess
  nexus for sales and use tax purposes.
• However, Illinois nailed the Readers Digests
  mail order subsidiary because the magazine had
  people in that state soliciting orders for the
  magazine.
• Note the query on Barnes Noble. Does the fact
  that mail order returns can be mailed, or
  processed in a local store, make a difference for
  nexus? Who knows? I dont.

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OSCILLATED TURKEY IN BELIZE